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2019 (8) TMI 902 - AT - Income TaxLTCG computation - adoption of the Stamp Duty Valuation for the purpose of determining the full value of consideration u/s 50C - HELD THAT - Where the Assessing officer gives a finding that the assessee has not objected to the adoption of stamp duty value during the course of assessment proceedings, the AO is not required to refer the matter to the valuation officer and he is required to adopt the value so determined by stamp duty authority as specified in section 50C(1) We find that the reasoning behind acceptance of variation within the tolerable limits is that DLC rates are indicative rates of a particular locality and not of a particular property and depending upon various factors, the value of two properties in the same locality may vary. Therefore, we find that the concept of determining a tolerable range has to be appreciated more so in the context of deeming fiction where the liability is fastened on the assessee based on such stamp duty valuation and a fact which has lately been recognized by the legislature whereby tolerance range of 5% has been specified by way of third proviso to section 50C(1) has been inserted by the Finance Act, 2018, w.e.f. 1-4-2019 In the instant case, the variation is only ₹ 35,99,208/-, which is 1.49% of the value determined by the Stamp Valuation Authority which should thus be ignored and the value so declared by the assessee should be accepted. In the result, the value so declared by the assessee should be adopted as full value of consideration and the addition of ₹ 35,99,208 is hereby directed to be deleted. The ground of appeal taken by the assessee is thus decided in favour of the assessee and against the Revenue. Deduction under clause (i) to Section 48 in the computation of the Long Term Capital Gain - HELD THAT - There is a direct and close linkage between the signing of the MOU dated 18.11.2010 and the sale deed executed on 06.12.2010 and the payment of ₹ 1 Cr is connected with the transfer of the impugned property in favour of M/s Triveni Kripa Enterprises Pvt. Ltd and the assessee should therefore be eligible to claim the same while computing the capital gains. We therefore, affirm the findings of the ld. CIT(A). The matter is thus decided in favour of the assessee and against the Revenue. Validity of reference to the DVO u/s 55A by the Assessing Officer - HELD THAT - Where the valuation so adopted by the assessee firm is based on a registered valuer report and the Assessing officer has formed an opinion that the value estimated by the registered valuer is at variance with the fair market value of the asset having regard to the nature of the asset and its use at relevant time, the Assessing officer has invoked the provisions of section 55A(a) of the Act. In fact, as we have discussed above, the main argument of the Revenue is regarding the amendment brought in by the Finance Act 2012 in section 55A(a) and which has been claimed as applicable for the impugned assessment year. Further, the Hon ble High Courts referred supra have also held that where the issue is covered by Section 55A(a) of the Act, resort cannot be had to the residuary clause provided in Section 55A(b)(ii) of the Act. Therefore, the contention so advanced by the ld CIT DR cannot be accepted. Where the reference made to DVO is held as invalid, can the AO still rely on the valuation report issued by the DVO as a reliable and admissible piece of evidence? - Where the reference to DVO has been held as invalid in the eyes of law, the valuation report so submitted by the DVO can be considered by the Assessing officer as a reliable piece of evidence as the Assessing officer is not bound by strict rules of evidence and where the report is found to be relevant, the same can be considered by the Assessing officer. However, whether the valuation report issued by the DVO is found to be relevant in the facts and circumstances of the present case, we shall be dealing with the same in the subsequent paragraphs. Reference of the matter to DVO u/s 55A on the basis of incorrect assumption of facts - HELD THAT - already decided earlier that the reference to DVO is invalid in the eyes of law, therefore, we don t deem it necessary to examine deeper into the issue around formation of opinion by the Assessing officer and what should be the ingredients or the basis/tangible material in possession of the Assessing officer before he refers the matter to the DVO though the ld AR has raised some relevant issues in this regard. Hence, in view of the same, the cross objection so raised is not adjudicated upon. Valuation by DVO - DVO s report on the basis of incorrect assumption of facts and against the established norms of the valuation and without following standard practice and procedures of the Revenue department for determination FMV - HELD THAT - fundamental difference where the DVO has taken the status of the property as residential whereas the facts on record suggest that the assessee was carrying out commercial activities by itself put a big question mark on the value finally determined by the Valuation Officer. - the valuation report so issued by the Valuation Officer suffer from serious deficiencies and the same cannot be held as reliable piece of evidences which can be applied by the Assessing Officer. - the adjustment made by the Assessing Officer basis the valuation report so submitted by the DVO cannot be accepted as the same suffer from serious infirmity. In the result, the cross objection taken by the assessee is allowed. Action of ACIT in directing the AO to complete assessment on the basis of report submitted by DVO vide his order passed U/s 144A - HELD THAT - Present proceedings are against the findings of the Assessing officer while passing the order u/s 143(3) where following the directions of the Add. CIT u/s 144A, he has completed the assessment proceedings. The Add. CIT u/s 144A has directed the AO to complete the assessment on the basis of the valuation report of the DVO on the issue of fair market value as on 1.4.1981 of the property discussed above which is in consonance with the provisions of Section 16A of the wealth tax Act which equally applies in the context of section 55A of the Act. Further, in respect of other issues dealt with by the Add. CIT, the same have already been dealt with and examined by us and doesn t require any separate adjudication.
