2024 (2) TMI 697 - AT - Income Tax

Assessment of capital gains/loss - assessee has declared the fair market value as on 01.04.1981 which is higher than the estimate made by the DVO - value adopted by the DVO can be taken for computing fair market value or not? - HELD THAT - It is clear that where value of capital assets shown by the assessee being less than its fair market value, reference can only be made to DVO in that condition, but in case the value of capital asset shown is more than fair market value, reference cannot be made as held by Hon ble Bombay High Court in the case of Daulal Mohta (HUF), 2008 (9) TMI 890 - BOMBAY HIGH COURT In the present case, the assessee has declared value as on 01.04.1981 at Rs. 21,58,689/- and hence, the value determined by the DVO is less than that at Rs. 27,000/- and hence, the value adopted by the DVO cannot be taken for computing fair market value. Hence, we allow this issue of assessee s appeal and reverse the orders of lower authorities on this issue.

Summary

Issues Involved:
1. Assessment of capital gains.
2. Jurisdictional ground.

Summary:

1. Assessment of Capital Gains:
The primary issue concerns the assessment of capital gains related to the sale of the assessee's 1/3rd share of vacant land. The assessee declared a capital loss of Rs. 87,57,468/- based on a sale consideration of Rs. 41,94,664/- and a cost of acquisition as on 01.04.1981 at Rs. 21,58,689/-. The AO issued a notice under section 148 of the Income Tax Act, 1961, assuming jurisdiction under section 147 due to an alleged inflation of the cost of acquisition, which led to the escapement of income. The AO, referencing the DVO's valuation, determined the cost of acquisition as Rs. 27,000/- and computed the capital gains at Rs. 40,32,664/-.

The CIT(A) upheld the AO's decision, stating that the value adopted by the assessee was exorbitantly high and lacked basis, thereby confirming the assessment order without interference.

On appeal before the Tribunal, the Amicus Curie argued that the reference to the DVO was invalid as per the Hon'ble Bombay High Court's decision in CIT vs. Puja Prints, which held that a reference to the DVO could only be made when the value adopted by the assessee was less than the fair market value. The Tribunal agreed, noting that the amendment to section 55A(a) by the Finance Act, 2012, effective from 01.07.2012, does not apply retrospectively. Consequently, the Tribunal reversed the lower authorities' orders on this issue, allowing the assessee's appeal.

2. Jurisdictional Ground:
The jurisdictional ground raised by the assessee was not argued and thus dismissed.

Conclusion:
The appeal filed by the assessee was partly allowed, with the Tribunal ruling in favor of the assessee on the capital gains assessment issue and dismissing the jurisdictional ground. The decision was pronounced in the open court on 9th February 2024 at Chennai.