2024 (1) TMI 941 - AT - Income Tax

Capital gain - Valuation - FMV determination - Conversion of agriculture land - reference to DVO - whether language of section 55A of the Act reference cannot be made to the DVO? - HELD THAT - No infirmity in the order of ld. CIT(A) so as to call interference. In the instant case, we are of the considered view that ld. CIT(A) has correctly observed that the report of the registered valuer on which reliance has been placed by the assessee is not reliable for various reasons as elaborated in the order passed by ld. CIT(A). Accordingly, looking into the facts of the case, the ld. CIT(A) has correctly held that in the instant case, the Assessing Officer was correct in referring the matter to the valuation officer to determine the value of such asset. Accordingly, we find no merit in the additional ground raised by the assessee. The additional ground raised by the Assessee is hereby rejected. Considering the cost of acquisition of the aforesaid property as non-agricultural land as on 01-04-1981 - Assessee has taken the value of cost of acquisition, by considering the same to be non-agricultural property at the time of purchase. However, we are of the considered view that there is apparently no justification for considering the cost of acquisition of the aforesaid property as non-agricultural land as on 01-04-1981, when such property was agricultural property as on the date of acquisition and such property had been converted into non-agricultural property only during the impugned year under consideration, prior to sale. Valuation adopted by the assessee has not given any comparative sale instances and has simply arrived at value of cost of acquisition of land by adopting reverse formula i.e. by taking sale rate of non-agricultural property in the current year and applying inflation index. CIT(A) has correctly observed that the land sold in current year is non-agricultural land but the land was agricultural land as on 01-04-1981 and therefore cost of land as on 01-04-1981 cannot be determined based on sale rate of non-agricultural land for the current year and thereafter applying reverse formula thereon. CIT(A) has correctly concluded that fair value of land adopted by the valuer appointed by the assessee is incorrect and that too without any supporting evidences. In the case of Meccano Industries 1985 (7) TMI 179 - ITAT MADRAS-A ITAT held that in case of sale of agricultural land, which was not capital asset at time of its acquisition by assessee but was subsequently converted into capital asset by its division into plots prior to sale, cost of acquisition of such capital asset for working out capital gains would be taken as its original cost of acquisition to assessee and not its market value on date of its conversion into non-agricultural land. - Decided against assessee.

Issues Involved:
1. Confirmation of the assessment order passed under section 143(3) of the Act.
2. Valuation of the property as on 01.04.1981.
3. Disallowance of the cost of improvement claimed by the assessee.
4. Additional grounds concerning the applicability of Section 55A(a) regarding the reference to DVO.

Summary:

Issue 1: Confirmation of Assessment Order
The learned CIT(A) confirmed the assessment order passed by the Assessing Officer under section 143(3) of the Income Tax Act. The assessee's appeal against this confirmation was dismissed.

Issue 2: Valuation of Property as on 01.04.1981
The CIT(A) upheld the valuation adopted by the Assessing Officer, which was based on the DVO's report. The DVO computed the cost of acquisition of the property as on 01-04-1981 at Rs. 1,17,865/-, using data from the sub-registrar. The CIT(A) rejected the valuation report submitted by the assessee's valuer, who was not authorized to value agricultural land and had used a reverse indexation method without providing comparative sale instances. The Tribunal found no infirmity in the CIT(A)'s order, agreeing that the valuation method used by the assessee's valuer was misleading and unsupported by evidence. The assessee's additional ground regarding the applicability of Section 55A(a) was also rejected, as the CIT(A) correctly observed that the Assessing Officer was justified in referring the matter to the DVO.

Issue 3: Disallowance of Cost of Improvement
The CIT(A) disallowed the cost of improvement claimed by the assessee, amounting to Rs. 9,00,000/-, due to the lack of supporting evidence. The Tribunal upheld this disallowance, noting that the assessee failed to provide basic details or evidence for the claimed improvement costs. The reliance on the case of ITO vs. Anilkumar was deemed inapplicable as it was based on different facts.

Issue 4: Additional Grounds on Section 55A(a)
The assessee's additional grounds argued that the lower authorities failed to appreciate that Section 55A(a) does not permit the AO/DVO to make a variance if the value determined by the assessee is higher than the FMV. The Tribunal found no merit in this argument, supporting the CIT(A)'s view that the Assessing Officer was correct in referring the matter to the DVO under the given circumstances.

Conclusion:
The appeal of the assessee was dismissed in its entirety. The Tribunal upheld the CIT(A)'s decisions on all grounds, including the confirmation of the assessment order, the valuation of the property, and the disallowance of the cost of improvement. The additional grounds raised by the assessee were also rejected. The order was pronounced in the open court on 10-11-2023.

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