2012 (5) TMI 177 - AT - Income Tax

Tribunal directs Assessing Officer to adopt fair market value for capital gains calculation

Chandra Bhan Agarwal Versus Additional Commissioner of Income-tax, Range-31, Kolkata

The Tribunal partly allowed the appeal of the assessee, directing the Assessing Officer to adopt the fair market value of Rs. 76,18,872/- as assessed by ... Full value of consideration in view of property assessed by Stamp Valuation Authority for charging stamp duty being deemed sale consideration of the property for computing LTCG on the same – Held that:- DVO has not discussed anything while determining fair market value, rather he has based his opinion on the basis of fair market value assessed by Stamp Valuation Authority for ascertaining value for stamp valuation purposes - the DVO has not ascertained any market value to which a willing, reasonable and prudent purchaser would pay for this property - considering the fair market value determined by A.D.S.R., Sutahata, Govt. of West Bengal at Rs. 76,18,872/- seems to be fair and reasonable for the purpose of computation of long-term capital gains because when assessee sold his property, in question, there was no circle rates fixed by stamp valuation authority as conceded by Ld. SR DR - though the assessee argued with the relevant materials that the valuation arrived at by the assessing officer was not proper and justified, Learned Tribunal has not considered this aspect of the matter - this matter needs to be reconsidered - remanded for fresh hearing by the Learned Tribunal – in favour of assessee Issues Involved:1. Justification of the Tribunal in accepting the valuation made by the assessing officer.2. Consideration of materials produced by the assessee regarding property valuation.3. Application of Section 50C of the Income-tax Act, 1961.4. Determination of fair market value by the Valuation Officer.5. Compliance with the directions of the Hon'ble Calcutta High Court.Issue-wise Detailed Analysis:1. Justification of the Tribunal in Accepting the Valuation Made by the Assessing Officer:The primary issue was whether the Tribunal was justified in accepting the valuation made by the assessing officer (AO) and confirmed by the Commissioner of Income Tax (Appeal) [CIT(A)] without considering the materials produced by the assessee. The Hon'ble Calcutta High Court had set aside the Tribunal's earlier decision, directing it to reconsider the matter afresh while considering the materials placed by the assessee.2. Consideration of Materials Produced by the Assessee Regarding Property Valuation:The assessee argued that the valuation arrived at by the AO was not proper and justified, and that the Tribunal had not considered this aspect. The AO had relied on the valuation provided by the Registrar of Assurance, which assessed the property at Rs. 1,24,14,400/-. The assessee objected to this valuation and presented a valuation report from the Office of ADSR, Sutahata, dated 08/09/2008, which assessed the market value at Rs. 76,18,872/-. The Tribunal considered this new material as directed by the High Court.3. Application of Section 50C of the Income-tax Act, 1961:Section 50C of the Act provides that if the consideration received from the transfer of a capital asset is less than the value assessed by the State Government's Stamp Valuation Authority, the latter value shall be deemed as the full value of consideration for computing capital gains. The AO initially adopted the value of Rs. 1,24,14,400/- as per the Stamp Valuation Authority. The assessee objected, leading to a reference to the Valuation Officer (DVO) under Section 50C(2)(b).4. Determination of Fair Market Value by the Valuation Officer:The DVO valued the property at Rs. 1,24,13,670/- based on the plinth area rates. However, the Tribunal found the DVO's report to be cryptic and lacking in substantial analysis, as it did not consider factors such as locality, situation, and other amenities. The DVO's valuation was essentially based on the Stamp Valuation Authority's assessment, without an independent evaluation. The Tribunal highlighted that the DVO's method did not comply with the guidelines laid down by the Hon'ble Supreme Court for determining fair market value.5. Compliance with the Directions of the Hon'ble Calcutta High Court:The High Court had directed the Tribunal to reconsider the matter, considering the materials placed before it earlier. The Tribunal, upon reconsideration, found that the DVO's report was not based on relevant factors and that the fair market value should be determined considering the valuation report dated 08/09/2008 by ADSR, Sutahata, which assessed the market value at Rs. 76,18,872/-. The Tribunal directed the AO to adopt this value for the purpose of computing long-term capital gains, as there were no fixed circle rates for the area at the time of the property's sale.Conclusion:The Tribunal partly allowed the appeal of the assessee, directing the AO to adopt the fair market value of Rs. 76,18,872/- as assessed by ADSR, Sutahata for the purpose of computing long-term capital gains, in compliance with the directions of the Hon'ble Calcutta High Court.