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2019 (7) TMI 1492 - AT - Income TaxRectification u/s 254 - capital gain computation - need for reference to the DVO - taking cost of acquisition as on 1.4.1981 on the basis of registered valuer s report - According to the assessee, the Tribunal has deleted the addition made by the AO, but not deleted the addition made by the ld.CIT(A) by way of enhancement - HELD THAT - There is no apparent error in the order of the Tribunal. The Tribunal has deleted the addition, if any, computed on the basis of DVO s report because the Tribunal has observed that if the value of the property shown by the assessee as on 1.4.1981 is more than the fair market value, then the AO has no jurisdiction to make reference to the DVO. In the absence of any reference to the DVO, capital gain has to be computed on the basis of registered valuer s report submitted by the assessee. For this proposition, the Tribunal has relied upon the decision of CIT Vs. Gauranginiben S. Shodhan 2014 (2) TMI 78 - GUJARAT HIGH COURT The Tribunal has taken into consideration amendment effected in section 55A w.e.f. 1.7.2012. This finding of the Tribunal, though covered the addition made by the AO as well as the ld.CIT(A), but if it does give any confusion while determining the taxable income of the assessee, then, we may reiterate that once reference to the DVO is invalid, then both the reports submitted by him are required to be ignored and the capital gain in the hands of the assessee is to be computed by taking cost of acquisition as on 1.4.1981 on the basis of registered valuer s report. In other words, the addition made by the AO as well as enhanced by the ld.CIT(A), both are not sustainable. MA of the assessee is allowed.
Issues:
Calculation of long term capital gain based on property valuation reports, jurisdiction of AO to refer to DVO, rectification under section 254(2) of the Income Tax Act. Analysis: The case involved a dispute regarding the calculation of long term capital gain based on the valuation of a property. The Assessee had a 1/16th share in a property sold for ?5,10,00,000, with the cost of acquisition as on 1.4.1981 initially taken at ?67,98,400 based on a registered valuer's report. The AO referred the matter to the DVO, who valued the property at ?36,54,000 as of 1.4.1981, leading to an addition in the capital gain calculation. The CIT(A) issued a notice for enhancement based on a supplementary valuation report by the DVO valuing the property at ?12,61,103 as of 1.4.1981. The AO and CIT(A) made additions to the capital gain, which the Tribunal later deleted, citing that if the property value shown by the Assessee exceeded the fair market value, the AO had no jurisdiction to refer to the DVO. The Tribunal relied on the decision of the Hon'ble Gujarat High Court and disregarded both reports by the DVO, directing the computation of capital gain based on the registered valuer's report. The Tribunal highlighted that rectification under section 254(2) of the Income Tax Act could only be done for an obvious patent mistake apparent from the record, not requiring a lengthy process of reasoning. The Tribunal emphasized that once the reference to the DVO was deemed invalid, both reports by the DVO had to be ignored, and the capital gain had to be computed based on the registered valuer's report. Consequently, the additions made by the AO and enhanced by the CIT(A) were deemed unsustainable, and the Misc. Application of the Assessee was allowed, leading to the deletion of the additional capital gain amounts. In conclusion, the Tribunal's decision clarified the jurisdictional limits of the AO in referring to the DVO for property valuation and emphasized the importance of following the fair market value principles in determining capital gains. The judgment provided a clear directive on the computation of capital gains based on valid valuation reports, ensuring a fair and accurate assessment of tax liabilities.
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