2020 (4) TMI 321 - AT - Income Tax

Reference of matter to DVO - valuation of the impugned land to valuation officer as provided in section 50C(2) - AO adopted the value as appearing in the certified copy of the sale deed - difference in market value of land as appearing in the registered sale deed, valuation report issued by Mr. Pramod Saraf and Shri D.K. Jain and sale consideration shown by assessee - HELD THAT - In the recent decision of the Coordinate Bench Mumbai in the case of Aavishkar Film (P.) Ltd. vs. ITO, 2019 (6) TMI 1175 - ITAT MUMBAI similar issue came for adjudication wherein held that even if in a case where no request is made by the assessee to make a reference to the DVO, the Assessing Officer while discharging a quasi-judicial function is duty-bound to act fairly by giving the assessee an option to follow the course provided by law to have the valuation made by the DVO . Respectfully following the decision above as in the instant case, facts are same wherein assessee challenged the fair market value adopted by the assessing officer during the course of assessment proceeding itself and made a request for referring the matter of the valuation to DVO which was not accepted. Set aside the issue raised to the file of the Ld. AO with a direction that the assessing officer will refer the matter of valuation of the impugned land to the DVO and after receiving the valuation report decide accordingly as per the provisions of law. Assessee s appeal allowed for statistical purposes.

Issues Involved:
1. Legality and jurisdiction of the assessment.
2. Classification of the land as urban land and consequent levy of capital gain.
3. Refusal to refer the matter to the valuation officer under Section 50C(2) of the Income Tax Act, 1961.
4. Adoption of sale consideration for Long Term Capital Gain computation.
5. Denial of exemptions under Sections 54F and 54EC.
6. Addition of Employee’s Contribution towards PF/ESIC under Section 36(1)(va).

Issue-wise Detailed Analysis:

1. Legality and Jurisdiction of the Assessment:
The assessee contended that the assessment was illegal, void, and without jurisdiction, arguing that the Assessing Officer (AO) relied on statements recorded under Section 131 without confronting the assessee and without granting any opportunity for cross-examination. However, the tribunal noted that the assessee was provided sufficient opportunity during the assessment proceedings. Consequently, this ground was dismissed.

2. Classification of Land as Urban Land:
The assessee argued there was no justification in treating the sale of agricultural land as a sale of urban land, thus subjecting it to capital gains tax. However, the tribunal observed that the assessee did not press this ground during the appeal, and no challenge was raised against the AO’s action of treating the agricultural land as urban land. Therefore, this ground was also dismissed.

3. Refusal to Refer to Valuation Officer under Section 50C(2):
The assessee requested the AO to refer the valuation of the land to the Valuation Officer as per Section 50C(2), which was declined. The tribunal noted that as per Section 50C(2), if the assessee claims that the value adopted by the stamp valuation authority exceeds the fair market value, the AO may refer the valuation to a Valuation Officer. The tribunal referred to the case of Aavishkar Film (P.) Ltd. vs. ITO, where it was held that the AO is duty-bound to act fairly and refer the valuation to the DVO if the assessee objects to the stamp duty valuation. Consequently, the tribunal directed the AO to refer the matter to the DVO and decide accordingly based on the DVO’s valuation report. This ground was allowed for statistical purposes.

4. Adoption of Sale Consideration for Long Term Capital Gain Computation:
The AO adopted the sale consideration of ?4,67,18,000 as per the certified copy of the sale deed instead of the actual sale value of ?2,45,00,000, leading to a computation of Long Term Capital Gain at ?4,33,31,197 after providing deduction for indexed cost of acquisition. The tribunal’s direction to refer the matter to the DVO for valuation implicitly addresses this issue, as the correct valuation will impact the computation of capital gains.

5. Denial of Exemptions under Sections 54F and 54EC:
The AO denied exemptions claimed under Section 54F (?35,18,588 for investment in house property) and Section 54EC (?50,00,000 for investment in infrastructure bonds). The Ld. CIT(A) allowed these exemptions, and the tribunal did not find any further contention on these grounds, implying that these exemptions were upheld.

6. Addition of Employee’s Contribution towards PF/ESIC under Section 36(1)(va):
The AO made a minor addition of ?20,509 for the delay in deposit of PF and ESIC. The Ld. CIT(A) allowed this ground in favor of the assessee, and the tribunal did not find any further contention on this issue, implying that this addition was reversed.

Conclusion:
The tribunal partly allowed the appeal for statistical purposes, directing the AO to refer the valuation of the land to the DVO and decide accordingly based on the DVO’s report. The order was pronounced in the open court on 29.01.2020.

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