Tax Tribunal Rules on Property Valuation Dispute, Invalidates DVO Assessment for Accurate Capital Gains Calculation.

The ITAT ruled in favor of the appellant, determining that the sale consideration for the property should be based on the value fixed by the Sub-Registrar at Rs. 2,20,00,000, rather than the higher valuation by the DVO at Rs. 3,56,93,000. The referral to the DVO was deemed illegal under section 50C of the Income Tax Act. Additionally, the ITAT held that the cost of acquisition should be based on the appellant's valuation of Rs. 37,32,000, as the DVO's lower valuation was improperly referenced. The AO was directed to adopt these figures for calculating LTCG.

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Issues:
The main issue in this case is whether the addition made on account of long term capital gains (LTCG) on the sale of property by adopting the value determined by the Departmental Valuation Officer (DVO) instead of the guideline value determined under section 50C of the Income Tax Act was justified.

Long Term Capital Gains (LTCG) on Sale of Property:
The appellant sold land and disclosed LTCG based on the sale consideration of Rs. 2,20,00,000, which was the same as the value fixed by the Sub-Registrar for stamp duty purposes. The Assessing Officer (AO) disregarded this value and adopted the DVO's valuation at Rs. 3,56,93,000, resulting in a higher LTCG. The ITAT held that if the sale consideration shown by the assessee is equal to or less than the value fixed by the stamp valuation authority, it should be considered as the full value of consideration. Referring the valuation to the DVO was deemed illegal and against the provisions of section 50C of the Act. Therefore, the AO was directed to adopt the sale consideration figure of Rs. 2,20,00,000 only.

Cost of Acquisition of Land:
Regarding the purchase cost of land, the appellant adopted the cost at Rs. 37,32,000 based on a registered valuer's report, excluding the cost of construction. The AO, however, referred to the DVO for fair market value determination as of 1.4.1981, which was lower at Rs. 14,84,738. The ITAT noted that the reference to the DVO should only be made if the value claimed by the assessee is less than the fair market value. As the appellant's claimed value was higher, the reference under section 55A of the Act was considered illegal. Citing a decision of the Bombay High Court, the ITAT emphasized that such references could not be made if the value claimed by the assessee exceeded the market value. Therefore, the indexed cost of acquisition was directed to be considered at Rs. 2,17,20,240.

Conclusion:
The ITAT allowed the appeal of the assessee, emphasizing the importance of adhering to the provisions of the Income Tax Act in determining long term capital gains and the cost of acquisition of property.

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