Tribunal Reverses CIT(A) Orders, Adopts Fair Market Value for Capital Gains Calculation

The Tribunal allowed the appeals, reversing the CIT(A)'s orders. It directed the adoption of Fair Market Value (FMV) as on 01.04.1981 as declared by the assessee for computing capital gains. The AO was instructed to allow the assessee to provide information for the deduction under Section 54F. The Tribunal emphasized the legal precedent restricting referral to the Valuation Officer if the declared value is higher than FMV.

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Issues Involved:
1. Adoption of Fair Market Value (FMV) as on 01.04.1981 for computing Capital Gains.
2. Non-referral to the Valuation Officer for determining FMV.
3. Deduction under Section 54F of the Income-tax Act, 1961.
4. Cancellation/reduction of interest charged under Section 234B.

Detailed Analysis:

1. Adoption of Fair Market Value (FMV) as on 01.04.1981 for computing Capital Gains:
The primary issue in both appeals is the adoption of FMV as on 01.04.1981 while computing income from capital gains. The assessee contended that the FMV should be based on the registered valuer's report, which was not accepted by the Assessing Officer (AO). Instead, the AO adopted a value of Rs. 10,000 per acre based on a sale instance of a nearby area. This decision was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)].

2. Non-referral to the Valuation Officer for determining FMV:
The assessee argued that the AO erred in not referring the matter to the Valuation Officer to determine the FMV as on 01.04.1981. The Tribunal referred to the judgment of the Hon’ble Bombay High Court in CIT Vs. Puja Prints (2014) 360 ITR 697 (Bom), which held that a reference to the Departmental Valuation Officer (DVO) under Section 55A of the Act can only be made if the value adopted by the assessee is less than the FMV. Since the value declared by the assessee was higher than the FMV, the AO's action was not justified.

3. Deduction under Section 54F of the Income-tax Act, 1961:
The assessee also claimed a deduction under Section 54F of the Act, which was denied by the AO and upheld by the CIT(A). The Tribunal directed that if the FMV is adopted as declared by the assessee, the AO should provide a reasonable opportunity for the assessee to furnish complete information regarding the deduction under Section 54F and decide the issue accordingly.

4. Cancellation/reduction of interest charged under Section 234B:
The assessee sought cancellation or reduction of interest charged under Section 234B. However, the Tribunal's order did not specifically address this issue, focusing instead on the primary issues of FMV and deduction under Section 54F.

Conclusion:
The Tribunal reversed the orders of the CIT(A) and directed the adoption of the FMV as on 01.04.1981 as declared by the assessee. It also instructed the AO to provide an opportunity for the assessee to furnish information regarding the deduction under Section 54F. The appeals were allowed, and the Tribunal emphasized the legal precedent set by the Bombay High Court in CIT Vs. Puja Prints, which restricts the AO from referring to the DVO if the value declared by the assessee is higher than the FMV.

Order Pronounced:
The order was pronounced on the 28th day of August, 2018.

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