2022 (3) TMI 33 - AT - Income Tax

Capital gain computation - Non reference to DVO - AO rejected the report of the Registered Valuer taking the rate of ₹ 17 per sq.ft. as on 1.4.1981 - HELD THAT - There is neither any reference to the receipt of the report of the DVO nor of carrying out any rectification to align the original computation of capital gain with the values as per the DVO s report. This course of action is impermissible. The contention of the ld. DR that the assessee did not extend co-operation to the DVO as a result of which the valuation could not take place, is neither here nor there. It is trite that even if an assessee does not extend co-operation in any proceedings under the Act, there are well defined ways and means to complete the proceedings. Once the assessment was finalised by expressly agreeing and specifically mentioning that the computation of capital gain was subject to rectification/revision as per valuation report of the DVO , it was all the more obligatory on the part of the AO to honour his words and do the needful. It is a matter of record that the AO did not give effect to his own undertaking which was a pre-condition of the assessee accepting the values proposed by the AO. In such a scenario, we are unable to countenance the view taken by the authorities below in the matter of computation of capital gain. We, therefore, set aside the impugned order and remit the matter to the file of the AO for obtaining the report of the DVO as admitted in the assessment order and then compute fresh amount of capital gain as per law after allowing adequate opportunity of hearing to the assessee - Appeals are allowed for statistical purposes.

Summary

Issues:
Appeals based on similar facts and common grounds arising from orders passed by CIT(A) for the assessment year 2015-16. Delay in filing appeals. Computation of capital gain based on valuation report discrepancies and failure to consider DVO's report. Non-alignment of capital gain computation with DVO's values. Failure to rectify assessment as per DVO's report.

Analysis:
The appeals, arising from orders passed by CIT(A) for the assessment year 2015-16, were time-barred but condoned due to valid reasons provided. The factual scenario involved a development agreement between the assessees and a company for a land transaction. Discrepancies arose in the valuation report used for computing capital gain, leading to the AO's proposal to adopt a different market value. Despite agreements subject to DVO's report, the assessment was completed without considering the DVO's valuation, leading to non-alignment of capital gain computation with DVO's values. The AO's failure to rectify the assessment as per DVO's report was deemed impermissible, as the assessees had cooperated and the AO had explicitly agreed to rectify based on DVO's values.

In the case of one appellant, the AO's actions were found impermissible due to not aligning the capital gain computation with DVO's values as agreed upon. The matter was remitted to the AO for obtaining and considering the DVO's report to compute the capital gain accurately. The other appellant's case was similar, and the impugned order was set aside for re-decision in line with the directions given for the first appellant. Both appeals were allowed for statistical purposes, emphasizing the need for proper consideration of DVO's valuation in capital gain computation.

The judgment highlights the importance of aligning capital gain computation with DVO's values as agreed upon during assessment proceedings. It underscores the obligation of the AO to rectify assessments based on DVO's report and provide adequate opportunity for the assessee to present arguments. The decision emphasizes the need for proper valuation considerations in determining capital gains, ensuring fair and accurate assessments in line with legal provisions.