2023 (2) TMI 451 - AT - Income Tax

Capital gain computation - fair market value determined by the DVO in terms of provisions of section 50C(2) - sale of property by adopting fair market value determined by the DVO - assessee has requested for reference to DVO and the Assessing Officer has referred valuation of property to Departmental Valuation Cell - HELD THAT - AO admitted fact that the DVO did not submit valuation report. Therefore, he has completed assessment by adopting guideline value fixed by the authorities for payment of stamp duty. In our considered view, the mandate of law as prescribed u/s. 50C(2) of the Act, is that the AO is bound to refer valuation of property to the DVO, in case the assessee seeks to refer valuation to the Departmental Valuation Cell and further, the AO is bound to consider value determined by the DVO for the purpose of provisions of section 50C(1) of the Act. Since, the AO has failed to comply with mandate of the law, even though he had referred valuation to the DVO, in our considered view, the issue needs to go back to the file of the AO to reconsider the issue in light of provisions of section 50C(2) of the Act. Hence, we set aside the issue to the file of the AO and direct the AO to obtain necessary valuation report from the DVO and re-compute the capital gain from sale of property by adopting fair market value determined by the DVO. AO is also directed to consider cost of acquisition of the property and exemption claimed u/s. 54F of the Act in accordance with law. Appeal filed by the assessee is treated as allowed for statistical purposes.

Summary

Issues:
1. Delay in filing appeals due to Covid-19 lockdown.
2. Computation of long term capital gains based on fair market value.
3. Failure to obtain valuation report from Departmental Valuation Cell.
4. Consideration of indexed cost of acquisition and exemption u/s. 54F of the Act.

Issue 1: Delay in filing appeals due to Covid-19 lockdown:
The appeals filed by different assesses were directed against orders passed by the Commissioner of Income Tax-1, Trichy, for assessment year 2014-15. The delay in filing the appeals was attributed to the Covid-19 lockdown. The Appellate Tribunal, considering the circumstances and the extension of limitation by the Hon'ble Supreme Court, condoned the delay in filing the appeals.

Issue 2: Computation of long term capital gains based on fair market value:
The appeals primarily contested the re-computation of long term capital gains by invoking Section 50C of the Income Tax Act. The Assessing Officer had adopted the guideline value as the fair market value without considering other vital factors. The Appellate Tribunal emphasized the importance of obtaining an independent valuation for determining the fair market value and directed the Assessing Officer to re-compute the capital gains by considering the fair market value determined by the Departmental Valuation Cell.

Issue 3: Failure to obtain valuation report from Departmental Valuation Cell:
The Assessing Officer had failed to comply with the mandate of law under Section 50C(2) by not considering the valuation report from the Departmental Valuation Cell. As per the provisions, once the valuation is referred to the DVO, the AO is bound to adopt the value determined. The Appellate Tribunal set aside the issue to the AO to obtain the necessary valuation report and re-compute the capital gains accordingly.

Issue 4: Consideration of indexed cost of acquisition and exemption u/s. 54F of the Act:
The appeals also raised concerns regarding the consideration of indexed cost of acquisition and the exemption claimed under Section 54F of the Act. The Appellate Tribunal directed the Assessing Officer to consider these aspects in accordance with the law while re-computing the capital gains.

In conclusion, the Appellate Tribunal allowed the appeals for statistical purposes, setting aside the issues to the Assessing Officer for re-evaluation in compliance with the relevant provisions of the Income Tax Act. The judgments highlighted the importance of proper valuation procedures and adherence to legal requirements in computing long term capital gains.