Mahdevbhai Mohanbhai Naik Vs ITO (ITAT Surat)
The assessee appealed against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2010-11, challenging an addition of ₹5,92,550 made on account of long-term capital gains arising from the sale of immovable property. The principal issue was whether the Assessing Officer (AO) was justified in referring the valuation of the property to the Departmental Valuation Officer (DVO) under Section 55A of the Income-tax Act, 1961.
During the relevant year, the assessee and others sold land measuring 9,207 square meters. For determining long-term capital gains, the assessee relied on a valuation report of a registered valuer, which estimated the fair market value (FMV) of the property as on 01.04.1981 at ₹7,36,560. The DVO, however, determined the FMV at ₹1,74,012. Based on the DVO’s valuation, the AO recomputed the indexed cost of acquisition and made an addition of ₹5,92,550 as long-term capital gain.
Before the Commissioner (Appeals), the assessee argued that, for Assessment Year 2010-11, Section 55A as it stood prior to its amendment with effect from 01.07.2012 permitted a reference to the Valuation Officer only where the value claimed by the assessee was less than the fair market value. Since the value declared by the assessee based on a registered valuer’s report was higher than the value determined by the DVO, the reference itself was invalid. Reliance was placed on various judicial precedents, including CIT v. Puja Prints, CIT v. Daulal Mohta (HUF), and CIT v. Gaurangiben S. Shodhan. However, the Commissioner (Appeals) upheld the reference, observing that it had been made after 01.07.2012, when the amendment to Section 55A had already come into force.
