2013 (6) TMI 288 - AT - Income Tax

Valuation - Computation of Capital Gains - Power of AO to refer to DVO u/s 55A - Reopening of assessment - Held that - The relevant portion of the assessment order where AO himself has written that these assessments are subject to rectification/revision on receipt of valuation report of the DVO, Mumbai which also include letter written to BMC in respect of assessment year 2009-10, have already been reproduced. Therefore, it was in the mind of AO that his calculation may vary subject to these valuations and letter from BMC. These are evidences of AO and department cannot go back from his own stand to contend that cognizance of such report cannot be taken as AO has no authority to refer the valuation under section 55A. However, the land has been valued by the DVO which has power and skill to determine such value. If the evidence is available on record then it will be inappropriate to compute capital gain without taking cognizance of that evidence just for the reason that the same is going against the revenue. It has already been pointed out that it is the evidence collected by the revenue and when the valuation has been disputed by the assessee, such authenticated evidence cannot be ignored simply for the reason that AO does not have power u/s 55A to refer the same to the DVO. Therefore, matter for both the years should be restored back to the file of AO with a direction to re-compute the capital gain in the light of valuation report received by AO for these properties and also the letter from BMC in respect of assessment year 2009-10. Appeal filed by the assessee is considered to be allowed for statistical purposes in the manner aforesaid.

Summary

Issues:
1. Validity of re-assessment proceedings for assessment years 2007-08 and 2009-10.
2. Application of section 50C regarding capital gain computation.
3. Competency of Assessing Officer to refer valuation to DVO under section 55A.
4. Re-computation of capital gain based on valuation reports and BMC certificate.

Analysis:

Issue 1: Validity of re-assessment proceedings
- The Appellate Tribunal noted that Ground No.1 regarding the validity of re-assessment proceedings for both assessment years was not pressed by the assessee's representative and hence dismissed.

Issue 2: Application of section 50C for capital gain computation
- The Assessing Officer (AO) challenged the long-term capital gain declared by the assessee for A.Y. 2007-08, citing unregistered sale agreements. The AO referred the matter to the District Valuation Officer (DVO) under section 55A. The AO computed the capital gain based on ready reckoner rates, resulting in a higher figure than declared by the assessee.
- Similarly, for A.Y. 2009-10, the AO computed short-term capital gain using ready reckoner rates, leading to a higher amount than declared by the assessee. The AO's assessments were subject to rectification/revision pending valuation reports from the DVO and BMC certificates.

Issue 3: Competency of Assessing Officer to refer valuation to DVO
- The Appellate Tribunal considered the AO's own acknowledgment in the assessment orders that the calculations were subject to rectification/revision upon receiving valuation reports from the DVO and BMC certificates. The Tribunal emphasized that the evidence collected by the revenue, including DVO valuation reports, should not be ignored, even if the AO lacked explicit authority to refer the valuation under section 55A.
- The Tribunal concluded that it was in the interest of justice to restore the matter to the AO for re-computation of capital gains based on the valuation reports and BMC certificates, providing the assessee with a reasonable opportunity to present evidence.

Issue 4: Re-computation of capital gain based on valuation reports and BMC certificate
- The Tribunal directed the AO to re-compute the capital gain for both assessment years using the valuation reports received for the properties and BMC certificates. If the DVO report was also available for A.Y. 2009-10, it should be considered. The assessee would be given a chance to provide evidence and arguments in support of their calculation of capital gain.
- As a result, the Tribunal allowed the appeals filed by the assessee for statistical purposes, considering the matter restored to the AO for re-adjudication based on the provided directions.

This detailed analysis highlights the issues of re-assessment validity, application of section 50C, the AO's competency to refer valuations, and the need for re-computation of capital gains based on proper valuation reports and BMC certificates.