In a recent ruling, the Bangalore Bench of the Income Tax Appellate Tribunal( ITAT) rejected DVO valuations and ensured equal treatment among co-owners.
Rita Goel, the assessee, had filed her return of income for the assessment year 2017-18, declaring an income of ₹6.6 Crores.
The assessee’s case was selected for scrutiny. During the examination, the assessing officer observed that she and her husband sold a property for ₹28 crore in the assessment year 2017-18. After considering the improvement costs, she received ₹14 crores as her share and reported a long-term capital gain (LTCG) of ₹6.45 crore.
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The Assessing Officer (AO) raised concerns about her cost calculation and referred the matter to the District Valuation Officer (DVO). Based on the DVO’s valuation, the AO taxed the difference in the assessee’s hands and restricted the deduction claim under Section 54 F of the Income Tax Act.
Aggrieved by this order, the assessee appealed against the order, arguing that her husband, who was a co-owner in the same property sale, had been taxed differently. The Income Tax Department accepted her husband’s acquisition cost yet challenged hers, even though both had an identical transaction. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO’s decision and dismissed the appeal raised by the assessee. The CIT(A) further held that reference to the DVO was made under Section 55A(b)(ii) of the Act and not under Section 50C of the Act.
Aggrieved with the order of the CIT(A), the assessee moved to the Income Tax Appellate Tribunal, where the authorised representative(AR) of the assessee stated that the approach of revenue in disallowing the benefit under Section 54 of the Income Tax Act, altering the cost of acquisition based on DVO report is not tenable in law. The AR pointed out that the tax department has accepted the cost of acquisition, which is similar to the figures of the assessee, in the assessment of the husband of the assessee and the order of the evaluation was passed under Section 143(3) of the Act.
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The tax department’s representative relied upon the order of the authorities below. After considering both submissions, the ITAT held that tax authorities cannot apply different valuation methods for co-owners in the same transaction. The ITAT also held that the principle of equality under Article 14 of the Constitution applies to tax assessments. The department’s stance was held to be inconsistent, as the assessee’s husband’s cost of acquisition was accepted without dispute.
The ITAT bench, consisting of Waseem Ahmed (Accountant Member) and Prakash Chand Yadav (Judicial Member), relied on the Supreme Court’s ruling in Union of India vs. Kaumudini Narayan Dalal, which held that the revenue is not free to accept judgment in the case of an assessee and challenge the correctness in the case of other assessees without just cause. As a result, the assessee’s appeal was allowed.
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