2021 (1) TMI 480 - AT - Income Tax

Capital gain computation - Determination of Fair Market Value by the Ld. CIT(A) with regard to sale of land - AO invoked the provisions of section 50C and directed the assessee as to explain as to why the value of Sub Registrar Office should not be considered for computing the capital gains, against the sale consideration admitted by the assessee - CIT(A) held that the AO is not permitted to adopt the value determined by the DVO for the A.Y.2009-10 for the earlier year i.e 2008-09 and determined the fair market value by allowing reduction of 15% for the annual increase in rates and accordingly partly allowed the appeal of the assessee. HELD THAT - In the circumstances AO ought to have referred the valuation to the Departmental Valuation Officer as provided in sub section 2 of section 50C or made the enquiries with the APIIC. In the instant case, the AO has not done the above exercise, instead blindly adopted the value decided by the DVO for the A.Y.2009-10 for the impugned assessment year. The short question whether the value decided by the DVO for the A.Y.2009-10 can be applied for the A.Y.2008-09 or not? is to be answered as No since, the values keep changing and for income tax, each assessment year is independent. AO ought to have referred the valuation of property to the DVO for the A.Y.2008-09 also separately and taken the value so decided by the DVO for the purpose of capital gains. In the instant case, the Ld.CIT(A) has determined the fair market value of ₹ 6800/- after giving some reduction for annual increase and the department did not bring any material to show that the market value of the land in the impugned A.Y. is more than the value determined by the Ld.CIT(A). Therefore, we find no reason to interfere with the order of the Ld.CIT(A) and the same is upheld. - Decided against revenue.

Summary

Issues involved:
Condonation of Delay, Determination of Fair Market Value by CIT(A) regarding sale of land

Condonation of Delay:
The revenue filed an appeal against the order of the CIT(A) with a delay of 74 days, citing administrative reasons. The delay was condoned after considering submissions, and the appeal was admitted.

Determination of Fair Market Value:
The case involved the sale of land for which the assessee admitted capital gains. The Stamp Duty Authorities valued the land at a higher rate than the assessee. The AO invoked section 50C of the Income Tax Act, directing the assessee to explain why the higher value should not be considered. The assessee argued that the land was in an industrial area, valued by APIIC at a lower rate. The AO, not convinced, adopted a higher value determined by the DVO for a subsequent year. The CIT(A) partly allowed the appeal, determining a fair market value lower than the DVO's value. The department appealed, arguing for the DVO's value. The assessee contended that each year is independent for tax purposes, supporting the CIT(A)'s determination. The ITAT upheld the CIT(A)'s decision, emphasizing the need for proper valuation methods and rejecting the department's appeal.

Cross Objections:
The assessee filed cross objections supporting the CIT(A)'s order, but they were dismissed as defective for not being signed by the competent person.

In conclusion, the ITAT dismissed the revenue's appeal and the assessee's cross objections, upholding the CIT(A)'s decision on the determination of fair market value for the sale of land.