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Income Tax Appellate Tribunal, JAIPUR BENCHES ‘B’ JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 54/JP/2018
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES ‘B’ JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 54/JP/2018 fu/kZkj.k o"kZ@Assessment Year :2012-13 cuke Sh. Manoj Kumar, ITO, Vs. 332, Vivek Vihar, Ward -7(1), New Sanganer Road, Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AJEPK8799H vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Rajeev Sogani (CA) jktLo dh vksj ls@ Revenue by : Smt. Runi Pal (Addl.CIT) lquokbZ dh rkjh[k@ Date of Hearing : 21/12/2020 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 01/03/2021 vkns'k@ ORDER PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A)-1, Jodhpur dated 21.09.2017 wherein the assessee has taken the following grounds of appeal:-
1. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in applying the provisions of section 50C of the IT Act 1961, and adopting the sale consideration at Rs. 67,36,715 (1/8 of Rs. 5,38,93,718) against the declared sale consideration of Rs. 25,00,000/- (1/8 of Rs. 2,00,00,000/-). The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of 2 Manoj Kumar, Jaipur Vs. ITO, Ward 7(1), Jaipur the case. Relief may please be granted by accepting the sale consideration at Rs. 25,00,000/- as declared by the assessee, for computing the Long Term Capital Gain.
2. (a) In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in not considering the dispute involved in the property for further reduction of the value as determined by the ld. DVO. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by accepting the sale consideration at Rs. 25,00,000/- (1/8 of Rs. 2,00,00,000/-), as declared by the assessee, for computing the Long Term Capital Gain.
(b) In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. DVO in not considering the dispute involved in the property for estimating the fair market value. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by accepting the sale consideration at Rs. 25,00,000/- (1/8 of Rs. 2,00,00,000/-), as declared by the assessee, for computing the Long Term Capital Gain.
3(a). In the facts and circumstances of the case and in law ld. CIT(A) has erred in confirming the action of ld. AO in estimating the fair market value of the property as on 1.4.1981 at Rs. 80,728/- (1/8 of 6,45,830/-) against the declared value of Rs. 1,54,285/- for computing the Long Term Capital Gain. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and 3 Manoj Kumar, Jaipur Vs. ITO, Ward 7(1), Jaipur against the facts of the case. Relief may please be granted by accepting the fair market value of the property as on 1.4.1981 at Rs. 1,54,285/- as declared by the assessee, for computing the Long Term Capital Gain.
(b) In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of ld. DVO in estimating the fair market value of the land as on 1.4.1981 at Rs. 10,510/- (1/8 of 84,078/-). The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by accepting the fair market value of the property as on 1.4.1981 at Rs. 1,54,285/- as declared by the assessee, for computing the Long Term Capital Gain.
4. In the facts and circumstances of the case and in law ld. CIT(A) has erred in confirming the action of ld. AO in disallowing a sum of Rs. 11,500/- of expenses claimed against the professional receipts of the assessee. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the said disallowance of Rs.11,500/-.”
