2024 (2) TMI 924 - AT - Income Tax

Capital gain computation - Validity of CIT(A) enhancing the assessment by an amount on the basis of report of DVO without giving the appellant a reasonable opportunity of showing cause against such enhancement - HELD THAT - We find that the objections of the assessee are genuine and need to be considered by the Revenue. The DVO has not given opportunity nor given benefit of encroachment which has been examined by the Assessing Officer. Hence, in view of the additional grounds taken up, the change in the circle rates owing to decline in the market demand, non-deduction of expenses and value owing to the encroached portion, we deem it fit to remand the matter to the file of the Assessing Officer to adjudicate the issue afresh. Appeal of the assessee is allowed for statistical purpose.

Summary

Issues involved:
The issues involved in this case include the justification of upholding additions made by the Assessing Officer (AO) based on circle rate as the sale value of property, without considering ground realities, actual sale consideration, receipt of valuation report of Departmental Valuation Officer (DVO), and disallowance of brokerage/commission paid.

Details of the judgment:

1. Circle Rate vs. Sale Value:
The assessee appealed against the additions made by the AO based on the circle rate as the sale value of the property. The assessee argued that the sale consideration was justified due to encroachments on the land and the temporary nature of the construction. The Assessing Officer taxed the amount based on the difference in stamp duty value and disallowed commission paid. The CIT(A) affirmed the AO's decision. However, the Tribunal found the objections genuine and remanded the matter to the AO for fresh adjudication considering the decline in market demand, non-deduction of expenses, and encroached portion.

2. Valuation Report by DVO:
The assessee objected to the valuation report submitted by the DVO, stating it was unfair and unjust. The assessee raised concerns about the valuation of the structure, circle rate, and the lack of opportunity to present objections. The Tribunal noted the objections and directed the AO to consider the additional grounds raised by the assessee, emphasizing the need for a fair assessment based on market conditions and encroachment issues.

3. Natural Justice and Fairness:
The assessee highlighted the principles of natural justice and fairness in income tax proceedings, arguing against the valuation report's accuracy. The Tribunal acknowledged the need for fairness and directed the AO to reassess the valuation, taking into account the objections raised by the assessee and the modifications under relevant provisions. The Tribunal stressed the importance of giving the assessee a reasonable opportunity to present their case against enhancements made based on the DVO report.

In conclusion, the Tribunal allowed the appeal for statistical purposes, remanding the matter to the AO for a fresh assessment considering the objections raised by the assessee regarding the circle rate, valuation report, and encroachment issues.