Tribunal Sets Aside Section 263 Revision, Where AO Examined Valuation

The assessee, Chandra Prakash Goel, proprietor of M/s Chandra Bricks Field, had purchased agricultural land in 1977 and later converted it into residential plots after development. In earlier proceedings, the Income Tax Appellate Tribunal directed the Assessing Officer to recompute capital gains under Section 45(2) on conversion of the capital asset into stock-in-trade and determine business income from sale of plots, including verification of the fair market value (FMV) as on 01.04.1981.

In the set-aside assessment, the AO accepted the report of a registered valuer determining the FMV at Rs. 160 per sq. yard and recomputed the income accordingly. Later, the PCIT invoked revision under Section 263, holding that the AO should have referred the valuation to the Departmental Valuation Officer (DVO) and set aside the assessment for fresh determination. The assessee challenged this order before the Income Tax Appellate Tribunal.

Issue Raised: Whether revision under Section 263 was justified where the AO accepted the valuation report of a registered valuer without referring the matter to the DVO.

Tribunal Decided: The ITAT allowed the assessee’s appeal and quashed the revision order. It held that the AO had examined the registered valuer’s report and adopted a reasonable view while determining the FMV. The Tribunal observed that property valuation inherently involves estimation and the PCIT’s preference for a DVO reference merely reflected a different opinion.

Since the AO had conducted inquiry and taken a plausible view, the assessment order could not be considered erroneous. Thus, the Tribunal held that the conditions for invoking Section 263 were not satisfied and restored the assessment order.

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