2025 (9) TMI 1231 - AT - Income Tax

Assessing Officer ordered to recompute long-term capital gain, obtain 01.04.1981 FMV and consider Section 54F claim

Bharat Jaswantlal Bhatt Versus Income Tax Officer, Ward-3 (2) (6), Surat

ITAT allowed the appeal for statistical purposes and restored the matter to the AO for fresh adjudication. The AO shall compute long-term capital gain by ... Assessment u/s 144 r.w.s 147 - addition of entire deemed value of consideration as determined by Stamp Valuation Authority at the of registration of transaction of land. HELD THAT:- AO has not given any set off of cost of acquisition for the purpose of computation of long-term-capital gain. Further the entire sale consideration is added in the hand of assessee though assessee has claimed that he has only 30% owner of the land. CIT(A) despite recording the fact that assessee filed additional evidence before him, still was not accepted for technical reasons. No adjudication on the issue / addition on merit by lower authorities. Therefore, we deem it appropriate to restore the matter back to the file of Assessing Officer with a direction to consider the cost of acquisition of asset as on 01.04.1981. AO is also directed to refer the matter to District Valuation Officer for estimation of fair market value of asset as on 01.04.1981, with the direction to consider the Government approved valuer. Assessee has claimed exemption u/s 54F of the Act for the first time before the Tribunal. Therefore, claim of assessee is accepted for consideration and AO is directed to verify further fact and allow proper relief to assessee under section 54F of the Act in accordance with law. Appeal of the assessee is allowed for statistical purpose. ISSUES PRESENTED AND CONSIDERED 1. Whether the Assessing Officer was justified in adopting the Stamp Valuation Authority's valuation as the entire taxable consideration without allowing set-off for cost of acquisition and without taxing only the assessee's pro rata share. 2. Whether the Assessing Officer was obliged to refer to the District Valuation Officer (DVO) for determination of fair market value as on 01.04.1981 when the asset was acquired prior to that date and the Assessing Officer did not make any such reference. 3. Whether the First Appellate Authority (CIT(A)) erred in rejecting additional evidence (including report of a Government approved valuer) on technical grounds and thereby preventing adjudication on merits. 4. Whether an assessee may be permitted, in second appeal, to raise for the first time a claim for exemption under section 54F and have that claim remitted to the Assessing Officer for verification and decision. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Adoption of Stamp Valuation Authority value as entire consideration without set-off or pro rata taxation Legal framework: The computation of long-term capital gains requires determination of full value of consideration, allowance of cost of acquisition (or fair market value as on 01.04.1981 where applicable), and taxation of the assessee's share where the asset is co-owned. An assessing officer must compute gains on the correct taxable quantum. Precedent treatment: Lower authorities adopted the Stamp Valuation Authority figure wholesale. No precedent was overruled; the Tribunal reviewed the approach against statutory requirements. Interpretation and reasoning: The Assessing Officer added the Stamp Valuation Authority amount as the entire consideration without allowing any set-off for cost of acquisition and without recognizing that the assessee held only a 30% share. The Tribunal found this resulted in no adjudication on merits and an incorrect computation base. The Court reasoned that when an officer relies on stamp valuation to determine taxable consideration, the statutory principles requiring cost allowance and apportionment among co-owners remain applicable. Ratio vs. Obiter: Ratio - An assessing officer cannot simply substitute the Stamp Valuation Authority's figure for the purpose of taxation without applying the statutory cost-set-off and recognizing co-ownership proportions; such matters require computation on merits. Conclusion: Direction to restore to Assessing Officer to recompute capital gains after allowing cost of acquisition and taxing only the assessee's share (30%). Issue 2 - Obligation to refer to District Valuation Officer for fair market value as on 01.04.1981 Legal framework: Where asset was acquired prior to 01.04.1981 and original cost is not readily available, the Assessing Officer may obtain valuation from the competent authority (e.g., DVO) to arrive at fair market value as on 01.04.1981 for indexation/ computation purposes. Precedent treatment: The Tribunal directed a reference to the DVO