2021 (7) TMI 205 - AT - Income Tax

Capital gain computation - addition made by AO replacing cost of acquisition based on valuation report of registered valuer as 01/04/1981 by arbitrary figure - whether the land in question was jointly held by the assessee and therefore the entire amount of capital gain cannot be taxed in the hands of the assessee? - HELD THAT - AO himself in his order has recorded the fact that the assessee was the joint owner in the land in dispute after making a reference to the sale deed. The above observation of the AO supports the contention of the assessee that the land in dispute was jointly held. Furthermore, the learned AR has also filed the copy of the sale deed which is available on record and the same was not disputed by the learned DR. Accordingly we hold that, the authorities below erred in taxing the entire amount of capital gain in the hands of the assessee. Valuation of property - As basis adopted by the registered valuer for valuing the property as on 1 April 1981 was the gold rate index fixed by the Reserve Bank of India which was not doubted by the AO. Admittedly, the sales instances were given by the valuer in his report with the remark that these are not comparable and therefore the same cannot be used for valuing the property in question as on 1 April 1981- the authorities below without rejecting the basis adopted by the valuer has referred the sales instances for determining the value of the land in question as on 1 April 1981. As such, these sales instances were rejected by the valuer himself and therefore in our considered view the authorities below erred in using these sales instances in valuing the property in question as on 1 April 1981. Reference to Valuation Officer - Whether the AO can substitute the value determined by the registered valuer as on 1st April 1981? - AO may refer the valuation of capital assets to a valuation officer where he s of the opinion that the value so claimed by the assessee is less than its fair market value. It is an undisputed fact that the assessee did not claim the value of the impugned land as on 1st April 1981 which is less than the fair market value. As such the assessee has claimed higher value than the fair market value as per the AO. Thus in our considered view, the AO has no power to substitute the value of capital assets in the given facts and circumstances. Accordingly, the AO cannot substitute the value declared by the assessee as on 1st April 1981. No ambiguity that there was no power under the statute to the AO to refer the matter to the DVO or to substitute the value of the impugned land as on 1st April 1981. Therefore we hold that the AO in the given facts and circumstances cannot substitute the value of the impugned land as on 1st April 1981. Scope of amended provisions - Dispute before us relates to the year prior to the amended provisions of section 55A of the Act which is applicable prospectively. Therefore such amended provisions cannot be applied to the case on hand. Thus we are inclined to reverse the order of the learned CIT-A, and accordingly we direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed

Issues Involved
1. Delay in filing appeals.
2. Addition of ?1,52,96,645/- under the head capital gain by replacing cost of acquisition.
3. Computation of 100% LTCG in appellant's hand despite only 25% share in the property.
4. Jurisdictional issue regarding passing order u/s 143(3) r.w.s 147 without issuing mandatory notice u/s 143(2).

Detailed Analysis

1. Delay in Filing Appeals
The appeals were delayed by 253 days due to administrative lapses by the previous representative. The assessee changed the authorized representative and filed the appeals late. The delay was condoned as the tribunal found sufficient reason for the delay.

2. Addition of ?1,52,96,645/- under the Head Capital Gain by Replacing Cost of Acquisition
The assessee declared the cost of acquisition based on a valuation report dated 1 April 1981 at ?365 per square meter, leading to an indexed cost of ?2,45,05,168/-. The AO, however, determined the cost at ?142 per square meter, leading to an indexed cost of ?95,33,505/- and a long-term capital gain of ?1,52,96,645/-. The tribunal found that the AO erred by not referring the matter to the DVO under section 55A and instead using sales instances that were not comparable. The tribunal held that the AO had no power to substitute the value determined by the registered valuer as per the provisions of section 55A applicable for the year under consideration. The tribunal directed the AO to delete the addition.

3. Computation of 100% LTCG in Appellant's Hand Despite Only 25% Share in the Property
The tribunal noted that the property was jointly held by the assessee and co-owners, with the assessee holding only a 25% share. The tribunal found that the authorities below erred in taxing the entire amount of capital gain in the hands of the assessee. The tribunal directed that only the assessee's share of the capital gain should be taxed.

4. Jurisdictional Issue Regarding Passing Order u/s 143(3) r.w.s 147 Without Issuing Mandatory Notice u/s 143(2)
The assessee did not press this additional ground of appeal, and it was dismissed as not pressed.

Separate Judgments for Other Appeals
For ITA No. 144/Ahd/2019 and ITA No. 142/Ahd/2019, the issues were similar to those in ITA No. 143/Ahd/2019. The tribunal applied the same findings and directed the AO to delete the additions made by replacing the cost of acquisition based on the valuation report. The other grounds of appeal were dismissed as not pressed.

Conclusion
The tribunal allowed the appeals partly, condoning the delay in filing and directing the deletion of additions made by the AO under the head capital gain. The tribunal emphasized the necessity of adhering to the provisions of section 55A and the importance of recognizing the joint ownership in the property.

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