Tribunal overturns tax assessment due to procedural errors and lack of proper notification.

The Tribunal allowed the appeal, setting aside the addition made by the Assessing Officer regarding the Fair Market Value (FMV) of the property. It was found that the AO did not properly notify the assessee about the rejection of their FMV valuation and the application of a different method. The Tribunal also criticized the CIT(A) for dismissing the assessee's valuation report without substantial reasons and for procedural errors. The appeal of the assessee was successful due to procedural lapses and failure to consider relevant evidence, leading to the removal of the additional tax burden based on the AO's valuation.

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Issues Involved:
1. Fair Market Value (FMV) determination for the property as on 01.04.1981.
2. Legitimacy of the valuation method used by the Assessing Officer (AO).
3. Admissibility and consideration of the assessee's valuation report.
4. Procedural compliance by the AO and CIT(A).

Summary:

Issue 1: Fair Market Value (FMV) Determination
The primary issue revolves around the FMV of the property as on 01.04.1981. The assessee declared the FMV at Rs. 100 per Sq. Mtr. based on a valuer's report, while the AO determined it at Rs. 38 per Sq. Mtr. using the Compounded Annual Growth Rate (CAGR) method.

Issue 2: Legitimacy of the Valuation Method
The AO rejected the FMV of Rs. 100 per Sq. Mtr. taken by the assessee, considering it arbitrary. The AO used the CAGR method to determine the FMV, concluding it to be Rs. 38 per Sq. Mtr. The Tribunal found that the AO did not notify the assessee about the rejection of their FMV and the application of the CAGR method, which is a procedural lapse.

Issue 3: Admissibility and Consideration of the Assessee's Valuation Report
The CIT(A) dismissed the assessee's valuation report, calling it "cursory and self-serving" without substantial reasons. The Tribunal held that the valuation report should not be dismissed whimsically, especially when the AO did not dispute it on factual grounds or provide a remand report despite being given an opportunity.

Issue 4: Procedural Compliance by AO and CIT(A)
The Tribunal noted that the AO failed to refer the valuation to the Departmental Valuation Officer (DVO) as mandated by Section 55(2) of the Income Tax Act. The CIT(A) also erred by not considering the valuation report submitted by the assessee and failing to appreciate the factual submissions regarding the actual saleable land and substantial expenses incurred.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned addition made by the AO. The Tribunal emphasized that the AO and CIT(A) did not follow the correct procedural mandates and failed to appreciate the facts in the correct perspective. The appeal of the assessee was allowed, and the addition on account of FMV taken by the AO was set aside.

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