2022 (1) TMI 531 - AT - Income Tax

Capital gain determination - FMV determination - value determined by Assistant Valuation Officer u/s. 50C(2) - HELD THAT - As observed that guideline value of the property was much higher than the prevailing market value of the property and the same do not represent true market value of the property. The same is an undisputed fact which is also evident from the valuation made by valuation officers for AY 2015-16 as well as for this year wherein on both the occasions, the valuation has come lower than the guideline value. In such a scenario, the valuation, in our considered opinion, would be subjective matter and no fixed formula could be laid down to ascertain the true fair market value of the property. The difference in two valuations is bound to happen since various factors would be required to be factored in while valuing the property - when once valuation has been done by departmental valuation officer, then the same has to be adopted and should be given due weightage. Further, had valuation report for this year been received by AO before completion of assessment, the same would have been binding on Ld. AO - CIT(A), in our opinion, was not correct to apply the valuation of AY 2015-16 to this year since specific separate reference was made for this year for valuation of property sold by the assessee during the year and the valuation would depend upon many variables viz. location of property, type of property, size etc. Therefore, on the given facts and circumstances of the case, we direct Ld. AO to adopt the fair market value as valued by the valuation officer. - Decided in favour of assessee.

Summary

Issues: Valuation of property for assessment year 2016-17 under section 50C of the Income Tax Act

Analysis:

Issue 1: Discrepancy in valuation - Assessee's appeal against CIT(A)'s directions

The appeal by the assessee for the Assessment Year (AY) 2016-17 challenges the directions of the Commissioner of Income Tax (Appeals) to adopt a higher value of consideration under section 50C of the Act. The dispute arises from the valuation of 4329 sq. feet of land sold by the assessee at a consideration lower than the guideline value. The Assistant Valuation Officer valued the property at &8377; 77.81 Lacs, while the CIT(A) directed to adopt a higher value of &8377; 1975/- per square feet based on previous year's valuation. The discrepancy in valuations and the correctness of applying the previous year's valuation to the current year are key points of contention.

Issue 2: Assessment process and authority's discretion

During the assessment proceedings, it was revealed that the assessee sold the land below the guideline value, leading to the adoption of a higher value by the Assessing Officer. The absence of a valuation report for the current year at the time of assessment completion influenced the AO's decision. The appellate proceedings introduced the Assistant Valuation Officer's report, challenging the valuation adopted by the CIT(A). The Tribunal noted the discrepancy between guideline and market values, emphasizing the subjective nature of property valuation and the importance of considering various factors. The Tribunal highlighted the binding nature of the valuation done by the departmental officer and criticized the CIT(A) for applying the previous year's valuation without considering the specific variables affecting the property's value.

Issue 3: Tribunal's decision and rationale

After considering the arguments and evidence, the Tribunal found that the guideline value significantly exceeded the market value, as indicated by previous valuations. Acknowledging the subjectivity of property valuation, the Tribunal emphasized the need to give weightage to the valuation done by the departmental officer. The Tribunal criticized the CIT(A) for not considering the specific valuation for the current year and directed the Assessing Officer to adopt the fair market value of &8377; 77,81,300/- as determined by the valuation officer. By allowing the appeal and setting aside the CIT(A)'s directions, the Tribunal clarified the importance of considering current market conditions and specific property variables in determining the property's true value for tax assessment purposes.

This detailed analysis of the judgment provides insights into the valuation dispute, assessment process, authority's discretion, and the Tribunal's decision-making rationale, offering a comprehensive understanding of the legal issues involved in the case.