and consideration of a Government approved valuer's report; no prior decision was expressly overruled or distinguished. Interpretation and reasoning: In the present facts the Assessing Officer made no reference to the DVO and did not consider the Government approved valuer report filed by the assessee. Given absence of adjudication on the valuation point, the Tribunal found it appropriate to remit the matter for a DVO report and ordered the Assessing Officer to consider the government-approved valuer's report while proceeding. Ratio vs. Obiter: Ratio - Where valuation as on 01.04.1981 is material and not determined, the matter should be referred to DVO and the Assessing Officer should consider any legitimate expert valuation produced by the assessee, subject to verification. Conclusion: Assessing Officer directed to refer the matter to the DVO for estimation of fair market value as on 01.04.1981 and to consider the Government approved valuer's report while recomputing gains. Issue 3 - Rejection of additional evidence by CIT(A) on technical grounds Legal framework: Appellate authorities have discretion to admit additional evidence subject to conditions; however, refusal to admit relevant evidence may preclude adjudication on merits and justify remand. Precedent treatment: The Tribunal noted the technical rejection of evidence by the CIT(A) and treated that refusal as preventing proper determination of issues; no authoritative precedent was expressly applied to depart from that approach. Interpretation and reasoning: The Tribunal recorded that the CIT(A) acknowledged receipt of additional evidence but declined to admit it for technical reasons. As a consequence, the lower authorities did not decide valuation and related cost questions on merits. Given the peculiarity of facts and the fundamental nature of the evidence (valuation report and computations), the Tribunal exercised its appellate power to remit the matter for fresh consideration rather than affirm the technical exclusion. Ratio vs. Obiter: Ratio - Where exclusion of material evidence on technical grounds prevents adjudication on core issues, remand for admission and fresh consideration is appropriate. Conclusion: Additional evidence should be considered on remand; matter restored to Assessing Officer who must give reasonable opportunity to the assessee and verify the evidence. Issue 4 - Permissibility of raising a new claim for exemption under section 54F in second appeal Legal framework: Section 54F provides exemption conditions for investment of capital gains in specified assets. Appellate powers permit remittal for verification of factual entitlement to exemptions where prima facie entitlement exists and facts can be examined. Precedent treatment: The Tribunal relied on jurisdictional authority (High Court decision referenced by parties) permitting additional claims to be raised where available; it accepted the claim for consideration rather than adjudicating entitlement itself. Interpretation and reasoning: The assessee sought exemption under section 54F for the first time before the Tribunal and produced supporting computations. The Revenue contended the claim was not made earlier. The Tribunal, invoking its second appellate powers, accepted the admissibility of the claim for remand and directed the Assessing Officer to examine entitlement and conditions for relief under section 54F, giving the assessee a reasonable opportunity to substantiate the claim. Ratio vs. Obiter: Ratio - A second appellate authority may permit and remit a new exemption claim to the Assessing Officer for verification where the claim appears bonafide and requires factual examination; the appellate body need not deny such a claim on procedural grounds alone. Conclusion: The Tribunal accepted the section 54F claim for consideration and directed the Assessing Officer to verify facts and allow relief under section 54F in accordance with law if conditions are met. Relief and Directions (operational conclusions) 1. The matter is restored to the Assessing Officer for fresh adjudication on merits. 2. The Assessing Officer shall recompute long-term capital gains after allowing cost of acquisition (including considering fair market value as on 01.04.1981), and shall tax only the assessee's proportionate share of the asset. 3. The Assessing Officer is directed to refer the valuation issue to the District Valuation Officer for estimation of fair market value as on 01.04.1981 and to consider the Government approved valuer's report furnished by the assessee. 4. The Assessing Officer shall examine and decide the claim for exemption under section 54F, giving the assessee reasonable opportunity to produce evidence and verifying conditions for relief in accordance with law.