Briefly stated, the facts of the case are that the assessee earned capital gain from sale of inherited properties on 19-1-2012. The assessee e-filed his return of income for the assessment year 2012-13 on 28.07.2012 declaring the total income of Rs. 13,98,900. The assessment was completed under section 143(3) vide order dated 11.03.2015 at a total income of Rs. 67,72,120/- which on appeal has been confirmed by
Regarding Ground Nos. 1 & 2, the ld AR submitted that during the previous year relevant to impugned assessment year, the appellant sold inherited residential properties situated at Plot No. 9 to 16 (Original Plot No. 105), Chune Ki Bhati, 1A Road, Sardarpura, Jodhpur to M/s Dhanlaxmi Real Mart Pvt. Ltd for a total sale consideration of Rs. 2.00 crores on 19-1- 2012 and earned income from capital gain on such sale of properties. The plots were inspected by the ld DVO on 17-2-2015. The subject properties were inherited properties in which the appellant had 1/8th share. The above mentioned properties being located in Jodhpur were not looked after regularly and, therefore, were occupied by some illegal occupants. Therefore, the market value of the property got substantially reduced and, thus, was sold at a price lower than the value adopted by the Stamp valuation authority. During the course of assessment proceedings, the property was referred for valuation to DVO u/s 50C(2). Ld. AO while computing the capital gain on sale of above inherited residential properties, substituted the transaction value with the valuation done by Stamp Valuation Authority, being lower than the valuation made by DVO. Ld. AO as well as ld DVO has not given any cognizance to the fact that property was occupied by unauthorized persons and, therefore, the market value of the property has been substantially reduced. Ld. CIT(A) restricted the deemed sale consideration under section 50C against the property No. 9 to 14, to the value adopted by DVO of Rs. 3,27,52,913 and, thus, reduced the value of the said property by Rs. 43,80,712 as per the provisions of section 50C. Further, ld. CIT(A) upheld the valuation of the property No. 15 & 16 as assessed by the Stamp Valuation Authority.
5 Manoj Kumar, Jaipur Vs. ITO, Ward 7(1), Jaipur Details of Transaction Value and Value Computed by ld AO/ld CIT(A) are as under: Particulars Plot No. 9 to 14 Plot No. 15 & Total Share of Amount (In Rs.) 16 Amount Amount (In Appellant (1/8th) (In Rs.) Rs.) Transaction Value 1,23,00,000/- 77,00,000/- 2,00,00,000/- 25,00,000/ - DLC Value 3,71,33,625/- 2,11,40,805/- 5,82,74,430/- Valued by ld DVO 3,72,03,037/- 2,19,34,836/- 5,91,37,873/- 73,92,234/ (3,27,52,913/- - + 44,50,124/- added by ld AO) Adopted by ld AO 3,71,33,625/- 2,11,40,805/- 5,82,74,430/- 72,84,304/ - Confirmed ld 3,27,52,913/- 2,11,40,805/- 5,38,93,718/- 67,36,715/ CIT(A) -
During the course of hearing, the ld. AR submitted that the submissions made before ld. CIT(A) appearing at pages 9-13 of ld. CIT(A) order may please be considered in correct perspective. Ld. CIT(A) has observed in her assessment order at page 15 that “the appellant has not offered any specific comments regarding the valuation done by the DVO”. It was submitted that the assessee appellant had specifically submitted (Para 1.13 reproduced in ld CIT Order at Page No. 11) that the Valuation Oficer has not given any discount from the value of property on account of illegal occpation of property by trespassers as is evident from the Valuation Report wherein there is no reference to above mentioned facts and that ld DVO simply relied on DLC rate.
It was submitted that the ld CIT(A) has misplaced her reliance on judgments of Hon’ble Gujarat High Court in the case of Pr. CIT vs Rajabhai Lumbhabhai Hadiya [2016] 65 taxmann.com 18 (Gujrat) and Pr. CIT vs Ravjibhai Nagjibhai Thesia [2016] 76 taxmann.com 76 (Gujrat). In both
6 Manoj Kumar, Jaipur Vs. ITO, Ward 7(1), Jaipur cases, the DVO estimated the value of property at a lower than the DLC value. It was held that for the purpose of computing capital gain on transfer of land or building, if valuation ascertained by valuation officer does not exceed value adopted by Stamp Duty Authority, then value ascertained by valuation officer would prevail. It is submitted that the cases relied upon by ld. CIT(A) are not even remotely connected with the issue under consideration before her. The issue raised in appeal before her was whether ld. DVO was justified in completing the valuation on the basis of DLC rate as she was duty bound under the law to consider the various deficiencies/ disadvantages associated with the sold property which had significantly reduced the sale consideration. Thus, the cases relied upon by Ld. CIT(A) were not at all relevant for issue before her. During the course of appellate proceedings for the proposition that ld. DVO was duty bound to consider the deficiency/disadvantages for arriving at a proper valuation, reliance was placed on the following two judicial pronouncements:
� Chandra Bhan Vs. ACIT [2012] 21 taxmann.com 133 (Kol.) � Ravi Kant Vs.ITO [2007] 110 TTJ 297(DELHI)
The Ld. CIT(A) has neither distinguished the above case laws nor followed the same. Ld. CIT(A) has rejected the claim of the appellant, contending that the “appellant did not respond to the DVO’s letter No. 93 dated 19.01.2015 and was not present on the date of inspection of the property on 17.02.2015.”.
