2022 (9) TMI 192 - AT - Income Tax

Revision u/s 263 - Capital gain computation - non-reference by the AO to the VO u/s. 55A - whether there has been due application of mind by the AO in accepting the returned value (cost)? - HELD THAT - A non-reference u/s. 55A may be justified where the AO, for reasons stated in his order which are non-existent, opines on valuation independent of VR, and which coincides or agrees with that by the RV, while, on facts, the latters report itself is found as without basis. Rather, if only the AO had applied his mind, he would have been able to discern that the valuation report being relied upon by the assessee is, we are afraid to say, a hash report and, in any case, without any basis of valuation, much less a valid basis, even as observed by the Bench during hearing. To us, it is a clear case of valuation being made by applying reverse indexation, i.e., by arriving at the value of land as on 01/04/1981, upon first determining the amount of capital gain that is to be disclosed. This is apparent from his order being sans any finding qua such basis, which also forms the reason for reassessment and, rather, without any deliberation thereon. The basis of valuation of the subject land (as on 01/04/1981) thus remains unstated and un-opined, much less examined, and which prompted us to state earlier of our being at a loss to understand the same. We, accordingly, find no reason to interfere with the impugned order, and uphold the same. The matter of valuation, as evident, being principally and essentially factual, reliance by Shri Bardia during hearing on the decision in Pr. CIT vs. Om Rudrapriya Holiday Resort Pvt. Ltd. 2019 (7) TMI 989 - RAJASTHAN HIGH COURT would be, for that reason, of no assistance. Even as observed by the Bench during hearing, in the facts of that case, the Hon'ble Court dismissed the Revenue s appeal in view of the finding by the Tribunal that the AO had taken a plausible view in respect of valuation, a matter of fact. In the instant case, on the contrary, we find a complete non-application of mind by the AO in the matter. Assessee appeal dismissed.

Summary

Issues Involved:
1. Legitimacy of the Principal Commissioner of Income Tax's (Pr. CIT) revision of the assessment under section 263 of the Income Tax Act, 1961.
2. Adequacy of the Assessing Officer's (AO) enquiry into the valuation of the land as on 01/04/1981.
3. Justification for the non-reference to the Valuation Officer (VO) under section 55A of the Act.

Detailed Analysis:

1. Legitimacy of the Principal Commissioner of Income Tax's (Pr. CIT) Revision:
The appeal by the assessee challenged the order by the Pr. CIT which revised the assessee's assessment under section 147 read with section 143(3) of the Income Tax Act, 1961. The Pr. CIT's revision was based on the view that the AO had failed to make proper enquiries regarding the valuation of the land, thus rendering the AO's order erroneous and prejudicial to the interests of the Revenue. The Pr. CIT set aside the assessment for a de novo consideration.

2. Adequacy of the Assessing Officer's (AO) Enquiry:
The assessee contended that the AO had made due enquiries and accepted the returned capital gain, and thus, it was not open for the Pr. CIT to substitute his view. The AO's enquiry included notices under section 142(1) and the assessee's reply, which enclosed a valuation report by a registered valuer. However, the Pr. CIT noted the absence of any basis for the value stated in the valuation report, which was a key reason for reopening the assessment. The Tribunal observed that the AO's enquiry should have ascertained the basis of the valuation, but there was no evidence of such basis being provided by the assessee or found by the AO. The valuation report contained generalized statements without specifying any detail, and the AO did not issue a finding on the basis of the valuation.

3. Justification for Non-Reference to the Valuation Officer (VO):
The Revenue argued that the AO should have referred the matter to the VO under section 55A due to the absence of an objective basis for the valuation. The Tribunal noted that the AO's failure to refer the matter to the VO was a significant lapse, as the valuation report lacked a valid basis and was issued in a mechanical manner. The Tribunal highlighted the need for the AO to have met the assessee's reliance on an expert opinion with another expert opinion, which the AO failed to do. The Tribunal found that the AO did not apply his mind in the matter and that the valuation report was without any basis of valuation, thus justifying the Pr. CIT's revision under section 263.

Conclusion:
The Tribunal upheld the Pr. CIT's order, finding no reason to interfere with it. The Tribunal concluded that there was a complete non-application of mind by the AO in the matter, and the valuation report relied upon by the assessee was without any valid basis. The appeal by the assessee was dismissed. The Tribunal emphasized that the matter of valuation is principally factual, and the AO's failure to conduct proper enquiry warranted the revision by the Pr. CIT.