2023 (2) TMI 708 - AT - Income Tax

Capital gain computation - Determing sale consideraation - adopting the value of the property as fair market value instead of actual sale consideration - Applicability of provision of 50C - HELD THAT - DVO has taken into consideration the highest sale instance as mentioned at Sl. No. 1 of the aforesaid chart, which is of dated 26.12.2013 @ 3,47,141/- per Sqm, but deliberately failed to consider the other instances mentioned at Sl. No. 2, 3 4 even dated 07.08.2014. As in the instant case, the property under consideration was sold in the financial year 2015-16, therefore, the instances of financial year 2014-15 would be most relevant for determining the sale consideration. Hence, considering the peculiar facts and circumstances, we deem it appropriate to direct the Assessing Officer to take into consideration, the average of three instances as mentioned at Sl. No. 2 to 4 of the chart referred to above and also add the fair market value of covered car parking as well, while estimating the fair market value of the property, as on the date of transfer and determine/compute the capital gain accordingly. Appeal filed by the Assessee stands allowed.

Issues:
1. Computation of fair market value of property for capital gain calculation.
2. Disallowance of claimed loss due to lack of business activities.
3. Challenge of fair market value adoption by Assessing Officer.
4. Judicial review of Assessing Officer's valuation decision.
5. Appeal against Commissioner's decision on fair market value.

Computation of fair market value of property for capital gain calculation:
The Assessee declared a loss and sold a property, leading to a discrepancy in the consideration amount. The Assessing Officer referred to the District Valuation Officer (DVO) for valuation, which resulted in a fair market value higher than the sale consideration. The Assessee argued for inclusion of additional expenses in the property cost. The Assessing Officer applied section 50C of the Income Tax Act, resulting in an addition to the capital gain calculation. The claimed loss was disallowed due to lack of business activities.

Disallowance of claimed loss due to lack of business activities:
The Assessing Officer disallowed the claimed loss as no business activities were conducted during the year, rendering the claimed loss ineligible against property transfer activities. The computation of income was also deemed incorrect, leading to the rejection of the loss claim.

Challenge of fair market value adoption by Assessing Officer:
The Assessee challenged the adoption of the DVO's valuation for fair market value, arguing that the actual sale consideration should be used for capital gain computation. The Assessee criticized the DVO's valuation methodology, claiming errors and excessive valuation. However, the Commissioner upheld the Assessing Officer's decision based on judicial precedents, considering the DVO's estimate as binding.

Judicial review of Assessing Officer's valuation decision:
The Assessee appealed the Commissioner's decision, contesting the adoption of DVO's valuation over the actual sale consideration. The Tribunal reviewed the facts and directed the Assessing Officer to consider multiple sale instances and include car parking value to determine the fair market value accurately for capital gain computation, allowing the Assessee's appeal.

Appeal against Commissioner's decision on fair market value:
The Tribunal allowed the Assessee's appeal, directing a reevaluation of the fair market value based on relevant sale instances and additional considerations, overturning the Commissioner's decision on the fair market value adoption.

This detailed analysis covers the issues related to the computation of fair market value for capital gain calculation, disallowance of claimed loss, challenges to fair market value adoption, judicial review of valuation decisions, and the final appeal outcome against the Commissioner's decision.

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