It was submitted that the appellant gave his reply to the said letter within time (Copy of reply is placed in Paper Book Page 99-104). It is further submitted that after giving the written reply on the matter, there was no necessity of appellant to be physically present at the time of 7 Manoj Kumar, Jaipur Vs. ITO, Ward 7(1), Jaipur inspection of the property since by that time, property was demolished and more particularly appellant was living in Jaipur. Purely, on this fact, that the appellant was not present at the time of inspection of the property is not a sufficient reason to reject the claim of the appellant that the market value of the land was less as compared to the Stamp Valuation Authority.
It was submitted that both the lower authorities failed to consider the main issue involved with the property due to which its market value has been reduced as compared to the DLC rate of that area. Not giving due consideration to the disputes involved with the property can never give a correct valuation of such property. Ld. CIT(A) has herself accepted that necessary safeguards have been provided under Income Tax Act under section 50C(2) to refer the case to valuation officer. In this regard, it is submitted that in the instant case, the safeguard provided to the assessee have been rendered infructuous by the action of the lower authorities of valuing the property at the same DLC rate disregarding dispute for which valuation was requested. The ld. DVO was duty bound to ascertain the Fair Market Value and not the DLC rate. It is established position that unauthorized occupancy of the property reduces the value which, basic fact, is ignored by the lower authorities Ld. CIT(A) has also accepted that the provisions of section 50C have been introduced only to check the undervaluation thereby evading tax payable to the Government and also curtail black money. It is submitted that, from the perusal of the above situation, it nowhere appears that the appellant assessee has tried to evade the tax as the fact of occupancy has been proved by the appellant. In view of the above, the capital gain may please be directed to be computed by taking actual sales consideration, disregarding the stamp duty valuation as well as the valuation done by DVO.
8 Manoj Kumar, Jaipur Vs. ITO, Ward 7(1), Jaipur 9. Per contra, the ld DR relied on the findings of the AO and that of the ld CIT(A) and our reference was drawn to the findings of the ld. CIT(A) which reads as under:
Considering the facts and circumstances of the case and authoritative judicial precedents as discussed in para nos.5.2, 5.3 & 5.4 (supra), it is held that the AO is perfectly justified in applying the provisions of sec. 50C of the Act to the appellant. However, as per sub-section (3) of section 50C, if the value ascertained as mentioned in sub-section (2) exceeds the value adopted, assessed or assessable by the stamp valuation authority, such valuation of the authority would prevail, in other words, for the purpose of capital gains it would be the lesser of the two valuations, that adopted by the State Valuation Authority or one suggested by the Department Valuation Officer, which would prevail. In the instant case, it is noticed that the value of the first property being plot no.9 to 14 is determined by the DVO at Rs.3,27,52,913/- as against Rs.3,71,33,625/- adopted by the Stamp Valuation Authority which is lesser by Rs. 43,80,712/-, however, the AO has adopted the higher value of Rs. 3,71,33,625/- only. Therefore, as per provisions of sec. 50C(3), the value of plot no. 9 to 14 adopted by the AO at Rs. 3,71,33,625/- is reduced by Rs. 43,80,712/- as per valuation done by the DVO. The appellant gets partial relief. The deemed sale consideration of the second property, being plot nos. 15 & 16, taken by the AO at Rs. 2,11,40,805/- as per the value assessed by the Stamp Valuation Authorities is upheld. The ground nos. 1 & 2 raised by the appellant regarding these issues are partly allowed.
