Tax Appeals Dismissed for Lack of Authority to Refer Matter for FMV Determination

The Tribunal upheld the Ld. CIT(Appeals)' findings and dismissed the Revenue's appeals in ITA No.1941/PUN/2019 and ITA No.1943/PUN/2019, affirming that the AO lacked authority to refer the matter to the DVO for FMV determination. Appeals in ITA No.1934/PUN/2019, ITA No.1942/PUN/2019, and ITA No.1944/PUN/2019 were dismissed due to low tax effect as per the recent CBDT Circular, with all Revenue appeals being dismissed.

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Issues Involved:
1. Deletion of addition made by the Assessing Officer (AO) under the head Long Term Capital Gain on sale of land.
2. Justification of AO's reference to the District Valuation Officer (DVO) for Fair Market Value (FMV) determination.
3. Adoption of cost of acquisition as per DVO's report.
4. Dismissal of appeals due to low tax effect as per recent CBDT Circular.

Issue-wise Detailed Analysis:

1. Deletion of Addition Made by AO Under Long Term Capital Gain:
The Revenue contested the deletion of the addition made by the AO under Long Term Capital Gain on the sale of land. The AO had assessed the Long Term Capital Gains at Rs. 14,82,08,800/- for the sale of property, of which the assessee was a co-owner. During the assessment proceedings, the AO referred the property to the DVO to determine the FMV as on the date of sale and to verify the correctness of the cost of acquisition as on 01.04.1981. The Ld. CIT(Appeals) deleted the addition made by the AO, leading to the Revenue's appeal.

2. Justification of AO's Reference to DVO for FMV Determination:
The AO referred the matter to the DVO under Section 55A of the Income Tax Act, 1961, to ascertain the FMV of the property as on the date of sale and to verify the cost of acquisition as on 01.04.1981. The Ld. CIT(Appeals) held that the AO did not have the mandate to refer the matter to the DVO for FMV determination as per the provisions of Section 55A, which was applicable for the assessment year under consideration. The reference to the DVO was not in line with the provisions of Section 55A, as the AO should be of the opinion that the value of the asset claimed by the appellant is less than its FMV, not for verification purposes.

3. Adoption of Cost of Acquisition as per DVO's Report:
The DVO's report determined the FMV of the property as on 01.04.1981 at Rs. 68,45,000/-, which was lower than the value declared by the appellant. The Ld. CIT(Appeals) adopted the valuation of the Approved Valuer, which was Rs. 50,91,000/-, as the cost of acquisition. The Ld. CIT(Appeals) placed reliance on various judicial pronouncements, including the decisions of the Hon'ble Bombay High Court and Pune ITAT, which held that where the value determined by the DVO as on 01.04.1981 was lesser than the value declared by the appellant, reference to the DVO under Section 55A was not warranted.

4. Dismissal of Appeals Due to Low Tax Effect as per Recent CBDT Circular:
The appeals in ITA No.1934/PUN/2019, ITA No.1942/PUN/2019, and ITA No.1944/PUN/2019 were dismissed on account of low tax effect in terms of recent CBDT Circular No.17/2019 dated 08-08-2019, which revised the upward monetary limits for filing of appeals in Income Tax Cases before various Appellate Forums. The tax effect involved in these appeals was less than Rs. 50 Lakhs, the threshold set by the CBDT Circular. The Tribunal clarified that the Revenue could approach the Tribunal for restoration of the appeal if it could show that the appeal is protected by the exceptions prescribed in the Circular.

Conclusion:
The Tribunal upheld the findings of the Ld. CIT(Appeals) and dismissed the Revenue's appeals in ITA No.1941/PUN/2019 and ITA No.1943/PUN/2019, confirming that the AO did not have the mandate to refer the matter to the DVO for FMV determination. The appeals in ITA No.1934/PUN/2019, ITA No.1942/PUN/2019, and ITA No.1944/PUN/2019 were dismissed due to low tax effect as per the recent CBDT Circular. All the appeals of the Revenue were dismissed.

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