Loading judgment…
Facts
The assessee filed an appeal against an order of the CIT(A)/NFAC concerning assessment year 2015-16. The appeal was filed with a delay of 190 days, which was condoned. The case involves the calculation of long-term capital gain on the sale of ancestral land.
Held
The Tribunal held that the Assessing Officer should have referred the matter to the Director of Valuation (DVO) for determining the fair market value of the land, as it is a technical matter. The AO cannot reject the registered valuer's report without such a reference.
Key Issues
Whether the Assessing Officer was justified in rejecting the registered valuer's report for determining the fair market value of the land without referring the matter to the DVO as per Section 55A of the Income Tax Act.
Sections Cited
143(2), 142(1), 131, 54F, 54EC, 234C, 234B, 55A, 16A, 23, 24, 34AA, 35, 37
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: JUSTICE (RETD.) C V BHADANG & SHRI R. K. PANDA
This appeal filed by the assessee is directed against the order dated 15.02.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2015-16.
There is a delay of 190 days in filing of this appeal before the Tribunal for which the assessee has filed a condonation application along with an affidavit explaining the reasons for such delay. After considering the contents of the condonation application filed along with the affidavit and after hearing the Ld. DR, the delay in filing of the appeal is condoned and the appeal is admitted for adjudication.
Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 28.08.2015 declaring total income of Rs.61,72,830/-. The case was selected for scrutiny through CASS under limited category. Accordingly statutory notices u/s 143(2) and 142(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) were issued and served on the assessee in response to which the assessee filed the requisite details.
During the course of assessment proceedings the Assessing Officer noted that the assessee offered long term capital gain on sale of ancestral land. From the various details furnished by the assessee such as sale and purchase agreement etc, the Assessing Officer noted that the assessee, for the purpose of cost of acquisition, has relied on the valuation report of a registered valuer for calculating the fair market value of the land. He noted that the valuation report relies on 4 instances / methods to determine the fair market value which are as under:
Instance No. Base for fair market value (FMV) Value (as on 01/04/1981) adopted by Valuer per Sq.mtr 1 The personal enquires Rs. 1050 2 Reverse working of Fair Market Rs. 1470 Value considering the ready reckoner rate for F.Y. 2012-13 3 Reverse working of Fair Market Rs. 697.67 Value considering the first ready reckoner rate in 1989 4 Using Dy. Director, Town Planning Rs. 480 Circular dated 03.10.1989
The Assessing Officer observed that the valuer has not considered any actual instance of sale nor did he submit any documentary proof in support of his claim of any personal inquiry in the adjourning area. He, therefore, summoned the valuer u/s 131 of the Act to appear in person and submit the relevant documents. After considering the reply of the valuer the Assessing Officer rejected the first two methods out of four methods and determined the fair market value by taking the average of the remaining two methods i.e. (a) FMV based on the first ready reckoner rate in 1989 – Rs.698/- per sq.meter and (b) FMV based on Circular dated 03.10.1989 issued by the Deputy Director of Town Planning – Rs.480/- per sq.meter. He accordingly determined the average value of these two methods i.e. Rs.590/- per sq.meter. After considering the average value @ Rs.590/- per sq. meter, the Assessing Officer determined the cost of acquisition at Rs.49,70,578/- and determined the long term capital gain at Rs.1,76,76,984/-. After deducting the exemption u/s. 54F and u/s 54EC of the Act, he determined the net capital gain at Rs.1,01,50,656/-. Since the assessee had already offered the long term capital gain of Rs.61,02,196/- the Assessing Officer made the addition of Rs.40,48,460/- to the total income of the assessee.
In appeal the Ld. CIT(A) / NFAC upheld the action of the Assessing Officer.
Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds:
The learned CIT(A) has erred in confirming the assessment of the total income at Rs.98,56,600/- as against the returned income of Rs.59,17,450/- thereby confirming addition of Rs.39,39,150/-. Just and proper relief be granted to the appellant.
2. The learned CIT(A) has erred in confirming the cost of investment for the purpose of computing exemption u/s 54F at Rs.37,16,700/- as against claimed by the appellant at Rs.54,34,720/- without making reference to the Departmental Valuation officer.
3. The learned CIT(A) erred in confirming the fair market value of the land as on 1.4.1981 at Rs.590 sq mtr as against claimed by the appellant at Rs.1000 sq. mtr based on valuation report of the Registered Valuer. 4. The learned CIT(A) has erred in computing interest u/s 234C on assessed income instead of return income, resulting in consequential impact on interest u/s 234B. Just and proper relief be granted to the appellant. 5. The learned CIT(A) has erred in granting adequate opportunity to the appellant. Just and proper relief be granted to the appellant. 6. The appellant prays to be allowed to add, amend, modify, rectify, delete, raise any grounds of appeal at the time of hearing.
The Ld. Counsel for the assessee at the outset submitted that when the Assessing Officer does not accept the registered valuer’s report, the best course of action should have been to refer the matter to the DVO for determination of the FMV. She submitted that since the issue of valuation of FMV is a technical matter, the same should have been referred to a technical person or the DVO to arrive at the FMV in the light of provisions of section 55A. Since the same has not been done in the instant case she submitted that she has no objection if the matter is restored to the file of the Assessing Officer with a direction to refer the matter to the DVO and decide the issue afresh. For the above proposition, she relied on the following decisions:
(i) Premila M Desai (HUF) vs. DCIT vide (ii) Shree Barjinder Singh Bhatti vs. ITO vide (iii) ACIT vs. Hiraben Govindbhai Patel vide ITA No.137/Ahd/2009
The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case rejected the report of the registered valuer and determined the long term capital gain at Rs.1,01,50,656/-. After considering the long term capital gain already offered by the assessee of Rs.61,02,196/- the Assessing Officer made addition of Rs.40,48,460/- being the difference which has been upheld by the Ld. CIT(A) / NFAC. It is the submission of the Ld. Counsel for the assessee that without obtaining the report from the DVO the Assessing Officer could not have rejected the registered valuer’s report and made the addition.
We find in the instant case it is an admitted fact that the Assessing Officer has not done any fresh work or made any valuation of his own. We find merit in the arguments of the Ld. Counsel for the assessee that since the issue of valuation of fair market value is a technical matter, the matter could have been referred to the technical person or the DVO to arrive at the fair market value.
We find the provisions of section 55A of the Act read as under:
“Reference to Valuation Officer. 55A. With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer— (a) in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the Assessing Officer is of opinion that the value so claimed is at variance with its fair market value; (b) in any other case, if the Assessing Officer is of opinion— (i) that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf ; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do, and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clauses (ha) and (i) of sub-section (1) and sub-sections (3A) and (4) of section 23, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall with the necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. Explanation.—In this section, "Valuation Officer" has the same meaning, as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).”
Since the Assessing Officer in the instant case has not done any fresh work or made any valuation of his own and since the assessee in the instant case has made a specific request before the Ld. CIT(A) / NFAC to refer the matter to the DVO or any other technical person for determination of the fair market value, therefore, in the light of the provisions of section 55A of the Act, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to refer the matter to the DVO for determination of the fair market value of the property and decide the issue afresh and in accordance with law after providing due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open Court at the conclusion of hearing itself i.e. on 25th August, 2025.