2013 (7) TMI 285 - AT - Income Tax

Sale consideration on sale of Land - disallowance while calculating the Capital Gains - whether CIT(A) has erred in holing that the action of the Valuation Officer and its consequent adoption by the ITO before indexation being the value of the property as on 1-4-1981 is not in accordance with law - Held that - The fact that the AO resorted to section 50C, it gave the assessee, reason to object to it and pray for valuation report. It is undisputed that the AO sought the valuation report and the DVO sent a preliminary report, which remained unconfronted. This itself brought in the infirmity in the order. As held in Tin Box Co. vs CIT 2001 (2) TMI 13 - SUPREME Court wherein it has been held that in absence of proper opportunity of being heard, the order lacs sanctify. This is apparent from the fact that preliminary report was received by the AO on 26.12.2007 and he passes the assessment order on 27.12.2007. This, itself shows that the assessee did not get proper and adequate opportunity to rebut the preliminary valuation report. Since both the appeals, are founded on the factum of sale of property, while admiting the additional evidence, as filed by the assessee, alongwith the Affidavit and consequentially, in the interest of justice to both the sides, restore the issue of sale of property and its consequential effects to the file of the AO.

Summary

Issues involved:
1. Disallowance of sale consideration while calculating Capital Gains.
2. Valuation of property for Capital Gains assessment.
3. Additional evidence submission and its impact on the case.
4. Proper opportunity of being heard before assessment order.

Analysis:

Issue 1: Disallowance of sale consideration while calculating Capital Gains
The appellant contested the disallowance of sale consideration of Rs. 50 lakhs for the Capital Gains calculation on the sale of land, arguing that the valuation officer had disregarded important factors. The AO based the assessment on a higher market value of Rs. 1.70 crores compared to the declared amount. The appellant highlighted the need for considering encumbrances, defects, disputes, and tenants affecting the property's value. The appellant submitted additional documents to support their case, emphasizing the importance of these materials for a fair assessment.

Issue 2: Valuation of property for Capital Gains assessment
The AO's reliance on a draft valuation report without providing the appellant an opportunity to respond was deemed improper. The appellant's submission of additional evidence, including documents previously unavailable due to the deceased's circumstances, was accepted. The Tribunal found that the AO's failure to consider all evidence, coupled with the rushed assessment process, deprived the appellant of a fair hearing. Consequently, the case was remanded to the AO for a fresh evaluation, taking into account all submitted documents and providing the appellant with a reasonable opportunity to present their case.

Issue 3: Additional evidence submission and its impact on the case
The appellant's submission of additional evidence, accompanied by an affidavit explaining the delayed filing due to the deceased's health and family litigation, was crucial in demonstrating the relevance of the new materials. The Tribunal acknowledged the significance of these documents in challenging the valuation done by the DVO. The decision to admit the additional evidence and remand the case for a thorough reassessment underscored the importance of a comprehensive review of all relevant information for a just outcome.

Issue 4: Proper opportunity of being heard before assessment order
The Tribunal emphasized the appellant's right to a fair hearing and the necessity of providing adequate time and opportunity to respond to valuation reports and present evidence. Citing legal precedent, the Tribunal highlighted the importance of proper consideration of all evidence before reaching a decision. The rushed assessment process, where the appellant was not given a chance to rebut the preliminary valuation report, was deemed unfair and a violation of procedural justice.

In conclusion, the Tribunal allowed both appeals for statistical purposes, setting aside the CIT(A)'s order on the sale of the property and directing a fresh assessment by the AO. The decision aimed to ensure a fair evaluation based on all available evidence and proper opportunity for the appellant to present their case.