2014 (4) TMI 892 - AT - Income Tax

Tribunal directs re-evaluation of property value for accurate capital gains calculation.

Shri Benjamin C Malhotra, C/o DM Harish and Co. Versus Income Tax Officer

The Tribunal allowed the appeal for statistical purposes, directing a re-determination of the property's fair market value as on 1.4.1981. The decision ... Validity of direction to compute LTCG – Sale of 50% undivided right – Valuation adopted by the DVO – Held that:- The report of DVO was not available to the AO - it was taken into consideration while adjudicating the appeal by CIT(A) during the course of first appellate proceedings - The assessee had also relied upon certain sale instances, and this fact has been admitted by CIT(A) - CIT(A) has not given any reason to deviate from the sale instances relied upon by the assessee and has simply observed that the report of valuation carried out by DVO is fair and reasonable – thus, it would be proper if the additional evidence filed by assessee is admitted and the issue is remitted back to the AO for redetermination of the FMV of the flat and garage as on 1.4.1981 after giving assessee reasonable opportunity of hearing – Decided in favour of Assessee. Issues:1. Computation of Long Term Capital Gain on the sale of property.2. Discrepancy in the valuation of property for capital gain calculation.3. Opportunity for the assessee to rebut valuation reports.Issue 1: Computation of Long Term Capital Gain:The appeal was filed against the order passed by the CIT(A) for the assessment year 2007-08. The assessee, a non-resident, inherited a property and calculated the capital gain based on the cost of acquisition as on 1.4.1981. However, the Assessing Officer disagreed with this calculation and considered a different indexed cost of acquisition, resulting in a taxable capital gain. The CIT(A) referred to a decision by ITAT Mumbai regarding indexation benefits from 1981-82. The valuation of the property was referred to the DVO, who determined a lower value. The assessee argued that the DVO's valuation was lower and provided a valuation from a Registered Valuer. The Tribunal allowed the appeal for statistical purposes, directing a re-determination of the property's fair market value as on 1.4.1981.Issue 2: Discrepancy in Valuation for Capital Gain Calculation:The Assessing Officer used a different indexed cost of acquisition compared to the assessee's calculation, resulting in a taxable capital gain. The CIT(A) considered the DVO's valuation, which the assessee contested by providing a valuation from a Registered Valuer. The Tribunal found the CIT(A)'s order lacking reasoning and admitted the additional evidence from the assessee. The matter was directed back to the AO for re-determination of the fair market value of the property as on 1.4.1981, allowing the appeal for statistical purposes.Issue 3: Opportunity for the Assessee to Rebut Valuation Reports:The assessee argued that they did not have a proper opportunity to rebut the valuation determined by the DVO. The Tribunal acknowledged that the DVO's report was considered without being available during the assessment proceedings. The assessee's submission of a valuation from a Registered Valuer was admitted as additional evidence. The Tribunal, in the interest of justice, directed the issue to be sent back to the AO for re-determination of the property's fair market value, providing the assessee with a reasonable opportunity for hearing.In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the importance of providing the assessee with a fair opportunity to contest valuation reports and ensuring proper computation of capital gains based on accurate property valuations.