We have heard the rival contentions and purused the material available on record. The undisputed facts which are emerging from the records are that the appellant, alongwith other persons, sold two
9 Manoj Kumar, Jaipur Vs. ITO, Ward 7(1), Jaipur properties for a total sale consideration of Rs.2,00,00,000/- during the FY 2011-12 vide two separate registered sale deeds and offered his 1/8th share of sale consideration of Rs.25,00,000/- to tax under the head “long term capital gains” in his return of income. The AO found that the stamp valuation authority valued the properties at Rs.3,71,33,625/- and Rs.2,11,40,805/- instead of Rs.1,23,00,000/- and Rs.77,00,000/- respectively as declared by the appellant and a show-cause was issued to the appellant as to why the value so determined by the stamp duty authority be not adopted for the purposes of computation of capital gains as per section 50C(1) of the Act. The appellant vide its letter dated 9.12.2012 has contested the adoption of stamp duty valuation and submitted that the property was sold at a price lower than the market value as the property was occupied by some illegal occupants. The AO thereafter referred the valuation of the properties to the DVO as per Section 50C(2) of the Act. The DVO vide his valuation report dated 25.02.2015 estimated the fair market value of the said properties at Rs.3,27,52,913/- and Rs.2,19,34,836/- respectively by taking the value of land @ Rs 2,944/sq ft in respect of first property and Rs 4,454/sq.ft in respect of second property as against Rs.3,71,33,625/-and Rs.2,11,40,805/- adopted by the Stamp Valuation Authorities. In respect of the first property being plot Nos. 9 to 14 which was valued by the DVO at Rs. 3,27,52,913/- taking into consideration only the value of land as the building constructed thereon was demolished by the buyer at the time of inspection, the AO noted that the fair market value of the building constructed on this land was not included in the DVO's valuation, the AO estimated the fair market value of the building at Rs.44,50,124/- @ Rs.400/- per sq. ft. on constructed area of 11125.31 sq. ft. The AO added
10 Manoj Kumar, Jaipur Vs. ITO, Ward 7(1), Jaipur this amount of Rs.44,50,124/- to the value of Rs.3,27,52.913/- estimated by the DVO and held that the total value of Rs.3,72,03,0374/- (Rs.3,27,52,913/- +Rs.44,50,124/-) is more than the value assessed by the Stamp Valuation Authority. In respect of the second property being plot Nos.15 & 16, the value determined by the DVO at Rs.2,19,34,836/- being more than the value adopted by the Stamp Valuation Authorities at Rs.2,11,40,805/-, the AO held that the value adopted by the Stamp Valuation Authority is correct and should be taken for computation of capital gains. The AO accordingly computed the long term capital gain by taking the deemed sales consideration as per Section 50C of the Act at Rs.5,82,74,430/- (Rs.3,71,33,625/- + Rs. 2,11,40,805/-) as per values assessed by the Stamp Valuation Authorities.
