2016 (5) TMI 1554 - AT - Income Tax

Capital gain computation - adopting the value determined by the DVO - Rejecting sale value declared by the assessee. - HELD THAT - The very fact that the Assessing Officer has called upon the assessee to raise his objections presuppose that the Assessing Officer is not bound by the DVO s report and he has got a duty to redetermine the value but the Assessing Officer chose to proceed as if he is bound by the DVO s report which speaks of itself. On the top of it the learned Commissioner- (Appeals) was of the opinion that the ITAT. Chennai Bench has directed the Assessing Officer to adopt DVO s report (even if it is wrong) overlooking the legal position that the DVO s report cannot be treated as sacrosanct and it is amenable to adjustment if the assessee is able to raise proper objections. In the instant case the assessee has relied upon various orders of the ITAT to indicate that the value determined should be based upon a sale instance which should be proximate to the date of actual sale. The assessee has also raised an objection with regard to the increase in sale instance rate by 2% per month but even till date Revenue could not point out as to what is the sanctity of that method being followed by the DVO. We are of the view that the DVO completely failed in his duty to appropriately make the valuation. Even if sale instance rate is taken into consideration the difference between the sale instance rate and the rate declared by the assessee is within the permissible limits and therefore in the light of the orders of the ITAT placed before us the Assessing Officer has not made out a case for adopting the value determined by the DVO. In the circumstances we delete the addition made by the Assessing Officer accepting the sale value declared by the assessee.

Summary

Issues involved:
Assessment of property value by the Departmental Valuation Officer (DVO) based on a sale instance nine months prior to the actual sale date, escalation of value at 2% per month, and the Assessing Officer's duty to redetermine the value.

Analysis:

1. Assessment of Property Value by DVO:
The case involved the sale of a property by the assessee, which was initially accepted by the Assessing Officer but later reopened and referred to the DVO. The DVO determined the property value at Rs. 55,22,000 based on a sale instance from approximately nine months before the actual sale date. The assessee objected, arguing that the DVO should consider sale instances closer to the actual sale date to reflect the true market value. The DVO defended the 2% per month escalation in value from the comparable sale instance, stating it was permissible under rules. However, the assessee challenged this escalation method, highlighting the lack of a specific rule supporting it.

2. Assessing Officer's Duty to Redetermine Value:
Despite the DVO's determination, the Assessing Officer gave the assessee an opportunity to explain why the DVO's value should not be adopted. The Assessing Officer ultimately decided to adopt the DVO's value, citing the DVO's competence in valuation matters. The assessee appealed, arguing that the DVO and Assessing Officer should not rely solely on a sale instance from nine months prior, especially when the difference between the sale consideration value and the comparable sale instance was within permissible limits without the time factor adjustment.

3. Judicial Review and Tribunal Decision:
The assessee challenged the Assessing Officer's decision before the Commissioner of Income-tax (Appeals) (CIT(A)), who upheld the Assessing Officer's decision based on the DVO's report and the ITAT's direction. The ITAT, upon review, found that the DVO's method lacked a proper basis and failed to substantiate the 2% escalation per month. The tribunal emphasized that the Assessing Officer was not bound by the DVO's report and had a duty to redetermine the value, especially when the method used was not justified. Consequently, the tribunal ruled in favor of the assessee, deleting the addition made by the Assessing Officer and accepting the sale value declared by the assessee.

In conclusion, the judgment highlighted the importance of considering sale instances proximate to the actual sale date for accurate property valuation and emphasized the Assessing Officer's duty to independently assess the value, especially when the method used by the DVO lacked a proper basis.