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2022 (9) TMI 515 - AT - Income TaxRectification u/s 154 - Receipt of valuation report after the date of assessment order passed - re-computation of the long term capital gain - FMV / Cost of acquisition determination - sale of immovable property - HELD THAT - Assessing Officer has not stated any reasons for not accepting the valuation report submitted by the assessee anywhere in the Assessment Order passed u/s. 143(3) of the Act. Subsequently valuation report from DVO dated 08.10.2018 was received wherein the construction cost of the immovable property situated at Hyderabad is valued at Rs.2,51,500/. Accordingly, the value determined by the DVO is Rs.2,51,500/- by adopting estimated cost method. Whereas assessee submitted the value of Rs.8,00,000/- adopting the fair market value method. Accordingly, Assessing Officer passed the rectification order u/s. 154 of the Act. In the case of of Kirit Thakker 2011 (10) TMI 771 - ITAT MUMBAI , it was held that, the issue of valuation/FMV accepted by the Assessing Officer while passing the assessment order u/s 143(3) cannot be disturbed and re-determined under the provisions of sec. 154, as the said issue, in our view, is not an error or mistake apparent on the face of the order, which can be rectified under the provisions of sec. 154. We are inclined to set-aside the order passed u/s. 154 and order of CIT(A). - Decided in favor of assessee.
Issues Involved:
1. Addition of Rs. 28,08,320/- on account of enhanced long-term capital gains. 2. Validity of rectification proceedings under Section 154 of the Income Tax Act, 1961. 3. Consideration of Fair Market Value (FMV) as on 01.04.1981 for computing indexed cost of acquisition. Issue-wise Detailed Analysis: 1. Addition of Rs. 28,08,320/- on account of enhanced long-term capital gains: The primary issue revolves around the addition of Rs. 28,08,320/- to the assessee's income due to enhanced long-term capital gains. The assessee declared a long-term capital gain of Rs. 2,51,18,239/- after claiming exemption under Section 54 of the Income Tax Act, 1961. The Assessing Officer (AO) recalculated the long-term capital gain based on a valuation report from the District Valuation Officer (DVO), which valued the construction cost of the immovable property at Rs. 2,51,500/- against the assessee's claim of Rs. 8 lakhs. Consequently, the AO issued a rectification order under Section 154, enhancing the long-term capital gain to Rs. 2,79,26,649/-. 2. Validity of rectification proceedings under Section 154 of the Income Tax Act, 1961: The assessee challenged the rectification proceedings under Section 154 on the grounds that there was no "mistake apparent from the records," and the additions made were based on a difference of opinion between two valuation reports. The Tribunal observed that the AO had not provided reasons for not accepting the valuation report submitted by the assessee during the original assessment proceedings under Section 143(3). The Tribunal cited precedents, including the case of Shri Kirit Thakker v. ITO, where it was held that a decision on a debatable point of law or fact cannot be corrected under Section 154. The Tribunal concluded that the issue of determining the FMV as on 01.04.1981 is highly debatable and not a mistake apparent from the record. Therefore, the rectification order under Section 154 was set aside. 3. Consideration of Fair Market Value (FMV) as on 01.04.1981 for computing indexed cost of acquisition: The assessee argued that the AO should have considered the FMV of the property as on 01.04.1981 to arrive at the indexed cost of acquisition, as per Section 55(2)(b) of the Income Tax Act. The DVO's report, which valued the construction cost at Rs. 2,51,500/-, was based on estimated cost rather than FMV. The Tribunal noted that the DVO's report was received after the original assessment and was used to rectify the assessment under Section 154. The Tribunal emphasized that the valuation method adopted by the DVO was not in line with the FMV method required under Section 55(2)(b). Consequently, the Tribunal found merit in the assessee's contention and allowed the additional grounds raised by the assessee. Conclusion: The Tribunal set aside the rectification order passed under Section 154 and the order of the Learned Commissioner of Income Tax (Appeals). The Tribunal allowed the additional grounds raised by the assessee, emphasizing that the issue of FMV as on 01.04.1981 is debatable and not a mistake apparent from the record. Consequently, the appeal filed by the assessee was partly allowed.
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