Suryanarayanan Ramachandran Vs ITO (ITAT Cochin)
Failure to refer FMV to DVO renders capital gains addition invalid; AO’s reverse FMV method rejected; DVO route mandatory
Assessee sold a property inherited from his father for Rs.2.80 crore & adopted fair market value of the property as on 01.04.1981 at Rs.4,89,900 & the cost of improvement at Rs.2 lakh in the financial year 1990-1991. AO adopted the fair market value at Rs.2,12,108 by adopting backward calculation based on the value as per the sale deed. AO adopted the cost of improvement at Rs.1,50,000 as against Rs.2 lakh claimed by Assessee, in the absence of proof.
CIT(A) confirmed AO’s action holding that in the absence of a registered valuer’s report, AO was justified in relying on Sub-Registrar’s guidance value.
Tribunal ruled that as regards the adoption off fair market value as on 01.04.1981 is concerned, the methodology adopted by the AO is erroneous and strange to the law. When the AO disputes the cost of fair market value adopted by Assessee, the only option available to the AO is to refer the matter to the DVO for estimation of fair market value as on 01.04.1981, which the AO had failed to do so. There is no material brought on by the AO to show that the fair market value adopted by Assessee is wrong. In the absence of any evidence on record, the AO should have accepted the cost of improvement as shown by the appellant.
