Nanubhai G. Ahir Vs ITO (ITAT Surat)
The appeal before the ITAT Surat concerned the computation of Long-Term Capital Gains (LTCG) arising from the sale of land during Assessment Year 2012-13. The assessee sold land situated at Sultanabad, Surat, for ₹3.30 crore and, while computing LTCG, adopted the fair market value (FMV) of the property as on 01.04.1981 at ₹290 per sq. meter based on a valuation report prepared by a Government Approved Valuer. Using this valuation, the assessee calculated the indexed cost of acquisition and claimed exemption under Section 54B of the Income Tax Act.
During assessment, the Assessing Officer (AO) obtained information from the Sub-Registrar regarding sale values of land in nearby areas in 1981 and questioned the valuation adopted by the assessee. The AO thereafter referred the matter to the District Valuation Officer (DVO), who determined the FMV as on 01.04.1981 at ₹63.50 per sq. meter. Based on the DVO’s report, the AO recomputed the LTCG and determined taxable LTCG at ₹1,48,41,340 after allowing exemption under Section 54B. The CIT(A) upheld the AO’s action, holding that the valuation report of the registered valuer was unrealistic and accepting the DVO’s valuation as fair and reasonable.
Before the Tribunal, the assessee raised a legal challenge to the validity of the reference made to the DVO under Section 55A. The assessee contended that the valuation adopted was based on a registered valuer’s report and that, for Assessment Year 2012-13, the unamended provisions of Section 55A(a) applied. Under those provisions, a reference to the DVO could be made only where the value claimed by the assessee was less than the fair market value. Since the assessee had adopted a higher value, the AO had no authority to refer the matter to the DVO. The assessee relied on decisions of the Gujarat High Court, the Bombay High Court, and earlier Tribunal rulings on similar facts.
