2023 (11) TMI 995 - AT - Income Tax

Consistent valuation required for all co-owners of same property in LTCG computation

Shri Chandra Kant Chahal Versus Income Tax Officer, Ward : 1 (2) Dehradun.

ITAT Delhi allowed the assessee's appeal regarding LTCG computation on co-ownership land sale. The AO adopted different valuations for co-owners of the ... LTCG on 'Sale of Co-ownership Land' - valuation report given by the DVO rejected - AO adopted the fair market value of the property sold for the purpose of computing capital gains - different valuation for the purpose of computing capital gains in each co-owners case - assessee submitted that in one of co-owners brother’s case reference was made to the DVO to ascertain the fair market value of the property sold and the DVO valued the property which value was adopted by AO accepting the valuation done by the DVO and assessment was completed u/s 143(3) r.w.s. 147 - CIT (Appeals) rejected the claim of the assessee on the ground that the valuation report given by the DVO is not correct as he has reduced 50% value of the property for the reason that the size of the property was large in extent and there were no buyers for such plot. HELD THAT:- In the case of the assessee, Assessing Officer adopted the fair market value of the property sold at Rs. 6,46,80,000/- for the purpose of computing capital gains ignoring the valuation report of the DVO and the assessment made in assessee’s brother’s case wherein the valuation of the DVO was adopted for computing long term capital gains. The ld. CIT (Appeals) also did not accept the contention of the assessee for adopting the DVO valuation in assessee’s case also for the purpose of computing the long term capital gain which in our view, is not justified. Having adopted the DVO’s valuation in one of the co-owners case who is the brother of the assessee for the assessment year i.e. 2011-12 for computing the long term capital gain, we see no justifiable reason to adopt a different valuation in assessee’s case for computing long term capital gain for his 1/6th share for the very same assessment year i.e. 2011-12. Even the case of the Revenue that the valuation of the DVO was not accepted by the Revenue in the case of Late Krishan Kant Chahal and the CIT had initiated proceedings under section 263 of the Act. The Revenue could not place before us any proceeding pending under section 263 in the case of co-owner and brother of the assessee Late Shri Krishan Kant Chahal. The valuation adopted by the Revenue as per the DVO’s report became final in the co-owners case and, therefore, the same valuation should be adopted in assessee’s case also for the purpose of computing long term capital gain. Thus, we direct the Assessing Officer to adopt the valuation report of the DVO dated 16.12.2006 which formed the basis for computing long term capital gain in the case of the other co-owner, Late Shri Krishan Kant Chahal, who is also the brother of the assessee for the purpose of computing 1/6th share of capital gains, in the case of the assessee also. Assessee appeal allowed. Issues Involved:1. Legality of the CIT(A)'s order.2. Application of Section 50C of the Income Tax Act.3. Consideration of additional evidence without a remand report.4. Disagreement with the DVO's valuation method.5. Inconsistent methods in calculating Long-Term Capital Gains for co-owners.Summary:Issue 1: Legality of the CIT(A)'s OrderThe assessee contested the CIT(A)'s order dated 25.01.2017, arguing it was 'bad in law and on facts and merits to be set aside.'Issue 2: Application of Section 50C of the Income Tax ActThe assessee challenged the CIT(A)'s decision to uphold the AO's computation of Long-Term Capital Gains based on the circle rate, invoking Section 50C of the Act. The AO had adopted a circle rate of Rs. 6,46,80,000/- instead of the actual sale consideration of Rs. 3,25,00,000/-, leading to a higher capital gains calculation.Issue 3: Consideration of Additional Evidence Without a Remand ReportThe assessee argued that the CIT(A) accepted the Departmental Valuation Officer's (DVO) report as additional evidence without seeking a remand report from the AO or the DVO, violating Rule 46A of the Income Tax Rules 1962. The DVO's report valued the property at Rs. 3,39,57,000/-.Issue 4: Disagreement with the DVO's Valuation MethodThe CIT(A) disagreed with the DVO's method of reducing the circle rate by 50% to determine the Fair Market Value, stating it lacked a scientific basis. This decision was made without reference to the DVO or the appellant, despite the DVO's valuation being accepted in the assessment of another co-owner, Smt. Krishna Nand Chahal.Issue 5: Inconsistent Methods in Calculating Long-Term Capital Gains for Co-OwnersThe assessee highlighted the inconsistency in methods adopted by different AOs for the same transaction involving co-owned property. The AO in the assessee's brother's case accepted the DVO's valuation, while in the assessee's case, a higher circle rate was used.Judgment:The Tribunal found merit in the assessee's arguments, particularly regarding the inconsistency in valuation methods. It emphasized that the same valuation should be used for all co-owners to ensure fairness and consistency. The Tribunal directed the AO to adopt the DVO's valuation report dated 16.12.2016, which was used in the co-owner's case, for computing the assessee's 1/6th share of the capital gains. Consequently, Ground Nos. 3 and 5 of the appeal were allowed, and the other grounds were deemed academic and not adjudicated.The appeal was partly allowed, and the order was pronounced in the open court on 22/11/2023.