2022 (11) TMI 731 - AT - Income Tax

Exemption u/s 54F 54EC - capital gain computation - reliance on reports of the Government approved valuer - addition by estimating the value of land @ Rs.750/- per square meter as on 01-04-1981 instead of adopted by the assessee @ Rs. 1,500/- per square meter on the basis of the Valuation Report - HELD THAT - DVO has mentioned the rates of comparable instances of property at Rs. 598/-, Rs, 643/- Rs. 263/- respectively. Still the DVO suggested the rate of property under consideration (PUC) at Rs. 880/- per square meter - we find no logic in suggesting such rate. DVO has also recorded that railway station and bus stand is only 2.0 to 2.5 Km away. The DVO despite giving such details has not justified the rate suggested at Rs. 880/- per square meter. Thus, in our view such report of DVO does not provide desired result. Report of Government approved valuer - The built in teak polished cupboards are made in walls. The kitchen on first floor is made of marble with shelves and dado up to lintel level. Wooden staircase is also provided to transit to upper level. The property is having good potential value. The rates of various instances are ranging from Rs. 126/- to 2500/- per square meter. In our view the report of Government approved valuer is based on minute details and supported with various comparable. Still considering the entire facts and circumstances, as find that the value suggested by Government approved valuer is on little higher side. No other cost of improvement is claimed by the assessee. Therefore, considering all the facts, the reports of the Government approved valuer and the instances recorded therein and taking holistic view, we direct the assessing officer to take value of land @ Rs. 1200/- per square meter and the rate of RCC and wooden structure @ 800/- per square meter and to re-compute the capital gain. The assessing officer shall allow the exemption under section 54F 54EC, which was otherwise not disputed by him during assessment. Considering the facts, as given considerable relief in directing the assessing officer to adopt the rate of land and construction, therefore, consideration and adjudication of other submissions of the assessee have become academic. In the result, the grounds of appeal raised by the assessee are partly allowed.

Summary

Issues Involved:
1. Valuation of land as on 01.04.1981 for computing capital gains.
2. Acceptance of valuation report from Government Approved Valuer versus Departmental Valuation Officer (DVO).
3. Correct computation of Long Term Capital Gains (LTCG).
4. Validity of rectification order under section 154 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Valuation of Land as on 01.04.1981:
The primary issue revolves around the valuation of land as on 01.04.1981 for computing capital gains. The assessee adopted the value at Rs. 1500/- per square meter based on a report from a Government Approved Valuer. The Assessing Officer (AO) found this valuation to be on the higher side and, without any comparable evidence, referred the matter to the DVO, who later valued it at Rs. 880/- per square meter. The AO initially adopted a rate of Rs. 750/- per square meter for assessment purposes.

2. Acceptance of Valuation Report:
The assessee argued that the valuation report from the Government Approved Valuer should be accepted as it was based on multiple sale instances from 1981. The AO, however, relied on the DVO's report, which was received after the assessment order was passed. The DVO's valuation was contested by the assessee, particularly the valuation of the RCC structure, which was not initially referred to the DVO. The CIT(A) upheld the AO's reliance on the DVO's report, stating that the valuation should include both land and structure.

3. Computation of Long Term Capital Gains:
The AO computed the LTCG based on the DVO's valuation, leading to a higher taxable capital gain. The assessee contested this computation, arguing that the AO should have considered the Government Approved Valuer's report, which provided a more detailed and higher valuation. The Tribunal, after considering both reports, directed the AO to adopt a value of Rs. 1200/- per square meter for the land and Rs. 800/- per square meter for the RCC and wooden structure to re-compute the capital gains.

4. Validity of Rectification Order under Section 154:
The AO passed a rectification order under section 154 based on the DVO's report, which increased the taxable LTCG. The assessee challenged this rectification, arguing that the original reference to the DVO was not justified and that the valuation of the RCC structure was not part of the initial reference. The CIT(A) upheld the rectification, but the Tribunal provided relief by adjusting the valuation rates and directing a re-computation of the capital gains.

Conclusion:
The Tribunal concluded that the valuation report from the Government Approved Valuer was detailed and supported by multiple sale instances. However, considering the overall facts and circumstances, it directed a revised valuation rate of Rs. 1200/- per square meter for the land and Rs. 800/- per square meter for the RCC and wooden structure. The AO was instructed to re-compute the capital gains accordingly and allow the exemptions under section 54F and 54EC. The appeal was partly allowed, providing relief to the assessee.