1991 (11) TMI 103 - AT - Income Tax

Summary

Issues:
1. Validity of ITO's action in referring the case to Valuation Officer under s. 55A for computation of capital gains.
2. Discrepancy in fair market value of property as on 1st Jan., 1954 between assessee and Departmental Valuer.

Analysis:

Issue 1: Validity of ITO's action in referring the case to Valuation Officer under s. 55A for computation of capital gains:
The appeal was against the CIT(A)'s order confirming the ITO's action in referring the case to the Valuation Officer under s. 55A. The assessee challenged this action, arguing that the ITO should have accepted the approved valuer's report and not referred the matter again. The Tribunal held that the ITO was within his right to refer the case to the Valuation Officer if he found the value shown by the assessee to be incorrect. The Tribunal emphasized that s. 55A empowers the ITO to make such a referral when necessary. It was noted that the approved valuer's valuation was deemed excessive and not following the accepted method, leading to the Valuation Officer determining the fair market value at a lower amount. The Tribunal upheld the CIT(A)'s order confirming the ITO's action as legal.

Issue 2: Discrepancy in fair market value of property as on 1st Jan., 1954:
The second and third grounds of appeal related to the valuation of the property as on 1st Jan., 1954. The assessee claimed a higher fair market value compared to the Departmental Valuer's assessment. The CIT(A) supported the Departmental Valuer's approach, considering the property to be tenanted on the valuation date. The Tribunal, after considering both parties' submissions, upheld the CIT(A)'s order. It clarified that the fair market value should be determined based on the property's condition as of 1st Jan., 1954, not the date of sale in 1971. The Tribunal found the rental method adopted by the Valuation Officer to be reasonable, fair, and just. It rejected the assessee's argument that the valuation should consider the property's condition at the time of sale. The Tribunal set the fair market value at Rs. 3,00,000, considering various factors, and directed the ITO to calculate capital gains based on this valuation.

Conclusion:
The Tribunal partly allowed the appeal, confirming the validity of the ITO's action in referring the case to the Valuation Officer under s. 55A and settling the fair market value of the property as on 1st Jan., 1954 at Rs. 3,00,000 for computing capital gains. The last ground of appeal was dismissed as not pressed.