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2020 (12) TMI 726 - AT - Income TaxLTCG - Computation of full value received on sale of property by the assessee for the purpose of computing the Long Term Capital Gain (LTCG) - HELD THAT - In the light of the objections given by the assessee to the preliminary report of the AO, the second sale instance which appears to be an extraordinary instance of sale ought to have been excluded. The admitted position is that all the khatas in the survey No. 4, Kurubarahalli Village, Kasaba Taluk, Mysore District, Mysore, have been cancelled by the Tahsildar, Mysore, and there are several litigations. There is also a third acquisition by Mysore Urban Development Authority (MUDA). The specific objection of the Assessee to the preliminary report of the DVO has not been considered by the DVO while giving his final report. In the circumstances, we accept the submission made by the learned Counsel for the assessee and direct that sale instance No.2 as given in the chart above should be excluded and if so excluded, the price of ₹ 80 lakhs received by the assessee should be accepted as correct. Consequently, there can be no addition on account of application of provisions of section 50C of the Act. The addition made is therefore directed to be deleted. Appeal of the assessee is allowed.
Issues:
Computation of full value received on sale of property for Long Term Capital Gain (LTCG) computation. Analysis: Issue 1: Computation of Full Value Received The primary issue in this appeal was the computation of the full value received on the sale of a property for the purpose of determining Long Term Capital Gain (LTCG). Section 50-C(1) of the Income Tax Act, 1961 was crucial in this regard, stating that the value adopted for stamp duty payment by a State Government shall be deemed as the full value of consideration received on transfer of a capital asset. In this case, the Assessing Officer (AO) adopted the value of the property at ?160 lakhs, leading to a specific computation of LTCG based on this value. Issue 2: Reference to District Valuation Officer (DVO) Before the AO, the assessee had requested a reference to the DVO for evaluating the property's value under section 50C(2) of the Act. Although the reference was made, the DVO's report was not available at the time of assessment, leading to the AO's inability to consider it during the assessment process. Issue 3: CIT(A) Direction Based on DVO Report During the appellate proceedings before the CIT(A), the DVO's report became available, indicating the property's value at ?95,68,400. The CIT(A) directed the AO to adopt this value as the full consideration received on the property transfer, providing partial relief to the assessee. Issue 4: Assessee's Objection to DVO's Valuation The assessee contested the DVO's valuation, presenting objections through their Counsel. The objections highlighted various factors, including litigation over ownership, cancellation of khatas, and the exclusion of an extraordinary sale instance from the valuation process. Issue 5: Tribunal's Decision Upon careful consideration of the submissions and objections, the Tribunal concluded that the second extraordinary sale instance should be excluded from the valuation. Considering the canceled khatas and ongoing litigations, the Tribunal accepted the assessee's submission, directing that the price of ?80 lakhs received for the property should be deemed correct. Consequently, no addition was warranted under section 50C, and the earlier addition was directed to be deleted, resulting in the allowance of the assessee's appeal. In conclusion, the Tribunal's decision favored the assessee, emphasizing the exclusion of extraordinary instances in property valuation and considering the specific objections raised regarding the property's unique circumstances and legal issues.
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