The Surat Bench of the Income Tax Appellate Tribunal ( ITAT ) remanded the case for fresh consideration, directing the Assessing Officer ( AO ) to correctly compute the capital gains liability of the assessee by considering the actual 30% ownership.
Bharat Jaswantal Bhatt ( assessee ) sold a property in Surat during the assessment year 2012-13. The assessee, along with co-owners, sold the property for ₹60.27 lakh, while the Stamp Valuation Authority valued it at Rs.86.74 lakh for registration purposes.
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In a reassessment, the AO added the entire difference to the taxpayer’s income without considering his 30% ownership and failed to refer the matter to the District Valuation Officer (DVO) for fair market valuation.
Aggrieved by the order of the AO, the assessee filed an appeal before the Commissioner of Income Tax (appeals)[CIT(A)]. The assessee filed additional evidence before the CIT(A). The CIT(A) failed to accept the additional evidence and dismissed the appeal of the assessee.
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Aggrieved by the order of the CIT(A), the assessee filed an appeal before the ITAT. The Counsel for the assessee contended that the assessee owned only 30% of the property, and taxing him on the full sale value was erroneous.
The Counsel also submitted that the AO failed to deduct the cost of acquisition from the computation of capital gains. The counsel further submitted that the AO did not refer the matter to a DVO, despite legal requirements.
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On the other hand, the counsel for the revenue supported the orders of the lower authorities and sought to dismiss the appeal of the assessee.
The two-member bench, comprising Shri Pawan Singh (Judicial Member) and Shri Bijayananda Pruseth (Accountant Member) observed that the AO had not given a set off of cost of acquisition for the purpose of computation of long term capital gain.
The tribunal also observed that the entire sale consideration was added on the income of the assessee. The tribunal highlighted that the assessee claimed only 30% ownership of the land.
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Therefore, the tribunal directed the AO to reassess and to compute capital gains based on the assessee’s 30% share. The tribunal also directed the AO to make reference to the DVO for fair market valuation. The Tribunal directed the AO to grant a fresh hearing and allow the assessee to submit additional evidence. Thereby, the appeal of the assessee was allowed for statistical purposes.
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