2022 (4) TMI 685 - AT - Income Tax

Capital gain computation - FMV determination of property - objection filed by the assessee on the issue of valuation of the property dismised as the issue is not emanating from order passed by the Assessing Officer u/s.154 - AO has referred valuation of the property to determine fair market value of the property as per request of the assessee, however, completed assessment without waiting for report of the DVO - HELD THAT - We find that when the Assessing Officer has referred valuation of the property to the DVO, the A.O. ought to have waited for report of the DVO to determine fair market value of the property - when the AO has revised fair market value of the property, as per valuation report of the DVO, then in our considered view, the issue of fair market value of the property sold by the assessee is merged with rectification order passed by the Assessing Officer u/s.154/155 and thus, when the assessee has challenged value determined by the Assessing Officer on the basis of report of the DVO, the learned CIT(A) ought to have dealt with objection filed by the assessee. In this case, the learned CIT(A), without considering objection filed by the assessee on the issue of valuation of the property has simply dismissed appeal filed by the assessee on technical reasons by holding that the issue is not emanating from order passed by the Assessing Officer u/s.154 of the Act. Therefore, we are of the considered view that there is an error in the order passed by the learned CIT(A), inasmuch as not considering the issue raised by the assessee and thus, we set aside order passed by the learned CIT(A) and restore the issue back to the file of the AO and direct the A.O. to deal with objections filed by the assessee on the issue of fair market value determined by the DVO before invoking provisions of section 50C - Assessee Appeal allowed for statistical purposes.

Issues:
1. Confirmation of addition made by the Assessing Officer
2. Referral to District Valuation Officer for determining fair market value
3. Discrepancies in the assessment order and consent for referral to DVO
4. Rejection of appeal by the CIT(A) based on technical grounds

Analysis:

Issue 1: Confirmation of addition made by the Assessing Officer
The appeal filed by the assessee challenged the order passed by the Commissioner of Income Tax (Appeals)-9 confirming the addition made by the Assessing Officer of ?1,09,53,080. The Assessing Officer determined the total income at ?1,32,53,010, making additions towards the difference in sale consideration as per section 50C of the Income Tax Act, 1961. The assessee did not challenge this assessment before the first appellate authority. Subsequently, the Assessing Officer passed a rectification order and reduced the total income to ?1,09,53,080 by adopting the fair market value determined by the District Valuation Officer.

Issue 2: Referral to District Valuation Officer for determining fair market value
The Assessing Officer referred the valuation of the property to the District Valuation Officer to determine the fair market value at the request of the assessee. However, the assessment was completed without waiting for the DVO's report. The Assessing Officer revised the fair market value based on the DVO's report and passed a rectification order. The CIT(A) rejected the appeal challenging the value adopted by the Assessing Officer, citing technical reasons that the issue did not arise from the rectification order. The ITAT Chennai found errors in this approach and directed the Assessing Officer to consider the objections filed by the assessee on the fair market value issue before applying section 50C of the Income Tax Act, 1961.

Issue 3: Discrepancies in the assessment order and consent for referral to DVO
There were discrepancies noted in the assessment order regarding the consent given by the appellant for referring the properties to the District Valuation Officer. The appellant denied giving any such authorization, contradicting the statements made in the order. The ITAT Chennai highlighted the importance of accurate representation and consent in such matters to ensure procedural fairness.

Issue 4: Rejection of appeal by the CIT(A) based on technical grounds
The CIT(A) rejected the appeal filed by the assessee on technical grounds, stating that the issue raised did not emanate from the rectification order passed by the Assessing Officer. The ITAT Chennai found that the CIT(A) failed to address the objections raised by the assessee regarding the valuation of the property, leading to an error in the order. Consequently, the ITAT set aside the CIT(A) order and directed the Assessing Officer to address the objections before applying relevant provisions of the Income Tax Act.

In conclusion, the ITAT Chennai allowed the appeal filed by the assessee for statistical purposes, emphasizing the importance of addressing objections and ensuring procedural fairness in tax assessments.

← Previous Next →