DILIP SHANTILAL JAIN,,PUNE vs. ASSISTANT COMMISSIONER OF INCOME TAX,,

The relevant facts as culled out from the material on record are as under :- The assessee is an individual stated to be having income from salary, capital gains and other sources. The assessee originally filed his return of income for A.Y. 2012-13 on 29.09.2012 declaring total income at Rs.21,12,060/-. Thereafter, the assessee filed revised return of income on 01.10.2012 declaring total income at Rs.1,61,85,670/-. The case was taken up for scrutiny and thereafter, assessment was framed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) vide order dated 09.03.2015 and the total income was determined at Rs.2,47,30,106/-. Aggrieved by the order of Assessing Officer, assessee carried the matter before Ld.CIT(A), who vide order dated 06.09.2016 (in appeal No.PN/CIT(A)-12/53/2015-16) granted partial relief to the assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before us and has raised original grounds which have been later amended. The amended ground read as under: On the facts and circumstances of the case and in law:

During the course of assessment proceedings, the Assessing Officer noticed that the assessee has sold rights in land along with shed thereon at C.S.No.2099, Western Highway, Vile Parle (East), Mumbai to M/s. Millenium Marbles Pvt. Ltd. for total consideration of Rs.1,65,00,000/-. It was also noticed that the value adopted for stamp duty was worked out at Rs.2,54,87,000/-, but the assessee had taken the sale value of the property for computing capital gains in the return of income at Rs.1,65,00,000/-. The assessee was therefore, asked as to why provisions of section 50C of the Act not be invoked, to which the assessee made submissions which were not found acceptable to the Assessing Officer. The Assessing Officer thereafter, by applying provisions of section 50C of the Act, adopted the fair market value of the property at Rs.2,54,87,000/- and accordingly worked out the capital gains. Aggrieved by the order of Assessing Officer, assessee carried the matter before the CIT(A), who after considering submissions of the assessee held as under: “3.2 Brief facts of the case are that the appellant was in possession of the property situated at CS No.2099, Western Highway, Vile Parle (East), Mumbai consisting of land admeasuring 232.2 sq.mt. and shed / shop with built-up area of 65.03 sq.mt. The appellant purchased the above property vide conveyance deed dated 14.09.1994. The property was later on let out to M/s Millenium Marbles Pvt. Ltd., the purchaser, who was in possession of the property on the date of sale. The land along with shed was transferred to M/s Millenium Marbles Pvt. Ltd vide sate deed date 19.11.2011 for an agreed consideration of Rs.1,65,00,000. During the period of tenancy of the purchaser, property was acquired by the Govt. of Maharashtra for widening of National Express Highway and the appellant's name in the ownership card was deleted vide entry dated 14.05.2009. However neither any compensation was given to the appellant nor possession of the land was taken over by the Govt. of Maharashtra. Appellant later was allowed to transfer the above property to the tenant M/s Millenium Marbles Pvt. Ltd and sale agreement was executed between the appellant as vendor and tenant being the purchaser. During the course of assessment proceedings, the AO noted that Stamp Valuation Authority has determined fair market value of the property at Rs.2,54,87,000. The AO invoking provisions of section 50C proposed to adopt sale consideration being the fair market value determined by the Stamp Valuation Authority in place of consideration received by the appellant for purpose of working out Long Term Capital Gains arising out of transfer of the property. Before the AO, the appellant disputed the valuation adopted by the Stamp Valuation Authority and contended that he was not the owner of the property as per the records and was only having incomplete rights by way of possession. The property was located in slum area and there was restriction on construction of high building as per orders of the Airport Authority of India. It was also submitted that shed constructed on the plot was temporary in nature and was quite old. Therefore, fair market value of shed at Rs.91,77,033 adopted by the Stamp Valuation Authority was unrealistic. It was pleaded that consideration received of Rs.1,65,00,000 was the fair, market value of the property. In view of these contentions, AO

Aggrieved by the order of CIT(A), the assessee is now in appeal before us.

