2020 (4) TMI 116 - AT - Income Tax

Tribunal Sets Fair Market Value, Emphasizes Expert Opinion in Property Valuation

Angeela Vasandani Versus DCIT, International Taxation, Circle-3 (1) (1), New Delhi.

The Tribunal directed the Assessing Officer to adopt a fair market value of &8377; 95,28,000 for a property, providing partial relief to the assessee ... Revision u/s 263 - long-term capital gain in the hands of the assessee being 50% of assessee’s share in the property before allowing deduction u/s 54E by considering the fair market value of the property as on 01.04.1981 - CIT(A) directed the AO to adopt the computation of capital gain as on 01.04.1981 as declared by the assessee on the basis of the report of a registered value - HELD THAT:- We find on appeal by the assessee, Tribunal, vide order dated 23rd September, 2015, restored the issue to the file of the AO for fresh adjudication. We find, the AO, subsequently, passed an ex parte order u/s 144 of the Act and determined the total income in the hands of the assessee at ₹ 7,68,81,070/- as against the returned income of ₹ 4,70,82,272/-. CIT(A) gave partial relief to the assessee by substituting the fair market value of the property as on 01.04.1981 at ₹ 16,32,036/-. It is the submission of the assessee that in the case of the brother of the assessee, the Tribunal has quashed the section 263 proceedings initiated by the CIT against the order passed by the AO wherein he has considered the fair market value of the property at ₹ 95,28,000/- as on 01.04.1981. In hands of the brother of the assessee the AO has already considered the fair market value of the property as on 01.04.1981 at ₹ 95,28,000/- and since the assessee is holding 50% of the share in the said property, therefore, in the fitness of things the fair market value of the property has to be adopted at ₹ 95,28,000/- as on 01.04.1981. AO is accordingly directed to recompute the indexed cost of acquisition and consequential capital gain in the hands of the assessee. Since levy of interest on tax demand is consequential, the ground on this is dismissed. The grounds raised by the assessee are accordingly partly allowed. Issues:1. Determination of fair market value of property as on 01.04.1981 for computing long-term capital gain.2. Validity of reference to Departmental Valuation Officer (DVO) for valuation of property.3. Consideration of Registered Valuer's report in determining fair market value.4. Jurisdiction of Commissioner under section 263 of the Income Tax Act.5. Assessment of total income and levy of interest on tax demand.Issue 1: Determination of Fair Market Value:The case involved the computation of long-term capital gain based on the fair market value of a property as on 01.04.1981. The Assessing Officer (AO) initially considered the fair market value at &8377; 6,70,000, leading to a capital gain assessment. The Commissioner of Income Tax (Appeals) directed the AO to adopt a higher value of &8377; 16,32,036 based on a registered valuer's report. The Tribunal, however, restored the issue to the AO for fresh adjudication. Ultimately, the Tribunal directed the AO to adopt the fair market value at &8377; 95,28,000, in line with the value accepted in the brother's case, resulting in a partial relief to the assessee.Issue 2: Validity of DVO Reference:The Tribunal analyzed the validity of the reference made to the DVO under Section 58 of the Income Tax Act. It was observed that both the registered valuer and the DVO had not provided comparable instances in their reports. The Tribunal emphasized that fair market value should be based on hypothetical market scenarios, not merely on stamp duty values. Consequently, the matter was remanded to the AO for a fresh assessment, allowing the assessee a reasonable opportunity to present their case.Issue 3: Consideration of Registered Valuer's Report:The assessee contested the CIT(A)'s decision to determine the fair market value based on land rates schedule, arguing that the Registered Valuer's report should have been given precedence. The Tribunal highlighted that the CIT(A) should not have ignored the Registered Valuer's report, emphasizing the need for technical expertise in property valuation matters. This issue underscored the importance of considering expert opinions in determining fair market value accurately.Issue 4: Jurisdiction under Section 263:The Tribunal referenced a case involving the brother of the assessee, where the Commissioner's jurisdiction under Section 263 was challenged. The Tribunal held that the Assessing Officer must accept the valuation provided by the assessee unless proven otherwise. It was emphasized that the Commissioner's exercise of jurisdiction under Section 263 was invalid in this context, leading to the quashing of the proceedings. This highlighted the need for proper adherence to legal provisions in invoking jurisdiction under Section 263.Issue 5: Assessment and Interest Levy:The AO had initially determined the total income, leading to a tax demand and interest levy. The CIT(A) provided some relief by adjusting the fair market value, but the Tribunal directed a reassessment based on the value accepted in the brother's case. Consequently, the interest levy on tax demand was considered consequential, and the grounds related to it were dismissed. The final decision partially allowed the assessee's appeal, considering the fair market value adjustment and directing the AO to recompute the capital gain accordingly.This detailed analysis of the judgment showcases the complex legal considerations surrounding the determination of fair market value for computing long-term capital gain, the validity of DVO references, the importance of expert reports, jurisdiction under Section 263, and the assessment of total income with interest levies in tax matters.