Harshadkumar Hargovandas Patel Vs ITO (ITAT Ahmedabad)
ITAT Ahmedabad remands capital gains additions – AO must refer FMV to DVO verify expenses instead of making additions on guesswork
Both appeals concerned capital gains on sale of land. The Tribunal found serious flaws in the approach of both AO & CIT(A) and remanded all issues back for fresh adjudication with proper verification.
Issue 1 – Long-Term Capital Gain (FMV as on 01.04.1981)
The assessee adopted FMV of ₹72.84 lakh (₹250/sq.m) based on a Registered Valuer’s report. AO rejected it and adopted ₹28.05 lakh based on Sub-Registrar sale instances without referring to DVO u/s 55A.
CIT(A) upheld AO stating DVO reference is discretionary (“may refer”).
Tribunal’s finding:
- Valuation is a technical matter.
- AO not an expert; cannot substitute his own view.
- Assessee specifically requested DVO reference.
- Valuer’s report also had weaknesses, so proper expert valuation required.
- FMV issue restored to AO with direction to refer to DVO.
Result: LTCG issue remanded. AO must re-compute after DVO report.
Issue 2 – Cost of improvement & transfer expenses (LTCG property)
Assessee claimed ₹12.50 lakh improvement + ₹50,000 transfer expense with supporting bills/confirmations.
AO disallowed fully alleging:
- Handwritten bills
- Same handwriting
- No PAN/TIN
- No verification done
CIT(A) upheld.
