2022 (9) TMI 882 - AT - Income Tax

Tribunal favors Assessee in property valuation dispute under Income Tax Act

Late Shri Devji Morarjibhai Thakrar, Legal Heir Sunil Devjibhai Thakrar, C/o. N.B. Kanani Versus The I.T.O. (International Taxation), Gandhidham

The Tribunal ruled in favor of the Assessee in a case concerning the valuation of a property under Section 50C of the Income Tax Act, 1961. The Assessee's ... Capital gain - addition u/s. 50C - AO referred the matter u/s. 50C(2) Valuation Officer who determined the valued - Assessee being 50% co-owner assessed as the sale consideration and determined the LTCG - CIT(A) holding that the DVO cannot revisit his order and the second report is not binding either of the AO or the Appellate Authority, since assessment has already been done in that case as against the principle of Audi Alteram Partem - HELD THAT:- DVO was entrusted to consider assessee’s objection on the valuation of the property. Further the DVO vide its letter admitted that preliminary report was not given to the assessee calling upon its objection during the original valuation proceedings. Therefore taking into account, the assessee’s objection second valuation report dated 28.02.2018 was submitted determining the value of the property - CIT(A) erred in holding that the DVO cannot revisit his order and the second report is not binding either of the AO or the Appellate Authority, since assessment has already been done in that case. This is against the principle of Audi Alteram Partem. It is clear find from the facts that the DVO in its first valuation report determined the value of Rs. 1,35,88,000/- without providing preliminary report to the assessee calling for his objection. When the assessee particularly raised its objection and the method of valuation, the Ld. DVO admitted the mistake and heard the objections of the assessee and then determined the value of the property vide second valuation report dated 28.02.2018. CIT(A) is legally in correct in interfering the Expert’s opinion, which cannot be determined either by the Assessing Officer or the Appellate Authority. DVO is himself admits preliminary report was not given to the assessee calling for its objection. When this mistake was being rectified by second valuation report determined by the DVO, the same cannot be rejected by the Ld. CIT(A) which is unjustified. Therefore the grounds raised by the assessee are hereby allowed and the appeal is allowed. Issues:1. Valuation of property under Section 50C of the Income Tax Act, 1961.2. Revisiting valuation by Departmental Valuation Officer.3. Legality of the second valuation report submitted by DVO.4. Admissibility of second valuation report in assessment proceedings.Analysis:Issue 1: Valuation of property under Section 50C of the Income Tax Act, 1961:The appeal pertains to the valuation of a property sold by the Assessee, with a variance between the actual sale consideration and the Jantri Value under Section 50C of the Act. The Assessing Officer (A.O.) referred the matter to the Valuation Officer, who determined the property value. The Assessee objected to the valuation, leading to a revised determination by the DVO. However, the CIT(A) dismissed the appeal, upholding the initial valuation. The Tribunal found in favor of the Assessee, allowing the appeal based on the principles of Audi Alteram Partem, emphasizing the importance of providing the Assessee with an opportunity to raise objections and be heard during valuation proceedings.Issue 2: Revisiting valuation by Departmental Valuation Officer:The DVO initially valued the property without providing a preliminary report to the Assessee for objections, leading to a flawed valuation. Upon objection by the Assessee, the DVO admitted the error and conducted a second valuation, taking into account the Assessee's objections. The Tribunal held that the DVO's second valuation report, which rectified the initial mistake, should be considered valid. The CIT(A)'s interference with the DVO's expert opinion was deemed legally incorrect, emphasizing that the DVO's revised valuation should not be disregarded, especially when rectifying a procedural error.Issue 3: Legality of the second valuation report submitted by DVO:The legality of the second valuation report submitted by the DVO was challenged by the CIT(A), who contended that the DVO cannot revisit his order without a fresh reference. However, the Tribunal disagreed, asserting that the DVO's revised valuation, which addressed the Assessee's objections and rectified procedural shortcomings, should be binding in the assessment proceedings. The Tribunal emphasized the importance of fairness and procedural correctness in valuation exercises.Issue 4: Admissibility of second valuation report in assessment proceedings:The Tribunal analyzed the admissibility of the second valuation report in the assessment proceedings, highlighting the DVO's acknowledgment of procedural lapses in the initial valuation process. The Tribunal concluded that the CIT(A)'s rejection of the revised valuation was unjustified, as rectifying procedural errors and considering the Assessee's objections were essential for a fair valuation process. Consequently, the Tribunal allowed the Assessee's appeal, emphasizing the significance of procedural fairness and adherence to legal principles in valuation disputes.In conclusion, the Tribunal's judgment favored the Assessee, highlighting the importance of providing opportunities for objections, rectifying procedural errors, and ensuring fairness in valuation exercises under the Income Tax Act, 1961.