2022 (2) TMI 315 - AT - Income Tax

Capital gain computation - action of the DVO in assessing the fair market value of the property sold as against sale consideration recorded in the sale deed - AO by applying the provisions of Section 50C of the Act treated the sale consideration as per circle rates i.e., stamp duty valuation at ₹ 5.95 crores and computed the capital gains accordingly - HELD THAT - The assessee has produced one letter dated 27.11.2019 filed with the DVO only on 29.11.2019 raising objections - Similar objections were raised by the assessee before CIT(A) and the CIT(A) has reproduced these objections in his order but these were never considered nor adjudicated upon. Keeping in view the entirety of facts in mind, we are of the considered view that the above objections cannot be decided at this stage because this being a technical issue. Moreover, the CIT(A) has passed a non-speaking order as noted above. Let the matter be referred back to the file of the AO, who will refer the matter back to the file of the DVO to consider the objections raised by the assessee and then determine the fair market value as per law. Hence, we set aside the orders of the lower authorities i.e., of the AO and that of the CIT(A) and remand the matter back to the file of the AO for reconsideration of the objections of the assessee. Disallowance of improvement cost, disallowance of deduction towards brokerage expenses and disallowance of construction expenses - HELD THAT - Since the main issue is going back to the file of the AO, these three issues can also go back to the file of AO because these issues will affect the determination of long term capital gain of the assessee. To this, the ld. senior DR has not objected. Hence, we set aside these three issues also to the file of the AO. The orders of the lower authorities are set aside and these three issues are remanded back to the file of the AO.

Summary

Issues:
1. Valuation of property for capital gains tax under Section 50C of the Income Tax Act.
2. Disallowance of improvement cost, brokerage expenses, and construction expenses.

Issue 1: Valuation of property for capital gains tax under Section 50C

The appeal pertains to the fair market value assessment of a property sold by the assessee for &8377; 4.40 crores, while the Stamp Valuation Authority valued it at &8377; 5.95 crores. The Assessing Officer (AO) invoked Section 50C of the Act, considering the stamp duty valuation, leading to a higher capital gains tax. The assessee objected, contending that the property was not referred to the District Valuation Officer (DVO) for fair market value determination. The DVO later valued the property at &8377; 5,98,96,000/-. The Commissioner of Income Tax (Appeals) upheld the DVO's valuation, stating the DVO's report is binding. The Tribunal found that the assessee's objections were not adequately considered by the CIT(A) or the DVO. The Tribunal set aside the lower authorities' orders and remanded the matter to the AO for reconsideration of the objections raised by the assessee and a fresh fair market value determination.

Issue 2: Disallowance of improvement cost, brokerage expenses, and construction expenses

The assessee raised three additional issues regarding the disallowance of improvement cost, brokerage expenses, and construction expenses. The CIT(A) confirmed the AO's decision on these matters without proper consideration. As the main issue of property valuation was remanded back to the AO, the Tribunal also remanded these three issues for reconsideration. The Tribunal held that these issues could impact the determination of long-term capital gains and needed proper assessment. Consequently, the orders of the lower authorities were set aside, and these issues were sent back to the AO for detailed examination.

In conclusion, the Tribunal allowed the appeal of the assessee for statistical purposes, setting aside the orders of the lower authorities and remanding both the property valuation issue and the additional expense issues back to the Assessing Officer for fresh consideration.