Property valuation dispute remanded after wrongful denial of DVO reference under section 50C(2)

The ITAT PUNE remanded the matter back to the AO after finding that the assessee's request to refer the property valuation to the DVO under section 50C(2) was wrongly denied by the CIT(A)/NFAC. The assessee had sold land below the guideline value, claiming the property's location near a riverbank, cremation ground, and lack of approach road justified the lower sale price. The ITAT held that when an assessee disputes fair market value determination based on stamp duty guideline value, the AO is bound to refer the matter to the DVO. The appeal was allowed for statistical purposes.

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Issues Involved:
The appeal challenges the addition made u/s 50C of Rs. 14,25,000, failure to refer the matter to DVO, and the calculation of short term capital gains.

Addition u/s 50C:
The appellant contested the addition u/s 50C, arguing that the fair market value of the land was lower due to its location and condition. The AO added the stamp duty value as income since no compliance was made by the appellant. The CIT(A) partly allowed the appeal, considering the appellant's submissions and valuation report. The Valuation Report indicated a fair price of Rs. 10,10,915, but it was not from the DVO. The CIT(A) rejected the valuation submitted by the appellant but allowed the cost of acquisition and directed computation of capital gain with indexation. The appeal was partly allowed, and the addition was deleted partially.

Failure to Refer to DVO:
The appellant argued that the matter should have been referred to the DVO for fair market valuation as per section 50C(2) of the IT Act. The appellant's counsel cited a decision of the Calcutta High Court emphasizing the need for DVO valuation to avoid miscarriage of justice. The Tribunal agreed with the appellant, stating that the AO should have referred the matter to the DVO. The Tribunal set aside the orders of the lower authorities and remanded the matter to the AO for valuation by the DVO, emphasizing the importance of fair treatment to taxpayers.

Calculation of Short Term Capital Gains:
The appellant contended that the property's sale value was appropriate due to its location near a river bank and cremation ground. The appellant requested setting aside the orders passed by the lower authorities and referring the matter to the DVO for fair market valuation. The Tribunal found merit in the appellant's argument, highlighting the option given to the assessee to object to the fair market value determination based on stamp duty guidelines. The Tribunal set aside the lower authorities' orders and remanded the matter to the AO for valuation by the DVO, ensuring a fair assessment based on the DVO's report.

In conclusion, the Tribunal allowed the appeal for statistical purposes, setting aside the orders of the lower authorities and remanding the matter to the AO for fair market valuation by the DVO in accordance with section 50C of the IT Act.

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