2020 (1) TMI 1066 - HC - Income Tax

Valuation for the purpose of capital gain - When once the revenue accepts the valuation for the purpose of capital gains in the returns filed over a period of years, subsequently can they refuse to accept the said valuation as the basis, for the subsequent years? - HELD THAT - It is evident that the issue whether, when the valuation for the purpose of capital gains in the returns filed over a period of years, is accepted by the authorities, they cannot refuse to accept the same for the consequent years, has not been adverted to by the authorities under the Act. For the aforementioned reasons, the substantial question of law framed is answered in favour of the assessee subject to the condition that the valuation report has been accepted in scrutiny assessment at the instance of the assessee - matter is remitted to the Assessing Officer to decide the issue with regard to valuation for the purpose of capital gains in the light of the observations made in this order supra.

Summary

Issues:
- Acceptance of valuation for capital gains in subsequent years

Analysis:
The appellant filed an appeal under Section 260-A of the Income Tax Act, 1961, questioning the refusal of the revenue to accept the valuation for capital gains in subsequent years after accepting it in previous years. The appellant, along with others, owned an inherited property and constructed a residential complex on it, selling the flats individually. The appellant declared the fair market value for capital gains as per a valuer's report at ?90.25 per square feet. However, the Assessing Officer considered this value high due to the location being underdeveloped, and adopted a lower value of ?25.50 per square feet, leading to certain disallowances. The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal modified the fair market value to ?38 per square feet and ?50 per square feet, respectively. The appellant argued that once the revenue accepts a valuation for capital gains in previous years, they cannot refuse to accept the same in subsequent years. The respondent contended that if a valuation is accepted in scrutiny assessments for previous years, it should be considered in subsequent years.

The High Court observed that the authorities under the Act did not address the issue of whether accepted valuations for capital gains in previous years should be continued in subsequent years. After reviewing the orders passed by the authorities, the Court found that this crucial aspect had not been considered. Consequently, the substantial question of law was answered in favor of the assessee, with the condition that the valuation report had been accepted in scrutiny assessments previously. As a result, the impugned order was quashed, and the matter was remitted to the Assessing Officer for a decision on the valuation for capital gains in accordance with the Court's observations. The appeal was disposed of accordingly.