AO cannot mechanically adopt stamp duty value over actual sale price without proper valuation verification

The ITAT Raipur held that AO erred in mechanically adopting stamp duty value of Rs. 31,55,100 as deemed sale consideration for capital gains computation when assessee claimed actual sale price of Rs. 3.50 lacs. The assessee's non-participation in assessment proceedings was justified due to father's death. Given property's locational disadvantages (wall-locked land with no independent access), the matter was remanded to AO with directions to refer to Valuation Officer for FMV determination and verify cost of acquisition claim.

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Issues Involved:

1. Adoption of Stamp Duty Value vs. Fair Market Value for Capital Gain Calculation.
2. Denial of Deduction for Cost of Acquisition and Indexation Benefits.
3. Violation of Principles of Natural Justice due to Ex-Parte Order.

Summary:

1. Adoption of Stamp Duty Value vs. Fair Market Value for Capital Gain Calculation:
The assessee challenged the addition of Rs. 31,55,100/- by the A.O, who adopted the stamp duty value instead of the fair market value (FMV) for computing capital gain under Section 50C. The A.O initiated proceedings under Sec. 147 due to the assessee's failure to file a return and issued a notice u/s. 148. The A.O found that the property was sold for Rs. 3,50,000/-, but the stamp duty value was Rs. 31,55,100/-. Due to non-compliance by the assessee, the A.O adopted the stamp duty value as the deemed sale consideration. The Tribunal held that the A.O should have referred the matter to the Valuation Cell u/s. 50C(2) to determine the FMV, citing the Calcutta High Court's judgment in Sunil Kumar Agrawal Vs. Commissioner of Income Tax.

2. Denial of Deduction for Cost of Acquisition and Indexation Benefits:
The assessee argued that the CIT(Appeals) erred in not allowing the deduction of Rs. 2,78,870/- for the cost of acquisition and the indexation benefits. The A.O had calculated the short term capital gain (STCG) without allowing any deduction towards the cost of acquisition. The Tribunal directed the A.O to verify the assessee's claim regarding the cost of acquisition and allow the deduction for the indexed cost of acquisition if found valid.

3. Violation of Principles of Natural Justice due to Ex-Parte Order:
The assessee contended that the CIT(Appeals) passed an ex-parte order without providing sufficient opportunity for a hearing, violating the principles of natural justice. The CIT(Appeals) had provided multiple opportunities, but the assessee failed to participate. The Tribunal acknowledged the assessee's reason for non-compliance, i.e., the death of his father, and directed the A.O to afford a reasonable opportunity of being heard during the set aside proceedings.

Conclusion:
The Tribunal restored the matter to the A.O for fresh adjudication, directing a reference to the Valuation Officer for determining the FMV of the property and verifying the cost of acquisition claim. The appeal was allowed for statistical purposes.

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