Tribunal Upheld AO's DVO Reference & Valuation Report, Directed Fresh Hearing

The Tribunal upheld the AO's reference to the DVO under section 55A(b)(ii) and allowed the use of the valuation report in the assessment. However, it acknowledged the lack of adequate hearing opportunity by the DVO and directed the AO to obtain a fresh valuation report after providing the assessee a proper hearing. The appeal was allowed for statistical purposes, and the matter was remanded to the AO for a fresh order.

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Issues Involved:
1. Assessment of long-term capital gain based on the valuation report.
2. Adequate opportunity of hearing by the valuation officer.
3. Justification for making reference under section 55A without mandatory recording of satisfaction by the Assessing Officer (AO).

Issue-wise Detailed Analysis:

1. Assessment of Long-Term Capital Gain Based on the Valuation Report:
The assessee sold a plot for Rs. 1.50 crore and computed the long-term capital gain using the market value as on 1.4.1981, based on a registered valuer's report valuing the property at Rs. 7,61,475/-. The AO referred the valuation to the District Valuation Officer (DVO), who valued it at Rs. 2,72,447/-. Consequently, the AO computed the long-term capital gain at Rs. 1,24,51,210/- and, after deductions, the taxable gain was Rs. 47,94,019/-. The assessee contested this, arguing that the DVO's valuation was unjustified and did not consider the terrace value. The CIT (A) upheld the AO's decision, leading to the present appeal.

2. Adequate Opportunity of Hearing by the Valuation Officer:
The assessee argued that the DVO did not provide adequate opportunity for hearing. The DVO issued a notice on 18.12.2009, received by the assessee on 26.12.2009, with the hearing fixed on 28.12.2009, a public holiday. The DVO passed the order on 30.12.2009 without further hearing. The Tribunal found merit in this claim, noting that the DVO fixed the hearing on a public holiday and did not provide further opportunity. The Tribunal directed the AO to obtain a fresh report from the DVO after giving the assessee a proper hearing.

3. Justification for Making Reference Under Section 55A Without Mandatory Recording of Satisfaction by the AO:
The assessee contended that the AO did not record satisfaction regarding the market value before referring to the DVO, making the reference invalid. The Tribunal noted that the legal issue of whether the AO could make a reference under section 55A even if the registered valuer's report was higher than the market value was supported by the Gujarat High Court's decision in ACC Ltd. v. DVO. The Tribunal held that the reference by the AO was justified under section 55A(b)(ii), as the AO can make such a reference if the registered valuer's report is higher than the market value. The Tribunal also noted that even if the reference was invalid, the valuation report could still be used in the income tax proceedings, supported by the Supreme Court's decision in Pooran Mal v. Director of Inspection.

Conclusion:
The Tribunal upheld the AO's reference to the DVO under section 55A(b)(ii) and found that the valuation report could be used in the assessment. However, it recognized the lack of adequate hearing opportunity by the DVO and directed the AO to obtain a fresh valuation report after providing the assessee a proper hearing. The additional ground raised by the assessee regarding the AO's failure to record satisfaction was dismissed as it was not supported by facts on record. The appeal was allowed for statistical purposes, and the matter was remanded to the AO for a fresh order.

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