Tribunal upholds assessee's objection, directs AO to compute capital gain as per registered valuer's report

The Tribunal dismissed the revenue's appeal and allowed the assessee's cross objection. The AO was directed to compute the capital gain as per the registered valuer's report, adhering to the legal precedent set by the Bombay High Court in Puja Prints. The decision emphasized the correct application of Section 55A and the importance of reliable valuation methodologies in determining fair market value.

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Issues Involved:
1. Deletion of addition by CIT(A) while computing long-term capital gain.
2. Cross objection by the assessee regarding part addition sustained by CIT(A).
3. Validity of reference to the Departmental Valuation Officer (DVO) under Section 55A of the Income Tax Act.

Detailed Analysis:

Deletion of Addition by CIT(A) while Computing Long-Term Capital Gain:
The revenue challenged the deletion of addition by CIT(A) in computing long-term capital gain. The assessee, a firm engaged in the business of Builders & Developers, sold a property and computed Long Term Capital Gains (LTCGs) showing a loss of Rs. 1,38,585/-. The property was sold for Rs. 45,00,000/- with a stamp duty value of Rs. 2,09,40,000/-. The assessee used a valuation report from a Government Approved Valuer to determine the cost of acquisition as on 1.4.1981 at Rs. 825/- per sq.mt. The AO rejected this valuation, arguing it was too high and instead adopted a value of Rs. 6/- per sq.mt. based on the Joint District Registrar's data. The AO referred the valuation to the Departmental Valuation Officer (DVO), who also provided a contested valuation.

Cross Objection by the Assessee Regarding Part Addition Sustained by CIT(A):
The assessee filed a cross objection against the part addition of Rs. 20,33,148/- sustained by CIT(A). The CIT(A) reviewed the valuation methodologies and found discrepancies in both the approved valuer's and DVO's reports. The CIT(A) determined the fair market value of the property as on 01.04.1981 to be Rs. 740 per sq.mt. based on comparable sales instances, leading to a revised LTCG computation.

Validity of Reference to the Departmental Valuation Officer (DVO) under Section 55A of the Income Tax Act:
The CIT(A) and the Tribunal scrutinized the AO's reference to the DVO under Section 55A. The Tribunal noted that as per the Bombay High Court's ruling in Puja Prints, a reference to the DVO can be made only if the value declared by the assessee is less than the fair market value. In this case, the value declared by the assessee was higher than the fair market value, making the AO's reference to the DVO improper. The Tribunal directed the AO to compute the capital gain based on the valuation report of the registered valuer, which was higher than the fair market value.

Conclusion:
The Tribunal dismissed the revenue's appeal and allowed the assessee's cross objection. The AO was directed to compute the capital gain as per the registered valuer's report, adhering to the legal precedent set by the Bombay High Court in Puja Prints. The decision emphasized the correct application of Section 55A and the importance of reliable valuation methodologies in determining fair market value.

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