2020 (10) TMI 1025 - AT - Income Tax

ITAT Mumbai: Assessee's Appeal Allowed for Property Valuation Discrepancies

Shri Sudeep Baburao Suryawanshi Versus Income Tax Officer Ward –3 (5) Thane

The Appellate Tribunal ITAT Mumbai allowed the assessee's appeal, directing the Assessing Officer to refer the valuation matters to the DVO as requested ... Capital gain computation - exemption claimed u/s. 54 denied - AO & CIT (A) not referring the matter to DVO even after requested by the assessee - Whether AO & CIT(A) has erred in not considering the fact about the disadvantaged to the location of the property in question? - HELD THAT:- Assessee made a request before the Assessing Officer that if the explanation of the assessee is not accepted that the market value is less than the stamp duty valuation the valuation of the property may be referred to the valuation cell of the department to compute the market value. This was completely ignored by the AO and also the Ld.CIT(A). Sub-section 50C(2) of the Act is very clear if the valuation of the property as arrived at by the stamp valuation authority is disputed by the assessee the As relying on ABBAS T. RESHAMWALA (PROP. DYNAMIC IMPRESSION) VERSUS I.T.O., WARD 22 (3) (1) , MUMBAI [2009 (11) TMI 943 - ITAT MUMBAI] we direct the AO to refer the matter to the DVO for valuation of the property as per the provisions of sub-section (2) of Section 50C and to determine the capital gains in accordance with law. Grounds raised by the assessee are allowed. Issues:1. Failure to refer the matter to DVO as requested by the assessee.2. Not considering the disadvantaged location of the property.3. Passing the Enhancement Order.Issue 1: Failure to refer the matter to DVO as requested by the assessee.The appeal was filed against the order of the Learned Commissioner of Income Tax (Appeals) for the Assessment Year 2014-15. The Assessing Officer disallowed the exemption claimed under section 54 of the Act based on the stamp duty value of the property being higher than the reported sale consideration. The assessee requested a referral to the valuation officer as per section 50C(2) of the Act, but both the Assessing Officer and the Ld.CIT(A) ignored this request. The Tribunal emphasized that if the value assessed by the stamp valuation authority is disputed, the Assessing Officer is obligated to refer the matter to the valuation officer. Citing a previous Tribunal decision, the Tribunal held that the Assessing Officer must refer the matter to the DVO when the assessee objects to the value adopted by the stamp valuation authority. Consequently, the Tribunal directed the Assessing Officer to refer the matter to the DVO for valuation and determine the capital gains accordingly.Issue 2: Not considering the disadvantaged location of the property.The assessee argued that the property's Ready Reckoner value was higher due to its location near the Central Jail, resulting in a discrepancy between the stamp duty value and the actual market price. The assessee requested a review of the valuation through the Income Tax Office's Valuation Department, but this request was disregarded by the lower authorities. The Tribunal noted that the Assessing Officer and the Ld.CIT(A) failed to consider the request for valuation review as required by section 50C(2) of the Act. Citing precedent, the Tribunal clarified that the Assessing Officer should have referred the matter to the DVO when the assessee objected to the stamp valuation authority's assessment. Consequently, the Tribunal directed the Assessing Officer to refer the matter to the DVO for proper valuation and determination of capital gains.Issue 3: Passing the Enhancement Order.The Ld.CIT(A) directed the Assessing Officer to make an addition of the differential amount while computing capital gains, contrary to the Assessing Officer's denial of the exemption claimed under section 54 of the Act. The Tribunal found that the Ld.CIT(A) failed to address the core issue of valuation discrepancy and the assessee's request for a valuation review. Relying on a previous Tribunal decision, the Tribunal held that the Assessing Officer should have referred the matter to the DVO for proper valuation. Consequently, the Tribunal allowed the appeal, directing the Assessing Officer to refer the matter to the DVO and determine the capital gains in accordance with the law.In conclusion, the Appellate Tribunal ITAT Mumbai allowed the assessee's appeal, emphasizing the Assessing Officer's obligation to refer valuation matters to the DVO when disputed by the assessee. The Tribunal highlighted the importance of considering location-based valuation discrepancies and directed a proper valuation of the property to determine capital gains accurately.