2021 (2) TMI 348 - AT - Income Tax

Additional long term capital gain earned on sale of agriculture land - assessee adopted cost of land as on 01.04.1981 @ ₹ 110/- per Sq mtr on the basis of report of Government Approved Valuer, which is higher to the alleged fair market value suggested by DVO - AO disregarded the working of the assessee and computed LTCG, on the basis of information gathered from the officer of Sub- Registrar Surat about the value of land in the area in 1981 in Vesu area of Surat, at ₹ 6.45/- per Sq mtr. - Commissioner (Appeals) made reference to the DVO - whether the Assessing Officer was empowered to make reference to the DVO when he was of the view that the value adopted by assessee for computing LTCG is at variance with its fair market value ? - HELD THAT - As decided in Jignesh Kumar N Modi HUF 2019 (6) TMI 1571 - ITAT SURAT when the transaction of the land taken place during the financial year 2011-12 relevant the assessment year 2012-13, the amended provisions of section 55A(a) would not be applicable and one shall be guided by the erstwhile provisions of section 55A(a) of the Act. It was also held that in order to refer the matter to the valuation officer as per under erstwhile provisions of section 55A(a) of the Act would be applicable - value so claimed by assessee is less than its Fair Market Value in the opinion of Assessing Officer, matter can be referred to valuation officer. In a scenario, where the value so claimed by the assessee is more than its fair market value, the matter could not be referred to the valuation officer. It was ultimately held that the Assessing Officer was not empowered to refer the matter to the valuation officer, even as per the erstwhile provisions of section 55A(a) prior to amendment by the Finance Act, 2012. Also see M/S. PUJA PRINTS 2014 (1) TMI 764 - BOMBAY HIGH COURT Thus we hold that reference made to the DVO by Assessing Officer for determination of Fair Market Value was not valid. Therefore, respectfully following the same, we accept the legal submissions of the ld. AR of the assessee and held the reference to the DVO for determination of fair market value is not valid. No contrary facts or law is brought to our notice to take other view. Penalty u/s 271(1)(c) - No sufficient opportunity of hearing given to assessee - HELD THAT - No notice on the address provided by assessee was sent to the assessee and that the assessee has good case on merit and is likely to succeed, if the assessee is given opportunity of hearing on merit. We find merit in the submissions of the ld. AR for the assessee that the assessee was prevented by sufficient cause in non-appearance before ld. Commissioner (Appeals). Moreover, the ld. Commissioner (Appeals) has not passed order as per the mandate of section 250(6) of Income Tax Act. Therefore, we restore the appeal to the file of ld. Commissioner (Appeals) to consider the grounds of appeal raised by the assessee afresh. We find that the additional grounds of appeal is purely legal in nature and will not require to bring additional facts on record, thus, the additional ground of appeal is admitted and is also restore back to the file of ld. Commissioner (Appeals)

Summary

Issues Involved:
1. Validity of reference to the District Valuation Officer (DVO) for determining the fair market value (FMV) of land.
2. Legitimacy of the penalty levied under section 271(1)(c) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of Reference to the DVO for Determining FMV:
The assessee filed a return for the assessment year 2012-13, declaring a total income of ?48,570. During scrutiny, it was noted that the assessee, along with co-owners, sold agricultural land and calculated Long Term Capital Gain (LTCG) using a valuation of ?110 per sq. meter based on a Government Approved Valuer's report. The Assessing Officer (AO) disputed this valuation, referring to sale instances in 1981 where land value was around ?6.45 per sq. meter, thus recalculating the LTCG and making an addition of ?22,61,009.

On appeal, the Commissioner (Appeals) referred the matter to the DVO, who suggested a value of ?28 per sq. meter. The Commissioner (Appeals) directed the AO to re-calculate LTCG based on this DVO report, partially granting relief to the assessee. The assessee further appealed to the Tribunal, arguing that the AO assumed the role of a technical expert without the necessary skills and that the amended provisions of section 55A(a) were not applicable retrospectively.

The Tribunal noted that the amendment to section 55A(a) effective from 01.07.2012, which allowed references to the DVO when the value claimed was at variance with FMV, was not applicable to transactions before this date. The Tribunal relied on precedents from the Gujarat High Court (CIT vs. Gaurangiben S. Shodhan) and the Bombay High Court (CIT vs. Pooja Prints), which held that references to the DVO were not valid if the claimed value was higher than FMV under the erstwhile provisions of section 55A(a). Consequently, the Tribunal held that the reference to the DVO was not valid and deleted the additions based on such reference.

2. Legitimacy of Penalty Under Section 271(1)(c):
The AO levied a penalty of ?2,77,173 under section 271(1)(c) for concealment of income, based on the addition of ?13,45,497 to LTCG as per the Commissioner (Appeals)'s order. The assessee contended that the addition was based on the DVO's estimation, which should not attract a penalty. The Commissioner (Appeals) upheld the penalty in an ex-parte order due to non-appearance by the assessee.

The Tribunal reviewed the case and found that the assessee had provided the address of their Authorized Representative (AR) in Form-35, and no notice was sent to this address. The Tribunal acknowledged that the assessee was out of the country and did not receive the hearing notice. It was also noted that the Commissioner (Appeals) did not pass the order as per the mandate of section 250(6) of the Income Tax Act.

Given these circumstances, the Tribunal restored the appeal to the Commissioner (Appeals) for fresh adjudication, ensuring that the assessee is granted an opportunity of hearing. The Tribunal also admitted the additional grounds of appeal raised by the assessee, which were legal in nature and did not require new facts to be brought on record.

Conclusion:
The Tribunal allowed the appeal on the quantum assessment, holding the reference to the DVO invalid and deleting the related additions. The penalty appeal was remanded to the Commissioner (Appeals) for fresh consideration, ensuring due process and opportunity for the assessee to present their case.