Valuation Report for Cost of Acquisition in LTCG Computation Accepted: ITAT Directs Re-Computation of ₹104.27 Lakh Gains [Read Order]

The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) accepted the valuation report for computing the cost of acquisition as on 01-04-1981 and directed re-computation of long-term capital gains (LTCG) of Rs. 104.27 lakh.

Sukh Pal Singh (assessee) sold commercial land for Rs. 101.03 lakh against its stamp duty valuation of Rs. 105.60 lakh. Since the land was acquired prior to 01-04-1981, the assessee adopted the cost of acquisition based on a valuation report from a registered valuer, estimating the market rate at Rs. 980/- per square meter.

The Assessing Officer (AO) rejected the valuation report and adopted the notified rate of Rs. 20/- per square meter, reworking the cost of acquisition. Applying Section 50C, the stamp duty value was adopted, resulting in net LTCG of Rs. 104.27 lakh.

The assessee claimed deduction under Section 54F, supported by bank statements and a valuation report, but the AO rejected it due to discrepancies in bank entries. Aggrieved by the AO’s order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] who confirmed the assessment due to lack of representation from the assessee.

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Aggrieved by the CIT(A)’s order, the assessee appealed to the ITAT. The assessee argued that the statutory provisions mandate adoption of fair market value as on 01-04-1981, supported by the registered valuer’s report based on local market survey.

The AO did not refer the matter to the District Valuation Officer (DVO) under Section 55A. For the Section 54F deduction, the assessee demonstrated investments of Rs. 30.15 lakh sourced from cash withdrawals, with only minor discrepancies in entries aggregating Rs. 9.16 lakh.

The two-member bench comprising Rajpal Yadav (Vice President) and Manoj Kumar Aggarwal (Accountant Member) observed that the cost of acquisition adopted by the assessee was supported by the valuation report.

The tribunal observed that it could not be faulted, as the AO did not invoke Section 55A of the Income Tax Act. The bench directed the AO to adopt the assessee’s cost of acquisition. It accepted Rs. 27.90 lakh, as the remaining withdrawals were undisputed and supported by evidence.

The Tribunal accepted a valuation report for Cost of Acquisition in LTCG Computation and directed the AO to re-compute the income accordingly. The appeal of the assessee was partly allowed.

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