Before us the ld. AR reiterated the submissions made before the Assessing Officer and CIT(A) and further submitted that the assessee was in possession of the land along with shed and shop standing thereon which was acquired by him at a cost of Rs.4,42,560/- in F.Y. 1994-95. He submitted that as per the land records, property stands in the name of Mahanagar Bhumapan Adhikari, Government of Maharashtra meaning thereby that the assessee is not the legal owner of land and building under the Transfer of Property Act. He submitted that the land which has been sold off was already let out to M/s. Millenium Marbles Pvt. Ltd. and it was in the possession of Millenium Marbles. The fair value of the property as determined by Stamp Valuation Authority was Rs.2,54,87,000/-. Before Assessing Officer, assessee disputed the valuation adopted by Stamp Valuation Authority for various reasons. The Assessing Officer thereafter referred the valuation to DVO who vide order dated 29.07.2016 passed u/s 50C of the Act determined the fair market value at Rs.1,84,93,000/-. During the year under consideration by an agreement dated 19.11.2011 the assessee sold off his rights in the property to his tenant M/s. Millenium Marbles Pvt. Ltd. for an agreed consideration of Rs.1,65,00,000/-. He further submitted that valuation made by the District Valuation Officer (DVO) is not appropriate as he has not appreciated the realities of the transaction and the value worked out is excessive. He submitted that though the assessee was in occupation of the property but it was not the legal owner on record. He further submitted that the structure standing on the property comprised of shed and shop measuring 65.03 sq.mtrs., the shop was about 200 sq.ft. and the remaining area was an open shed covered by using steel columns and overhead asbestos and it was in existence since F.Y. 1994-95 and did not have any significant value. He submitted that the buyer of the property later on demolished the existing shed and shop and re-constructed afresh a new shop for his own use. He submitted that the estimation of the value of structure by the DVO based on the Ready Reckoner value of 2011 at Rs.69,64,713/- is excessive as compared to the fair market value of Rs.2.10 lakhs worked out by the valuation report submitted by the assessee. In support of his contention that in the property card, name of the assessee has been deleted, he pointed to the copy of DVO report which is placed at pages 84 onwards. From that he further pointed out that the said property was already let out to M/s. Millenium Marbles Pvt. Ltd. vide Leave and License Agreement dated 27.02.2007. He also pointed to the fact that the existing shed was demolished by the buyer which is also evident from the DVO report which is placed on record. He also pointed to the remark of the DVO which states that the assessee has only physical possession of the said property and the ownership of which rests with the Government of Maharashtra as per entry dated 19.06.2009 in the property card. He thereafter, pointed to the valuation made by DVO at page 89 and pointed to various shortcomings. He thereafter, submitted that the DVO has grossly erred in valuing the cost of shed taking into consideration the Ready Reckoner value, more so, when the shed has already been demolished by the buyer. He therefore, submitted that the value as adopted by the assessee be considered for the purpose of computation of capital gains. Considering the facts, the ld. AR submitted that the value adopted at Rs.69,64,713/- is on higher side and the reasonable valuation at around 20-25% if adopted, would be acceptable to the assessee.

The ld. DR on the other hand supported the orders of Assessing Officer and CIT(A).

We have heard the rival submissions and perused the material on record. The issue in the present appeal is with respect to the valuation made as per section 50C of the Act. It is an undisputed fact that though the assessee has the physical possession of the property, but as per Revenue records the ownership of land rests with the Government of Maharashtra. It is also a fact that during the year under consideration the assessee had sold the land along with shed thereon to M/s. Millenium Marbles Pvt. Ltd., who was already in possession of the land. It is also a fact that the structure that was sold by the assessee was demolished by the purchaser and the structure was stated to have been in existence since the time of its purchase by the assessee. It is also a fact that the assessee had got valuation report prepared by the registered valuer who had valued the shed at Rs.2.10 lakhs as against the value adopted by the DVO at Rs.69,64,713/-. Considering the totality of the aforesaid facts, more so, when the shed that was an old structure and was demolished by the purchaser, we are of the view that the DVO was not justified in valuing the shed at Rs.69,64,713/-. At the same time, we are of the view that the value adopted by the valuer at Rs.2.10 lakhs is also on a lower side. Considering the aforesaid facts, we are of the view that if the value adopted in the present case is restricted to Rs.20 lakhs, would meet the ends of justice and accordingly we direct the Assessing Officer to consider the value of shed at Rs.20 lakhs and re-work the capital gains. In view of the aforesaid, the amended ground raised by the assessee is allowed.

In the result, the appeal of assessee is allowed.