Dismissal of Appeal Upholding Deletion of Capital Gain & Referral to DVO for Property Valuation

The appeal was dismissed as the First Appellate Authority (FAA) upheld the deletion of Short Term Capital Gain, allowing adjustment of acquired assets in the block of assets under section 43(6)(c). The FAA also directed the Assessing Officer (AO) to refer property valuation to the District Valuation Officer (DVO) as mandated by section 50C(2), leading to the dismissal of the AO's appeal.

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Issues:
1. Deletion of Short Term Capital Gain
2. Treatment of acquired assets in block of assets
3. Reference to District Valuation Officer (DVO) for property valuation

Deletion of Short Term Capital Gain:
The appellant challenged the order of the CIT(A) regarding the deletion of Short Term Capital Gain of Rs. 47,69,046. The Assessing Officer (AO) determined the income of the assessee at Rs. 47.80 lakhs, noting the sale of a business premises and purchase of new galas. The AO treated the amount of Rs. 47,69,046 as Short term capital gain under section 50 of the Act. However, the First Appellate Authority (FAA) held that the assessee had acquired the assets as per section 43(6)(c) and was entitled to adjust the cost of the property with the Written Down Value (WDV) of the block of assets for capital gains. The FAA deleted the disallowance made by the AO, leading to the appeal being dismissed.

Treatment of Acquired Assets in Block of Assets:
The AO argued that the galas purchased by the assessee could not form part of the block of assets as they were not in possession or put to use for business purposes. However, the FAA referred to section 43 clause (c) and held that the assessee had acquired the galas during the year, entitling adjustment in the block of assets. The FAA emphasized that the use of the asset was not a condition precedent for adjustment. The AR contended that the use of the asset was not essential for availing benefits under section 50. Citing relevant case law and the interpretation of "acquired" in section 50, the FAA upheld the adjustment, resulting in the deletion of the disallowance.

Reference to District Valuation Officer (DVO) for Property Valuation:
The issue revolved around the AO's failure to refer the valuation of the property to the DVO as per section 50C(2) of the Act. The FAA directed the AO to adopt the value determined by the DVO if the matter was referred. The AO and DR supported the AO's decision, while the AR cited a judgment emphasizing the mandatory nature of the reference to the DVO. The tribunal noted the clear mandate of section 50C(2), requiring the AO to refer the matter to the DVO. Consequently, the conditional direction by the FAA was upheld, leading to the dismissal of the AO's appeal.

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