2015 (11) TMI 794 - AT - Income Tax

Valuation Officer's Role Emphasized in Tax Appeal Decision

INCOME-TAX OFFICER Versus SMT. RUCHITA GIR

The Tribunal found merit in the Revenue's argument that the Commissioner of Income-tax (Appeals) erred in deleting the addition without allowing the ... Computation of capital gains under section 50C - adoption of Fair market value proposed by the District Valuation Officer - Held that:- Grievance of the Revenue in this appeal that the learned Commissioner of Income-tax (Appeals) ought not to have deleted the addition inasmuch as the objections raised by the assessee were already considered by the District Valuation Officer in his report and without confronting the District Valuation Officer with the objection raised by the assessee the Commissioner of Income-tax (Appeals) should not have deleted the addition finds considerable merit. See CIT v. Prabhu Steel Industries Ltd. [2013 (7) TMI 204 - BOMBAY HIGH COURT] The interests of justice would be served, if the matter is restored to the file of the Assessing Officer with a direction that the Assessing Officer shall confront the District Valuation Officer with the objections raised by the assessee and the assessee shall also be given an opportunity of being heard on the report submitted by the District Valuation Officer. And accordingly the matter is remitted back to the file of the Assessing Officer for de novo assessment - Decided in favour of revenue for statistical purposes. Issues Involved1. Whether the Commissioner of Income-tax (Appeals) erred in law and on facts.2. Whether the fair market value proposed by the District Valuation Officer should have been sustained.3. Whether the objections raised by the assessee were already considered by the District Valuation Officer.Detailed AnalysisIssue 1: Error in Law and Facts by Commissioner of Income-tax (Appeals)The Revenue contended that the Commissioner of Income-tax (Appeals) made errors in law and facts in the case. The assessee had declared an income of Rs. 16,64,308 for the assessment year 2009-10, but the Assessing Officer completed the assessment at a total income of Rs. 68,26,062. The discrepancy arose because the Assessing Officer found that the assessee sold a plot for Rs. 1,72,50,000, but the valuation as per SRO was Rs. 2,12,41,000. Consequently, the Assessing Officer invoked section 50C and adopted the SRO value for computing capital gains. The Commissioner of Income-tax (Appeals) later deleted the addition without adopting the SRO valuation, which the Revenue challenged.Issue 2: Fair Market Value by District Valuation OfficerThe Revenue argued that the Commissioner of Income-tax (Appeals) should have sustained the fair market value proposed by the District Valuation Officer. The District Valuation Officer had estimated the fair market value at Rs. 2,12,41,000, which the Assessing Officer used to compute the capital gains. The Commissioner of Income-tax (Appeals) disregarded this valuation, leading to the Revenue's appeal.Issue 3: Consideration of Assessee's ObjectionsThe Revenue claimed that the objections raised by the assessee were already considered by the District Valuation Officer. The assessee had objected to the adoption of the SRO value, arguing that the property was anti vastu, rocky, and unevenly shaped. The Commissioner of Income-tax (Appeals) received additional evidence, including a sale deed showing a different valuation, but the Revenue argued that these objections had already been addressed by the District Valuation Officer.Tribunal's DecisionThe Tribunal reviewed the submissions and material on record. It found merit in the Revenue's argument that the Commissioner of Income-tax (Appeals) should not have deleted the addition without confronting the District Valuation Officer with the objections raised by the assessee. Citing the Bombay High Court case of CIT v. Prabhu Steel Industries Ltd., the Tribunal emphasized that the Valuation Officer must be given an opportunity to address the objections.The Tribunal noted that the Valuation Officer is an independent statutory forum with the responsibility to determine the correct market value of the asset. The Tribunal highlighted that the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal must extend an opportunity of hearing to the Valuation Officer when his report is disputed. This procedural requirement was not followed in the present case.ConclusionThe Tribunal concluded that the interests of justice would be served by remitting the matter back to the Assessing Officer. The Assessing Officer was directed to confront the District Valuation Officer with the assessee's objections and allow the assessee an opportunity to be heard on the report submitted by the District Valuation Officer. The matter was thus restored for de novo assessment.Final OrderThe appeal was partly allowed for statistical purposes, and the order was pronounced in the open court on July 1, 2015.