DVO reference invalid where value of property is more than FMV as on April 1, 1981

DVO reference u/s 55A invalid where value was more than FMV as on April 1, 1981 as per approved valuer’s report submitted by assessee

ABCAUS Case Law Citation:
ABCAUS 2865 (2019) (04) ITAT

Important Case Laws Cited/relied upon by the parties
Commissioner of Income Tax (Appeals) vs Hotel Joshi (2000) 242 ITR 478 (Raj.)
CIT Vs Ba jrang Lal Bansal (2011) 335 ITR 572 (Del.)
K.P . Varghese v. Income-tax Officer [1981] 7 Taxman 13 (SC)/[1981 ] 131 ITR 597 (SC)
Commissioner of Income-tax v. Smt. Shakuntala Devi [2009] 316 ITR 46 (Delhi)
Commissioner of Income-tax v. Manoj Jain [2007] 163 Taxman 223 (Delhi)/[2006] 287 ITR 285 (Delhi)

The sole issue involved in the instant appeal filed by the assessee was confirmation of addition made by the Assessing Officer (AO) by relying on the report of the DVO u/s A of the Income Tax Act, 1961 (the Act) in place of the report of the registered valuer submitted by the assessee.

The assessee had sold a property and declared long term capital gains in his return of income. The AO found that the fair market value (FMV) of the property on 01.04.1981 was shown by the assessee relying on the report of the registered valuer.

The Assessing Officer referred the matter to the DVO to determine the value of the property as on 01.04.1981. The DVO determined the FMV on 01.04.1981 at an amount lower than shown by the assessee.

The Assessing Officer relying on the same made addition of the difference to the income of the assessee.

On appeal , the Commissioner of Income Tax (Appeals) confirmed the action of the Assessing Officer.

Before the Tribunal, the assessee submitted that the appellant had duly discharged his onus by obtaining a valuation report from a government approved valuer for the purpose of valuing his property as on 01.04.1981 and submitting the same before the AO during the course of assessment proceedings to substantiate his computation of capital gains.

It was contended that the AO, did not identify any deficiencies or defects in the said valuation and instead mechanically referred the matter to the DVO for valuation without any application of mind.

The Tribunal observed that the AO had no reason to refer the valuation of the said property to the DVO. The AO had no information available to prove that the valuation adopted by the appellant did not reflect the fair market value. Further, the AO had not mentioned the particulars of section under which a reference was made by her to the DVO.

The Tribunal noted that the issue was covered in favour of the assessee by the decision of the High Court in which it was held that that reference to the DVO can only be made in cases where the value of capital asset shown by the assessee is less than its fair market value of land as on April 1, 1981, shown by the assessee on the basis of the approved valuer’s report being more than its fair market value, reference under section 55A was not valid.

Following the above, the Tribunal held that the reference to the DVO was not correct and accordingly  it deleted the addition made by the Revenue while calculating the long term capital gains of the assessee.

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