Issues Involved:
1. Deletion of addition on account of Long Term Capital Gain. 2. Deletion of disallowance of deduction claimed under Section 48. 3. Adoption of value by the Stamp Authority instead of transaction value. 4. Validity of reference to DVO under Section 55A. 5. Determination of Fair Market Value (FMV) of property as on 01.04.1981. 6. Application of the fair market value determined by DVO. 7. Directions issued by the Additional Commissioner of Income Tax. Issue-wise Detailed Analysis: 1. Deletion of addition on account of Long Term Capital Gain: The Revenue challenged the deletion of the addition of ?16,53,86,672/- made by the Assessing Officer (AO) on account of long-term capital gains. The AO adopted the value determined by the stamp duty authority as the full value of consideration under Section 50C of the Act, which was higher than the sale consideration stated in the sale deed. The CIT(A) upheld the adoption of the stamp duty value but deleted the addition made by the AO by adopting the indexed cost of acquisition based on the DVO’s report, holding the reference to the DVO invalid. The Tribunal affirmed the CIT(A)'s decision, noting that the variance between the stamp duty value and the sale consideration was only 1.49%, which should be ignored as per the Coordinate Bench decision in Sita Ben Khetan vs. ITO. 2. Deletion of disallowance of deduction claimed under Section 48: The Revenue contended that the CIT(A) erred in allowing a deduction of ?1 crore under Section 48 while computing the long-term capital gains. The assessee argued that the amount was paid to withdraw the rights of an earlier purchaser, enabling the sale to another party at a higher consideration. The Tribunal upheld the CIT(A)'s decision, finding a direct and close linkage between the payment and the transfer of the property, making it an allowable deduction under Section 48. 3. Adoption of value by the Stamp Authority instead of transaction value: The assessee challenged the adoption of the stamp authority's value of ?18,99,70,208/- instead of the transaction value of ?18,63,71,000/-. The Tribunal noted that the difference was only 1.49%, which should be ignored based on the Coordinate Bench decision in Sita Ben Khetan vs. ITO, and directed the AO to adopt the transaction value declared by the assessee. 4. Validity of reference to DVO under Section 55A: The Revenue argued that the AO was justified in referring the matter to the DVO under Section 55A. The Tribunal held that the amendment to Section 55A(a) by the Finance Act, 2012, which allowed reference to the DVO when the value claimed by the assessee is at variance with its fair market value, was effective from 01.07.2012 and not applicable retrospectively. Therefore, the reference made by the AO was invalid as the transaction pertained to the period before the amendment. 5. Determination of Fair Market Value (FMV) of property as on 01.04.1981: The assessee argued that the AO did not consider the registered valuer’s report correctly and referred the matter to the DVO based on incorrect assumptions. The Tribunal found that the AO had not formed a proper opinion as required under Section 55A before making the reference and that the DVO’s report was based on incorrect assumptions and did not follow standard valuation practices. 6. Application of the fair market value determined by DVO: The Tribunal noted several discrepancies in the DVO’s report, including incorrect assumptions about the property’s use and failure to consider relevant factors such as the property’s commercial potential, frontage, and locality. The Tribunal held that the DVO’s report could not be relied upon due to these deficiencies and directed the AO to adopt the value determined by the registered valuer. 7. Directions issued by the Additional Commissioner of Income Tax: The assessee challenged the directions issued by the Additional Commissioner of Income Tax under Section 144A, directing the AO to complete the assessment based on the DVO’s report. The Tribunal found that the directions were in line with the provisions of Section 16A of the Wealth Tax Act, which applies to Section 55A of the Income Tax Act. However, since the reference to the DVO was invalid, the directions based on the DVO’s report could not be sustained. Conclusion: The Tribunal dismissed the Revenue’s appeal and partly allowed the assessee’s cross-objection, directing the AO to adopt the transaction value declared by the assessee and the FMV determined by the registered valuer, and to allow the deduction of ?1 crore under Section 48.
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