Tribunal partially allows appeal, directs AO to adopt valuer's report, reconsider deductions

The Tribunal allowed the appeal partly, directing the Assessing Officer to adopt the registered valuer's report for the indexed cost, reconsider the deduction under Section 54B, and re-evaluate the treatment of agricultural income based on further evidence. The order was pronounced in the open court on 29 December 2022.

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Issues Involved:
1. Reference to Departmental Valuation Officer (DVO) under Section 55A of the Income Tax Act.
2. Disallowance of indexed cost of acquisition and improvement.
3. Disallowance of deduction under Section 54B of the Income Tax Act.
4. Treatment of agricultural income as income from undisclosed sources.

Issue-wise Detailed Analysis:

1. Reference to Departmental Valuation Officer (DVO) under Section 55A of the Income Tax Act:
The assessee contested the reference to the DVO, arguing that the amended provisions of Section 55A(a), effective from 01/07/2012, were not applicable to the Assessment Year (AY) 2012-13. The assessee relied on several judicial precedents, including CIT Vs Gauragiben S Shodhna and CIT Vs Puja Prints, to support the claim that the reference to the DVO was without jurisdiction. The Tribunal, agreeing with the assessee, concluded that the reference made by the Assessing Officer under Section 55A(a) was not competent and directed the Assessing Officer to adopt the value of land as per the registered valuer's report. Consequently, grounds No. 1 to 4 of the appeal were allowed.

2. Disallowance of indexed cost of acquisition and improvement:
The assessee claimed indexed costs based on a Government Registered Valuer's report, which the Assessing Officer deemed to be on the higher side. The DVO's report, which came later, suggested a lower valuation. The Tribunal noted that the reference to the DVO was not valid for AY 2012-13 and directed the Assessing Officer to adopt the value as per the registered valuer's report. Regarding the cost of improvement, the Tribunal allowed the deduction of Rs. 20.00 lacs paid to SUDA but did not find sufficient evidence for the remaining claimed amount. Partial relief was granted by the ld. CIT(A) based on the DVO's confirmation of the charges paid to SUDA.

3. Disallowance of deduction under Section 54B of the Income Tax Act:
The assessee argued that the land sold was used for agricultural purposes and provided supporting documents, including certificates from local authorities and cooperative societies. However, the Assessing Officer and the ld. CIT(A) disallowed the deduction, questioning the agricultural use of the land. The Tribunal found the ld. CIT(A)'s order contradictory and remitted the issue back to the Assessing Officer to reconsider in light of the Hon'ble Jurisdictional High Court's decision in CIT Vs Siddarth J Desai. The Assessing Officer was directed to provide a fair opportunity to the assessee to present evidence of agricultural activities and the acquisition of new agricultural land.

4. Treatment of agricultural income as income from undisclosed sources:
The assessee claimed agricultural income, which the Assessing Officer treated as income from undisclosed sources due to a lack of supporting evidence. The Tribunal noted that the assessee did not file returns for the preceding years, claiming only agricultural income. Given that the assessee still held some agricultural land, the Tribunal restored the issue to the Assessing Officer to reconsider the evidence. The Tribunal instructed that this issue be adjudicated after considering the deduction under Section 54B.

Conclusion:
The Tribunal allowed the appeal partly, directing the Assessing Officer to adopt the registered valuer's report for the indexed cost, reconsider the deduction under Section 54B, and re-evaluate the treatment of agricultural income based on further evidence. The order was pronounced in the open court on 29 December 2022.

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