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2017 (6) TMI 1148 - AT - Income TaxComputation of long term capital gains on sale of hotel land and building - action of Assessing Officer in making reference under section 55A to the DVO to determine the Fair Market Value of property as on 01.04.1981 - Held that - The issue arising in the present appeal is identical to the issue before the Tribunal in co-owner s case and following the same parity of reasoning, find there is no merit in computation of income in the hands of assessee as determined by the Assessing Officer. The reference made under section 55A of the Act by the Assessing Officer to the DVO to determine the Fair Market Value of property as on 01.04.1981 which was worked out to be lesser than the value declared by the assessee on the basis of Registered Valuer s Report, is not warranted. CIT(A) is set aside and the Assessing Officer is directed to delete the addition made on this account. The grounds of appeal raised by the assessee are thus, allowed.
Issues:
Computation of long term capital gains on sale of hotel land and building. Analysis: Issue 1: Computation of Fair Market Value The appeal challenges the adoption of Fair Market Value of the property as on 01.04.1981 at a lower value determined by the DVO compared to the value determined by the Government Approved Valuer. The assessee contends that the reference made to the DVO under section 55A was unjustified as the value declared by the assessee was higher. The Authorized Representative argued that the Registered Valuer had valued the property higher, including the cost of land and structure, whereas the DVO only considered the land value. The Departmental Representative highlighted the assessee's failure to provide information before the CIT(A). Issue 2: Judicial Precedents and Legal Interpretation The Tribunal referred to a similar case involving the co-owner of the property, where it was held that a reference to the DVO can only be made if the value declared by the assessee is less than the fair market value. Citing the decision of the Hon'ble Bombay High Court in another case, it was established that the reference under section 55A was not justified when the declared value exceeded the fair market value. The Tribunal emphasized that the law applicable at the relevant time governed the assessment, and the Assessing Officer's reference to the DVO was unwarranted. Issue 3: Decision and Outcome Based on the legal interpretation and precedents, the Tribunal concluded that the Assessing Officer's reference to the DVO was not valid as the declared value by the assessee was higher than the fair market value. Consequently, the addition made by the Assessing Officer was directed to be deleted, and the order of the CIT(A) was set aside. The appeal of the assessee was allowed, and the computation of income in the hands of the assessee was found to lack merit. The Tribunal ruled in favor of the assessee, directing the deletion of the addition made on the basis of the disputed Fair Market Value. In conclusion, the Tribunal's judgment favored the assessee by setting aside the order of the CIT(A) and directing the Assessing Officer to delete the addition made in the computation of long term capital gains on the sale of the property. The legal interpretation and precedents cited emphasized that a reference to the DVO can only be made if the declared value is lower than the fair market value, which was not the case in this instance.
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