2018 (3) TMI 428 - AT - Income Tax

Capital gain computation - adopting value of Stamp Valuation Authority - Held that - From the above, it is clear that assessee has made objections for adopting value of Stamp Valuation Authority, which exceeds FMV of the property on the date of transfer, AO may refer the valuation of the capital assets to a valuation officer. In the given case, AO has adopted the stamp valuation without referring to the valuation officer, even though, AO objected for adopting SRO value. We are in agreement with the findings of the coordinate benches and accordingly, we remit this issue back to the file of the AO with a direction to refer this matter to the DVO and redo the income from capital gains de-novo. Coming to the adoption of SRO value for cost of acquisition as on 1981 instead of FMV as on that date, we notice that SRO value is a guideline value, which is to be applied for calculation of stamp duty only and the same is borne by the purchaser. As far as seller is concerned, what is relevant is the fair market value that could have been received by him. In few cases, they raise objection before the stamp valuation authority for adopting higher valuation or go to courts. Therefore, it is proper and wise to adopt the actual FMV existed as on 1981. Therefore, we are inclined to remit this issue also to the file of AO to determine the FMV as on 1981. Therefore, ground raised by the assessee on this issue is allowed. With regard to adhoc disallowance of expenditure of ₹ 1 lakh, we notice that AO has disallowed ₹ 1 lakh against the claim of expenditure to the extent of ₹ 6,47,621/-, which may be reduced to 10% of the expenditure claimed since all the expenditures are relating to running of the assessee s business. Accordingly, this ground is partly allowed.

Summary

Issues Involved:
1. Jurisdiction under section 148 of the Income Tax Act.
2. Adoption of valuation under section 50C.
3. Adoption of SRO value for the cost of acquisition as on 1981.
4. Adhoc disallowance of expenses.
5. Procedural lapses in reopening the assessment.

Issue-wise Detailed Analysis:

1. Jurisdiction under section 148 of the Income Tax Act:
The assessee contended that the Commissioner (Appeals) erred in upholding the action of the Assessing Officer (AO) in invoking jurisdiction under section 148 when the time was available for making a regular assessment. The assessee argued that the reopening of the assessment was not justified as the non-adoption of guideline value by stamp duty authorities does not necessarily imply escapement of income. The Tribunal dismissed these grounds as not pressed by the assessee.

2. Adoption of valuation under section 50C:
The assessee objected to the AO adopting the SRO value instead of the actual sale consideration received, arguing that the property’s condition and location did not warrant the higher value. The Tribunal noted that the AO should have referred the matter to the Departmental Valuation Officer (DVO) as per section 50C(2) when the assessee disputed the SRO value. The Tribunal cited the case of R. Suhasini Bheemunipatnam Vs. DCIT and other precedents, emphasizing that the AO is mandated to refer the valuation to the DVO if the assessee objects to the SRO value. Consequently, the Tribunal remitted the issue back to the AO to refer the matter to the DVO for proper valuation.

3. Adoption of SRO value for the cost of acquisition as on 1981:
The assessee argued that the AO incorrectly adopted the SRO value as the cost of acquisition instead of the Fair Market Value (FMV) as on 1981. The Tribunal agreed with the assessee, stating that the SRO value is merely a guideline for stamp duty purposes and not necessarily the FMV. The Tribunal directed the AO to determine the actual FMV as on 1981 and not rely solely on the SRO value. This issue was thus remitted back to the AO for proper determination.

4. Adhoc disallowance of expenses:
The AO disallowed an adhoc amount of ?1 lakh from the expenses claimed by the assessee, which totaled ?6,47,621/-. The Tribunal found this disallowance excessive and reduced it to 10% of the claimed expenses, acknowledging that the expenditures were related to the business operations of the assessee. This ground was partly allowed.

5. Procedural lapses in reopening the assessment:
The assessee raised concerns about procedural lapses in reopening the assessment, arguing that the AO should not have adopted the SRO value without referring the matter to the DVO. The Tribunal reiterated that the AO must follow the procedure outlined in section 50C(2) and refer the valuation to the DVO when disputed by the assessee. The Tribunal remitted the issue back to the AO for compliance with the proper procedure.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, directing the AO to refer the valuation issue to the DVO and determine the FMV as on 1981. The adhoc disallowance of expenses was reduced to 10% of the claimed amount. The grounds related to procedural lapses in reopening the assessment were dismissed as not pressed. The Tribunal emphasized the mandatory nature of referring valuation disputes to the DVO as per section 50C(2).