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2021 (5) TMI 57 - AT - Income TaxCapital gain computation - valuation of property - AO took into account the value of the property as on 01.04.1981 - reliability on Valuation report of DVO - HELD THAT - We note that where the assessee objects before the assessing officer that value adopted by stamp valuation authority under section 50C(1) exceeds fair market value of property on date of transfer, assessing officer may either accept valuation of property on the basis of report of approved valuer filed by the assessee or he may refer question of valuation of capital asset to DVO in accordance with section 55A. We note that assessee has objected/challenged the DVO report during the assessment proceedings as well as appellate proceedings. Besides, the ld CIT(A) has also not considered the valuation report of Shri Ramesh Jain, submitted by the assessee, during the appellate proceedings. The ld CIT(A) ought to have considered the valuation report of Shri Ramesh Jain, submitted by the assessee and he must have disposed of the objections of the assessee in respect of DVO report, but he has failed to do so therefore it is against the principle of natural justice. Valuation report of DVO, after all, cannot be treated as the last word on valuation, and there has to be a grievance redressal mechanism against incorrectness of the DVO s valuation- particularly when the DVO has not properly disposed of the objections of the assessee. It is abundantly clear from the precedents cited above, that correctness of a DVO s report can be challenged by the assessee. We note that correctness of the DVO s report is to be examined on merits and there is no adjudication, on that aspect, by the CIT(A). Thus, Ld CIT(A) has to examine correctness of the DVO s report on merits after hearing both sides. Therefore, we deem it fit and proper to set aside the order of the ld. CIT(A) and remit the matter back to the file of the ld. CIT(A) to adjudicate the issue afresh on merits, in accordance with the scheme of the law, after giving a due and reasonable opportunity of hearing to the assessee as well as DVO.
Issues Involved:
1. Validity of the reference made by the Assessing Officer (AO) to the District Valuation Officer (DVO) under section 55A of the Income Tax Act. 2. Accuracy and fairness of the DVO's valuation report. 3. Right of the assessee to challenge the DVO's valuation report. 4. Consideration of the valuation report submitted by the assessee's Registered Valuer. 5. Principle of natural justice in providing the assessee an opportunity to challenge the DVO's report. Detailed Analysis: 1. Validity of the Reference to DVO: The AO referred the valuation of the agricultural land to the DVO under section 55A of the Income Tax Act, 1961, due to a significant discrepancy between the assessee's valuation and the DVO's valuation. The AO's action was based on the belief that the assessee's declared value of ?180 per square meter as of 01.04.1981 was excessively high compared to the DVO's valuation of ?6.95 per square meter. 2. Accuracy and Fairness of the DVO's Valuation Report: The DVO's report, dated 24.02.2016, valued the property significantly lower than the assessee's valuation. The assessee contested this valuation, arguing that the DVO's report was biased and defective, especially when compared to valuations of nearby properties where the DVO had given higher values. The AO, however, relied on the DVO's report to compute the capital gains, leading to an addition based on the lower valuation. 3. Right to Challenge the DVO's Valuation Report: The assessee argued that the reference to the DVO was erroneous and that the DVO's report was not based on a scientific and objective basis. The assessee's counsel cited the judgment of the Hon'ble High Court of Allahabad in Chandra Narain Chaudhri, which emphasized the AO's duty to consider the assessee's objections and the approved valuer's report before referring the matter to the DVO. The Tribunal noted that the correctness of the DVO's report can indeed be challenged by the assessee, as supported by the ITAT Ahmedabad's decision in Lovy Ranka. 4. Consideration of the Assessee's Valuation Report: The assessee had submitted a valuation report from a Government Approved Registered Valuer, valuing the property at ?180 per square meter as of 01.04.1981. The CIT(A) failed to consider this report and did not provide the assessee an opportunity to challenge the DVO's valuation. The Tribunal highlighted that the CIT(A) should have considered the assessee's report and provided a fair opportunity to challenge the DVO's findings. 5. Principle of Natural Justice: The Tribunal emphasized the principle of natural justice, stating that the assessee must be given a fair opportunity to challenge the DVO's report. The CIT(A)'s failure to consider the assessee's objections and the valuation report of Shri Ramesh Jain was against the principle of natural justice. The Tribunal reiterated that the DVO's report is not the final word on valuation and that there must be a mechanism for redressing grievances against incorrect valuations. Conclusion: The Tribunal set aside the order of the CIT(A) and remitted the matter back to the CIT(A) for fresh adjudication. The CIT(A) is directed to consider the assessee's objections, the valuation report submitted by the assessee, and provide a fair opportunity for both the assessee and the DVO to be heard. The Tribunal's decision applies mutatis mutandis to all related appeals. Order Pronouncement: The appeals of all the assessees are treated as allowed for statistical purposes, and the order was pronounced on 01/02/2021.
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