Tribunal Invalidates Long Term Capital Gain Addition, AO's Reliance on DVO Report Deemed Erroneous

The Tribunal ruled in favor of the assessee, finding the addition of Rs.87,41,778/- as Long Term Capital Gain invalid. The Tribunal held that the reopening of the assessment under Section 147 based on the DVO's report beyond the 4-year period was not valid. It was also determined that the amended provisions of Section 55A were not applicable for the Assessment Year 2012-13. The Tribunal concluded that the AO's reliance on the DVO's report was erroneous, and the appellant's valuation report should have been considered, ultimately deciding in favor of the assessee and deleting the addition.

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Issues Involved:
1. Validity of the addition of Rs.87,41,778/- as Long Term Capital Gain.
2. Legitimacy of reopening under Section 147 based on DVO's report beyond the period of 4 years.
3. Applicability of Section 55A for the Assessment Year 2012-13.
4. Consideration of the appellant's valuation report over the DVO's report.

Summary:

1. Validity of the addition of Rs.87,41,778/- as Long Term Capital Gain:
The assessee contended that the addition made by the Assessing Officer (AO) and confirmed by the CIT(A) was incorrect. The Tribunal referenced the case of Virendra Natwarlal Jariwala vs DCIT, which adjudicated that the amendment to Section 55A(a) effective from 01.07.2012 is not applicable retrospectively. Since the assessment year in question is AY 2012-13, the amended provisions do not apply. The Tribunal found no reason to deviate from this precedent and ruled in favor of the assessee, thereby deleting the addition.

2. Legitimacy of reopening under Section 147 based on DVO's report beyond the period of 4 years:
The assessee argued that the reopening of the assessment under Section 147 based on the Departmental Valuation Officer's (DVO) report was a change of opinion and not valid. The Tribunal upheld the view that the AO's reliance on the DVO's report for reopening was invalid, especially since the amendment to Section 55A(a) was not applicable for AY 2012-13.

3. Applicability of Section 55A for the Assessment Year 2012-13:
The Tribunal reiterated that the amendment to Section 55A(a), which substituted "is less than the fair market value" with "is at variance with its fair market value," is clarificatory and should be applied prospectively from 01.07.2012. Therefore, for AY 2012-13, the unamended provisions apply, which do not permit the AO to refer the matter to the DVO if the value claimed by the assessee is higher than the fair market value.

4. Consideration of the appellant's valuation report over the DVO's report:
The Tribunal noted that the AO and CIT(A) erred in not considering the appellant's valuation report. The Tribunal referenced multiple judicial precedents, including decisions from the jurisdictional High Court and other tribunals, which supported the assessee's claim that the AO could not rely on the DVO's valuation for the purpose of determining the fair market value as of 1-4-1981 for AY 2012-13.

Conclusion:
The Tribunal allowed the appeal, ruling that the AO's reference to the DVO and the subsequent addition to the Long Term Capital Gain were invalid. The appeal was decided in favor of the assessee, with the addition of Rs.87,41,778/- being deleted. The order was pronounced on 18/04/2023.

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