2024 (7) TMI 1016 - AT - Income Tax

Computation of capital gain - LTCG - FMV determination - property is an old one, was received as a gift by the assessee from his mother - AO refused to accept the registered valuer s report for the cost of acquisition and he has relied upon section 55A to emphasize that in case the AO was not in agreement with the valuation made by the registered valuer, he ought to have referred the property for valuation by the departmental valuer - HELD THAT - AO should have referred the property to the DVO if he was not satisfied with the registered valuer s report. The property is an old one, was received as a gift by the assessee from his mother and, therefore, the value was unascertainable and the cost of acquisition was required to be taken as the fair market value as per clause (3) of Explanation to section 48. Since the assessee had filed a valuation report and if the Ld. AO was of the opinion that the value so claimed is at variance with its Fair Market Value, as per clause (a) of Section 55A, the Ld. AO should have referred the valuation of capital asset to the Valuation Officer instead of outrightly rejecting the valuation reports and without pointing out any error in the rate or the area adopted for the valuation. Thus, the order of the Ld. CIT(A) is set aside and the AO is directed to adopt the FMV of the properties as per the rates adopted by the registered valuer and which reports were filed during the course of the assessment proceeding as he did not form any opinion that the value so claimed was at variance with the FMV but outrightly rejected the report of the registered valuer which he was not legally authorised to do as the valuer is a technical expert in respect of valuation and unless there was any error or discrepancies in the reports the valuation as shown by him ought to have been adopted. Assessee appeal allowed.

Issues Involved:
1. Acceptance of revised computation of income.
2. Consideration of valuer's report for indexed cost of acquisition and FMV.
3. Requirement to refer valuation to the DVO under section 55A.
4. Computation of LTCG on Jhalda property.
5. Set off of LTCL on sale of Aurangabad properties.
6. Date of acquisition/transfer under section 2(47) of the Act.
7. Computation of LTCG on Aurangabad property (Dag No. 211).

Detailed Analysis:

1. Acceptance of Revised Computation of Income:
The assessee filed a revised computation of income during the assessment proceedings, which was not accepted by the AO. The Ld. CIT(A) upheld this decision, stating that the revised computation was not properly substantiated and was considered an afterthought.

2. Consideration of Valuer's Report for Indexed Cost of Acquisition and FMV:
The AO and Ld. CIT(A) rejected the valuer's report submitted by the assessee, which was prepared after the sale of the property. The report was deemed speculative and based on verbal information without documentary evidence. The Ld. CIT(A) upheld the AO's decision, stating that the valuation was done three years after the property transfer, making it unreliable.

3. Requirement to Refer Valuation to the DVO Under Section 55A:
The assessee argued that the AO should have referred the valuation to the DVO if he disagreed with the registered valuer's report. According to section 55A, the AO is required to refer the valuation to a Valuation Officer if the claimed value is at variance with the fair market value. The Tribunal agreed with the assessee, stating that the AO should have referred the matter to the DVO instead of outrightly rejecting the valuer's report.

4. Computation of LTCG on Jhalda Property:
The AO computed the LTCG at Rs. 36,18,119/- based on the original computation, rejecting the revised computation which showed a capital loss of Rs. 9,238/-. The Ld. CIT(A) upheld the AO's computation, citing the unreliability of the valuer's report. The Tribunal set aside the Ld. CIT(A)'s order, directing the AO to adopt the FMV as per the registered valuer's report.

5. Set Off of LTCL on Sale of Aurangabad Properties:
The assessee claimed a capital loss of Rs. 2,07,054/- for the sale of Aurangabad properties in FY 2011-12, which was not claimed in that year but in FY 2013-14. The AO disallowed this claim, and the Ld. CIT(A) upheld the decision, citing section 80 which prohibits carrying forward a loss not determined in the return filed for the relevant year. The Tribunal dismissed these grounds as not pressed by the assessee.

6. Date of Acquisition/Transfer Under Section 2(47) of the Act:
The assessee argued that the transaction was completed in FY 2013-14, and the date of registration is not conclusive for determining the date of transfer. The Ld. CIT(A) dismissed this argument, upholding the AO's decision based on the registration date.

7. Computation of LTCG on Aurangabad Property (Dag No. 211):
The AO computed the LTCG at Rs. 32,31,633/- based on the original computation, rejecting the revised computation which showed capital gains of Rs. 93,495/-. The Ld. CIT(A) upheld the AO's computation, stating that the assessee adjusted the FMV to suit his requirements. The Tribunal set aside the Ld. CIT(A)'s order, directing the AO to adopt the FMV as per the registered valuer's report.

Conclusion:
The appeal was partly allowed. The Tribunal directed the AO to adopt the FMV as per the registered valuer's report for the properties in question. Grounds related to the set off of LTCL for FY 2011-12 were dismissed as not pressed. The Tribunal emphasized the AO's duty to refer the valuation to the DVO if not satisfied with the registered valuer's report.

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