ITAT nullifies AO's Attempt to Override Government Valuer's Fair Market Valuation Report in Piramal Enterprises Flat Sale [Read Order]

In a recent ruling, the Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) overturned the Assessing Officer's ( AO ) decision to disregard the fair market valuation report provided by a government valuer in Piramal Enterprises' flat sale.

The issue arose when the Commissioner of Income Tax (Appeals) [CIT (A)] affirmed the AO's action of not accepting the fair market value of a flat on April 1, 1981, as determined by a valuation report. This decision led to an additional amount of Rs. 2,98,680 being added to the computation of Long Term Capital Gains from the sale of a flat in Malabar Hill.

The assessee had relied on a valuation report by government valuer Mr. UD Chandey to determine the flat's acquisition cost. However, the AO rejected this valuation and instead calculated the cost of acquisition using a rate obtained from a reference book by Mr. Santosh Kumar and Sunil Gupta.

The argument put forth by the assessee was that since the cost of acquisition was based on the fair market value determined by a government-approved valuer, the AO had no authority to substitute this valuation with their own.

Furthermore, it was emphasized that the AO's power under section 50A of the Income Tax Act, 1961 only allowed for referral to the Department Valuation Officer (DVO) if the assessee's valuation was lower than the fair market value. However, in this case, the AO bypassed this procedure.

The two-member bench consisting of S. Rifaur Rahman (Accountant member) and Kuldip Singh (Judicial member) concluded that the AO lacked the authority to supersede the valuer's opinion, which was based on publicly available facts and data. Consequently, they ordered the deletion of the addition made by the AO and confirmed by the CIT (A).

To Read the full text of the Order CLICK HERE

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