2022 (11) TMI 1198 - AT - Income Tax

Capital gain computation - Commissioner has considered valuation given by DVO - Whether Commissioner has not referred the valuation method provided by the approved valuer? - HELD THAT - The Registered Valuer had not based his Valuation Report on any scientific or logical basis but had made general observations to work out the FMV. The Registered Valuer is required to follow the provisions of the Urban Land Ceiling Land Act, Town and Country Planning Act, Chapter XXC of the I.T. Act, Capital Gains under the Income Tax Act and Guidelines referred by the Institute of Valuers and Guidelines from the sub-Registrar s Office (Col. No.38) wherein the Valuer has to report whether any comparable instances/cases of the sales relied upon to arrive at the value of the land. As per the Central Public Works Department s Manual, comparable sale instances, are only method for valuation. It is settled law that orange and apple cannot be compared which has been done by the Registered Valuers to arrive at an imaginary rate @ 235 per. Sq. mtr. The DVO has taken the rate @ Rs.50 per sq. mtr., which is based on some scientific analysis and as per the guidelines as the comparable sales instances has been taken. As correct computation of capital gains on the basis of the valuation report of the DVO has been made by the Assessing Officer. The AO is being directed to taken the estimated value as per DVO Report instead of the value of the Stamp Authorities to work out the correct computation of capital gains. Hence, the action of the AO is upheld. We find that there is no infirmity in the order passed by the ld. CIT(A) above. The ld. CIT(A) has considered all the facts and legal position applicable to the facts and delivered a reasoned order, therefore we decline to interfere in the order passed by the ld. CIT(A). Hence, the appeal of the assessee is hereby dismissed.

Summary

Issues:
Assessment Year 2015-16 - Valuation dispute - Long Term Capital Gains computation - Approval of valuation method - Jurisdictional concerns - Judicial review of valuation reports.

Analysis:
The appeal pertains to the Assessment Year 2015-16 and challenges the order of the Commissioner of Income Tax (Appeals) regarding a valuation dispute in the computation of Long Term Capital Gains. The Assessing Officer noted discrepancies in the valuation of properties sold by the assessee and referred the valuation to the Departmental Valuation Officer (DVO) for verification. However, due to the non-receipt of the DVO report before the assessment deadline, the Assessing Officer proceeded with the assessment based on available records. The assessee contested the addition made by the Assessing Officer, arguing that the valuation by the approved valuer should have been accepted instead of the rate used by the Assessing Officer.

The Commissioner of Income Tax (Appeals) partly allowed the appeal, emphasizing the need to consider the valuation method provided by the approved valuer. The Commissioner reviewed the details of the properties sold, the cost of acquisition, and the indexation costs claimed by the assessee. The Commissioner highlighted discrepancies in the valuation reports submitted by the registered valuer and the DVO, noting that the registered valuer's valuation method lacked scientific or logical basis. The Commissioner directed the Assessing Officer to use the estimated value as per the DVO report for the correct computation of capital gains.

The Tribunal, after hearing arguments from the Revenue's representative, upheld the Commissioner's order, stating that it was well-reasoned and legally sound. The Tribunal found no flaws in the Commissioner's decision-making process and declined to interfere in the matter. Consequently, the appeal filed by the assessee was dismissed, affirming the decision of the Commissioner of Income Tax (Appeals).

In conclusion, the judgment highlights the importance of adhering to proper valuation methods in determining Long Term Capital Gains and emphasizes the significance of relying on accurate valuation reports supported by scientific analysis. The judicial review process ensures that valuation disputes are resolved fairly and in accordance with established legal principles, ultimately upholding the integrity of the assessment process.