ITAT Deletes Capital Gains Addition as Section 55A DVO Reference Was Invalid

Arvindbhai Popatlal Patel Vs ITO (ITAT Ahmedabad)

The assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT), Ahmedabad, challenging the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2011-12. The appeal involved disputes relating to the fair market value (FMV) of two properties as on 01.04.1981, applicability of Section 54F exemption, additions under Section 68 for loans and gifts, and addition on account of cash deposits.

The assessee had sold two properties during the year: a land situated at Chandkheda and a bungalow at Tribhovan Park, Sabarmati, Ahmedabad. Both properties had been acquired prior to 01.04.1981. For computing capital gains, the assessee relied on a registered valuer’s report that determined the FMV of the land at ₹582 per sq. meter and the bungalow at ₹6,87,600 as on 01.04.1981. Based on this valuation, the assessee declared a long-term capital loss.

The Assessing Officer was not satisfied with the valuation adopted by the assessee and referred the matter to the Departmental Valuation Officer (DVO) under Section 55A. The DVO valued the land at ₹183 per sq. meter and the bungalow at ₹2,67,805 as on 01.04.1981. The Assessing Officer also considered information obtained from the stamp duty authorities and recomputed the long-term capital gains by adopting lower acquisition values and applying Section 50C for the bungalow. Consequently, long-term capital gains of ₹48,20,402 were assessed.