CIT vs. Prabhu Steel Industries Ltd.: [2013] 36 taxmann. com 393 (Bom):
The assessee admitted long-term capital gains from sale of immovable property and adopted actual sale consideration of Rs. 2,06,18,227 as basis for computation. The Assessing Officer found that as per concerned Stamp Valuation Authority, the market value of the property was Rs. 4,04,48,000. On reference, the valuation officer estimated the fair market value on the date of transfer to be Rs. 2,83,19,289. Meanwhile, the assessee submitted a report of Registered Valuer disclosing fair market value on the date of transfer to be Rs. 2,23,41,000. The Assessing Officer worked out long-term capital gain on basis of report of valuation officer and made addition. The Tribunal held that the fair market value worked out by the assessee’s registered valuer alone should have been used for computing the longterm capital gain, as it was reasonably arrived at after making allowances for various encumbrances attached to the subject property and rejected the valuation arrived at by the Valuation Officer after noting that the Valuation Officer treated stamp duty valuation as base rate, instead of actual sale instance value. Further, it held that though such report is binding on Revenue Authorities, it is not binding on the Tribunal.
The Bombay High Court allowed the appeal filed by the Revenue and held as under:
“i) It is apparent from section 16A of Wealth Tax Act that these provisions mandate that after the Assessing Officer receives report of Valuation Officer u/s. 50C, he has to act in conformity with the valuation of the capital asset worked out therein. Thus, an order of Valuation Officer determining the market value of the asset on the date of transfer u/s. 50C(2) is made appealable even for the purpose of Income-tax Act, 1961 as per scheme in section 23A of Wealthtax Act. S/s. (6) of section 23A stipulates that when the valuation of any asset is objected to in an appeal, the Commissioner (Appeals) has to extend an opportunity of hearing to the Valuation Officer, who has made order u/s. 16A. It therefore, follows that when in an appeal, such exercise of valuation officer is disputed, the Appellate Authority has to extend an opportunity of hearing to the Valuation Officer.
ii) Section 24 speaks of further appeals to the Appellate Tribunal. As per section 24(5) of the Wealth Tax Act, 1957; the Appellate Tribunal has to extend opportunity of hearing to the Valuation Officer, and this provision is pari materia with section 23(6) above. Therefore, when order of CIT (Appeal), is questioned in further appeal before the Tribunal, the Tribunal has to keep in mind the provisions of section 24(5) of the Wealth Tax Act, 1957 and has to extend an opportunity of hearing to the Valuation Officer.
iii) As per the statutory scheme when the report/order of Valuation Officer u/s. 50C(2) is objected to by assessee, the CIT (Appeals) or Tribunal are obliged to extend an opportunity of hearing to such Valuation Officer.
iv) The Tribunal has found faults with the report/ order of District Valuation Officer. Admittedly, the said Valuation Officer had not been heard and no opportunity was extended to him. This is contrary to obligation cast upon it by the proviso of section 24(5) of the Wealth Tax Act, 1957 as attracted by section 50C(2).
v) In this situation, a mandatory requirement of law has been violated in present matter. Hence, the impugned order of the Tribunal is hereby quashed and set aside and the proceedings are restored back to the file of the Tribunal for taking decision afresh, in accordance with law.”