Regarding the contention advanced by the assessee that the property was sold at a price lower than the market value as the property was occupied by some illegal persons and which is a precise reason for referring the matter to the DVO, we find that there is no finding recorded by the DVO in his report. However, the AO in the assessment order has taken cognizance of the said contention and held that the explanation given by the assessee is not enough to substantiate that he had to actually sell the property at a price lower than the market value due to occupation of these properties by the alleged illegal occupants and except for copies of some civil suits between the purchaser and some persons, the assessee has not been able to furnish any documents which could prove that the assessee was under compulsion to dispose of his properties at a lower price than the market price and also, there is no mention of any condition for getting the properties vacated by 11 Manoj Kumar, Jaipur Vs. ITO, Ward 7(1), Jaipur the assessee. Further, referring to the provisions of section 50C, the AO held that the report of the DVO is binding on him and thus, the contentions so advanced by the assessee was held not maintainable and was thus not accepted. On appeal, the assessee has again raised the said contentions and filed his written submissions along with evidences which are reproduced at para 5.1 pages 9 to 13 of ld CIT(A)’s order. We therefore find that various evidences were filed before the ld CIT(A) in the form of copies of civil suits, copies of electricity bills, copies of sale deed, power of attorney etc in support of his contention that the property was sold along with occupancy of certain persons and it was submitted that said evidences were also filed before DVO which have not been considered by him while determining the fair market value. It has also been contended by the assessee that the DVO has adopted two different rates for two properties which are adjoining plots and that too, applying the average circle rate of residential and commercial area instead of bringing on record comparable cases and taking into consideration other factors effecting the impugned transactions making the whole reference as a futile exercise. The ld CIT(A) has however not accepted the said contention of the appellant stating that the appellant has not offered any specific comments regarding valuation done by the DVO. The said finding of the ld CIT(A) is clearly not borne out of records, as we have noted above that the assessee has submitted specific comments challenging the valuation so adopted by the DVO. Further, the ld CIT(A) has stated that the appellant did not respond to the DVO's letter No.93 dated 19.01.2015 and was not present on the date of inspection of the property on 17.02.2015, these facts are clearly recorded in column-2 regarding "Collection of Documents" on 12 Manoj Kumar, Jaipur Vs. ITO, Ward 7(1), Jaipur page-2 of the DVO's valuation report dated 25.02.2015. To our mind, the DVO has recorded a finding that at the time of inspection, the building stood demolished by the buyer and thus, he is unable to determine the value of the building. Therefore, the fact that the building was demolished at the time of inspection is a finding of fact which is not disputed by either authorities and in fact, the AO has thereafter carried out the valuation of the building on his own which goes to show that as far as physical presence of the assessee at the time of inspection is concerned, the same should not have come in the way of the DVO in determining the value of the building as per the built up area and other specification so given in the sale deed. Secondly, regarding the response to the DVO's letter No.93 dated 19.01.2015, we find that the assessee did respond to the said notice vide its submission dated Nil sent vide speed post on 31.01.2015. We therefore find that various contentions advanced by the assessee regarding determination of fair market value and evidences already brought on record have not been properly addressed by the DVO and even though, the DVO report is binding on the AO and when the matter was brought to the notice of ld CIT(A), the later is well within her jurisdiction to consider those contentions and where so required, the matter could have been referred to the DVO to seek his comments. Therefore, considering the entirety of facts and circumstances of the case, we are of the considered opinion that being a matter involving technical expertise and where the assessee has contested the valuation on multiple grounds and has brought on record various evidences in support of his contention, the matter deserve to be set-aside to the file of the AO to call for fresh report from the DVO and decides the same a fresh as per
Regarding Ground No. 3, the ld AR submitted that the appellant estimated the fair market value of the property sold as on 01.04.1981 at Rs. 1,54,285/- (1/8th of Rs. 12,34,280/- ) based on information gathered by him. The Ld DVO estimated the fair market value of the property being land as on 01-04-1981 at Rs. 84,078/- (Rs. 49,063/- + Rs. 35,015/-) on the basis of comparable sale instance of the area. The Ld. AO has completed his assessment by considering the fair market value of the property being land as estimated by the DVO. The Ld AO further estimated the value of building at Rs. 5,61,750/-. Ld. CIT(A) confirmed the value adopted by ld. AO for the purpose of calculation of capital gains under section 50C.
