2022 (6) TMI 1243 - AT - Income Tax

Appellant wins appeal on fair market value for capital gains calculation under sec 55A(a).

The judgment favored the appellant regarding the referral to the DVO under section 55A, directing the assessing officer to consider the fair market value ... LTCG - Reference to approved valuer’s reports - addition by adopting different cost of acquisition than claimed by the appellant - validity of reference of matter to the DVO u/s 55A - HELD THAT:- As relying on the case of Swami Sat yananda, 2020 (6) TMI 429 - ITAT KOLKATA] pre-amended section 55A(a) is applicable to the assessee wherein the terminology used is “is less than its fair market value” - we direct assessing officer to take indexed cost of acquisition of asset at Rs.80 per sq.meter, for the purpose of computation of long term capital gain. Issues:1. Validity of notice u/s 1482. Enhancement of assessment3. Addition of LTCG4. Referral to the DVO u/s 55A5. Assessment u/s 143(3) vs. section 144Validity of notice u/s 148:The appeal contested the legality of the notice u/s 148 issued by the Assessing Officer (AO). The appellant argued that the notice was bad and illegal, as no amount of escapement of income was recorded in the reasons. The Commissioner of Income Tax (Appeals) upheld the AO's action. The appellant prayed for the notice and consequent assessment to be quashed. The issue revolved around the legality and factual basis of the notice under section 148 of the Income Tax Act, 1961.Enhancement of assessment:The appellant challenged the enhancement of assessment by Rs. 17,57,238 by the Commissioner of Income Tax (Appeals). The appellant contended that such an enhancement could only be done through a notice u/s 148 or revision u/s 263. The dispute centered on the authority of the CIT(A) to enhance the assessment amount without following the prescribed procedures under the Income Tax Act.Addition of LTCG:The dispute involved the addition of Rs. 35,33,081 as Long Term Capital Gain (LTCG). The appellant disagreed with the AO's adoption of a different cost of acquisition than claimed. The CIT(A) confirmed the AO's action, which involved ignoring the approved valuer's reports without providing reasons and using a property rate not comparable to the appellant's property. The issue raised concerns about the correctness of the valuation methodology used by the AO and the CIT(A) in determining the LTCG amount.Referral to the DVO u/s 55A:The appellant contested the AO's referral to the District Valuation Officer (DVO) under section 55A. The appellant argued that the reference was illegal and invalid, as it should only be made when the AO believes the asset's value claimed by the assessee is less than its fair market value. The dispute centered on the timing and validity of the referral to the DVO in relation to the fair market value of the asset.Assessment u/s 143(3) vs. section 144:The appellant raised concerns about the assessment being done under section 143(3) instead of section 144. The appellant claimed that no return was filed in response to the notice u/s 148, and the assessment should have been done under section 144. The issue involved the procedural correctness of the assessment conducted by the AO and the implications of filing a return in response to the notice u/s 148.The judgment ultimately favored the appellant on the grounds related to the referral to the DVO under section 55A, directing the assessing officer to consider the fair market value determined by the Registered Valuer for computation of long term capital gain. The decision was based on the applicability of pre-amended provisions of section 55A(a) to the assessment year in question. Other grounds raised by the appellant became irrelevant due to the favorable decision, leading to the allowance of the appeal.