2003 (10) TMI 271 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the reference made to the Departmental Valuation Officer (DVO) without affording an opportunity to the assessee.
2. Applicability of Section 52(2) of the Income Tax Act, 1961.
3. Determination of fair market value for capital gains under Section 55A of the Income Tax Act, 1961.
4. Adequacy of the opportunity granted to the assessee to contest the DVO's report.
5. Levy of interest under Section 234B of the Income Tax Act, 1961.
6. Miscellaneous application filed by the assessee under Section 254(2) of the Income Tax Act, 1961.

Detailed Analysis:

1. Validity of the Reference to the DVO:
The assessee contended that the reference to the DVO was made without affording an opportunity to the assessee. The CIT(A) dismissed this contention, stating that the reference was valid under Section 2(22B) and not under the now-defunct Section 52(2). The Tribunal upheld this view, emphasizing that no provision in the Act mandates an opportunity to be granted to the assessee before making a reference to the DVO. The Tribunal noted that the DVO's report was duly confronted to the assessee, and the objections were considered, thus fulfilling the requirement of fair opportunity.

2. Applicability of Section 52(2):
The assessee relied on the Supreme Court's decision in K.P. Varghese vs. ITO, arguing that the fair market value could not be adopted unless there was evidence of higher consideration received. The CIT(A) and the Tribunal distinguished this case, noting that Section 52(2) was no longer on the statute and the present context derived its sustenance from Section 2(22B). The Tribunal concluded that the reference under Section 55A was valid and not governed by the principles laid down in K.P. Varghese.

3. Determination of Fair Market Value under Section 55A:
The AO referred the matter to the DVO, who determined the fair market value of the plot at Rs. 24,10,621. The DVO's report was based on comparable sale instances and adjustments for location and size. The Tribunal upheld the DVO's valuation, noting that the assessee's objections were considered, and appropriate deductions were made. The Tribunal emphasized that the AO's reference to the DVO under Section 55A was valid and supported by legal precedents, including Jindal Strips Ltd. vs. ITO and ITO vs. Pradeep Kumar Badjatiya & Co.

4. Adequacy of Opportunity to Contest the DVO's Report:
The assessee argued that the inspector's report was not confronted, and the DVO's report was not adequately challenged. The Tribunal found that the DVO's report was confronted to the assessee, and the objections were duly considered. The Tribunal noted that the assessee failed to provide a valuation report from a registered valuer to counter the DVO's report. The Tribunal concluded that the assessee was given adequate opportunity to contest the DVO's report, and no material defects were pointed out.

5. Levy of Interest under Section 234B:
The assessee contested the levy of interest under Section 234B, relying on the Supreme Court's decision in CIT vs. Ranchi Club. The Tribunal restored this issue to the CIT(A) for necessary verification, noting that the computation of interest needed to be examined in light of the Supreme Court's decisions in Kalyan Kumar Ray vs. CIT and Ranchi Club.

6. Miscellaneous Application under Section 254(2):
The assessee filed a miscellaneous application under Section 254(2), arguing that there was a mistake apparent on record in the Tribunal's order. The Tribunal dismissed the application, stating that no error was pointed out, and the assessee was attempting to re-argue the appeal. The Tribunal emphasized that the reference to the DVO was valid, and the assessee failed to demonstrate any material defects in the DVO's report. The Tribunal concluded that the miscellaneous application lacked merit and upheld the original order.

Conclusion:
The Tribunal upheld the validity of the reference to the DVO, the determination of fair market value under Section 55A, and the adequacy of the opportunity granted to the assessee. The issue of interest under Section 234B was restored to the CIT(A) for verification. The miscellaneous application filed by the assessee under Section 254(2) was dismissed for lack of merit.