In the aforesaid background, the ld. AR submitted that the submissions made before ld. CIT(A), also appearing at page 22-23 of CIT(A) order, may please be considered in correct perspective. Ld. CIT(A) has rejected the claim of the appellant, holding that the “appellant did not respond to the DVO’s letter No. 93 dated 19.01.2015. It is submitted that the appellant assessee, gave his reply for the said letter within time (Copy of reply is placed in Paper Book Page 99-104). Ld CIT(A) observed that since AO has already computed the value of building construction at Rs. 5,61,750, the contention of the appellant have no merit that in the valuation report, only land value was taken. It is humbly submitted that the valuation is a technical matter. It is specifically provided in section 142A that for the purpose of assessment, the AO can refer the valuation to the Valuation Officer, who is technically competent to value the property. In no case, he can himself carry out the valuation exercise. Therefore, the valuation of building done by ld AO cannot be taken for 14 Manoj Kumar, Jaipur Vs. ITO, Ward 7(1), Jaipur computation of capital gain. In view of the above, the capital gain may please be directed to be computed by taking Fair Market Value as on 01- 04-1981 as declared by appellant disregarding the valuation done by DVO/AO.
Per contra, the ld DR relied on the findings of the AO and that of the ld CIT(A) and our reference was drawn to the findings of the ld. CIT(A) which are contained at para 6.2 of her order which are reproduced as under:
“6.2. I have carefully considered the assessment order and appellant's submissions. The appellant estimated the value of the property sold as on 01.04.1981 on estimate basis based on information gathered by him. The DVO estimated the fair market value of the property as on 01-04-1981 on the basis of comparable sale instance of the area. The AO completed his assessment by considering the fair market value of the property as estimated by the DVO. Comparative position of the value estimated by the appellant and by the DVO is as under: Property Description Valuation Value Adopted by the by the DVO Appellant Plot No. 9 & 14 (Original Plot No. 49,063/- 105), Chune Ki Bhari, 1A Road, Sardarpura, Jodhpur 1,54,285/-*8= Plot No. 15 & 16 (Original Plot No. 35,015/- 12,34,280/- 105), Chune Ki Bhari, 1A Road, Sardarpura, Jodhpur Total 84,078/- 12,34,280/-
The appellant has objected to the DVO's estimation of the cost of acquisition on two counts- first, that the details of comparable sale
15 Manoj Kumar, Jaipur Vs. ITO, Ward 7(1), Jaipur instances were not provided to the appellant and second, that the DVO has only taken the land value, the value of construction is not taken therefore the valuation is not correct. I find that the DVO specifically asked the appellant to furnish the comparable sale instances of the area vide his office letter no.93 dated 19.01.2015 but the appellant did not furnish the information called for as is recorded clearly in column-2 regarding "Collection of Documents" on page-2 of the DVO's Report. Thus, it is clear that the appellant failed to avail the opportunity provided by the DVO and is therefore precluded from raising any objection now. As regards the second objection regarding not including the value of constructed building in the fair market value as on 01.04.1981, the AO has already computed the value of the building at Rs.5,61,750/- (@ Rs.35/- per sq. ft. for 16,050.06 sq. ft. of constructed area) and included the same in the cost of acquisition arriving at the fair market value as on 01.04.1981 at Rs.6,45,830/- (Rs.84,078/- + Rs.5,61,750/-). These figures have not been disputed by the appellant. Considering the facts and circumstances of the case as discussed above, I find no merits in the objection raised by the appellant regarding the cost of acquisition as on 01.04.1981, the same are rejected. The ground no.3 raised by the appellant regarding this issue is dismissed.”
Given that we have set-aside the matter to the file of AO for determination of fair market value as on the date of transfer, the matter relating to cost of acquisition is also remitted to the file of the AO to call for a report from the DVO seeking valuation of land and building both and decide the same afresh as per law. In the result, the ground of appeal is allowed for statistical purposes.
16 Manoj Kumar, Jaipur Vs. ITO, Ward 7(1), Jaipur 16. Ground no. 4 relates to disallowance of a sum of Rs. 11,500/- of expenses claimed against the professional receipts of the assessee. We have gone through the order of the lower authorities and donot find any infirmity therein and hence, the said ground of appeal is dismissed.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open Court on 01/03/2021.