SHRI VIJAY KUMAR PATNI,JAIPUR vs. INCOME TAX APPELLATE TRIBUNAL, WARD-2-1, JAIPUR

We have heard the ld. AR as well as the ld. DR and carefully perused the reasons explained by the assessee for delay of 51 days in Shri Vijay Kumar Patni vs. ITO filing the present appeal. It was submitted that the assessee’s mother aged about 71 years was not keeping well and was eventually hospitalized on 28.07.2017. The assessee is the only son and was busy in looking after his mother and was disturbed on account of ill health and hospitalized of his mother. Thus, the assessee has explained the cause of delay as he was engaged in taking care of his mother who was not maintaining good health and was hospitalized therefore, the assessee could not take the necessary steps in filing the appeal within limitation. The assessee has also filed the medical record of mother of the assessee as well as the death certificate dated 05.09.2017 of the mother of the assessee.

On the other hand ld. DR has objected to the application for condonation of delay.

Having considered the rival submissions and careful perusal on record, we find that the assessee has explained the cause of delay as the mother of the assessee was not well and was hospitalized on 28.07.2017. Further, the mother of the assessee died on 05.09.2017.

The assessee has raised the following grounds:-

Ground No. 1(c), at the time hearing, the learned counsel for the assessee has stated at bar that the assessee does not press ground no. 1(c) and the same may be dismissed as not pressed. The ld. DR has raised no objection if ground no. 1(c) of the assessee’s appeal is dismissed as not pressed. Accordingly the ground no. 1(c) of the assessee’s appeal is dismissed being not pressed.

Ground Nos. 1(a) (b) and (d) are regarding the addition made by the AO on account of long term capital gain by adopting the full value consideration as per the provisions of Section 50C of the IT Act at Rs. 2,61,53,980/- as against sale consideration of Rs. 1,55,00,000/-. The assessee is an individual and proprietor of M/s Trading Corporation and e-filed his return of income on 13.10.2010 declaring total income of Rs. 3,75,690/-. In the scrutiny assessment, the AO noted that the assessee has sold some portion of building D-38A, Ashoka Marg, Ahinsha Circle, Jaipur for a consideration of Rs. 1,55,00,000/- and the stamp duty value of the same was taken at Rs. 1,55,53,414/- at the time of sale deed dated 09.12.2009. Subsequently, the AO found that as per ITS information the value of the property sold by the assessee was determined by Sub-registrar, Sanganer, Jaipur at Rs. 2,61,53,980. In order to verify the correct status of the value for stamp duty value. The Shri Vijay Kumar Patni vs. ITO AO requested the Sub-registrar to provide the correct position vide letter dated 11.03.2013. In response, the Sub-registrar vide letter dated 12.03.2013 provided details of valuation of the property in question whereby the valuation was revised at Rs. 2,61,53,980/-. The AO has reproduced the details of the said letter in the assessment order. The AO noted that the assessee as declared the sale of one flat only in the return of income whereas the details provided by the Sub-registrar the assessee has sold two properties a flat as well as portion of the land.

Before us, the ld. AR of the assessee has submitted that the property in question was a residential property as stated in the sale deed whereas the DVO has considered the same as commercial while determining the fair market value of the land in question. Since, the assessee never apply for conversion of the said land/property therefore, the same can be valued as a residential property and not commercial.

On the other hand, ld. DR has relied upon the order of authorities below and submitted that there is no dispute that the property is being used for commercial purpose which is also admitted by the assessee as well as this fact was pointed out by the show cause issued by the Nagar Nigam dated 24.12.2014. Once the actual use of the property is for commercial then the rates of commercial property are to be applied for determining the fair market value of the property. Since, the DVO valued the property more than the value adopted by the stamp duty authority therefore, the AO has taken the lesser value which is fair and reasonable.

We have considered the rival submissions as well as relevant material on record. The dispute is only regarding the full value consideration adopted by the AO U/s 50C of the Act as per the revised stamp duty valuation based on commercial property. In response to the objections raised by the assessee the AO referred the valuation to the DVO however, due to shortage of time the said reference was returned by the DVO. In any case the ld. CIT(A) again referred the valuation to the DVO and after receiving the report of the DVO which determined the fair market value of the property more than the value adopted by the stamp duty authority has upheld the action of the AO. The main Shri Vijay Kumar Patni vs. ITO contention of the assessee is that the property in question is a residential as per record and there is no conversion of the property from residential to non residential. Therefore, even if the property was being used for non residential purpose/commercial purpose the valuation of the same cannot be determined by adopting the commercial rates. The unauthorized use of the property would not enhanced the value as per the contention of the assessee. There is no dispute that the property in question as per record is a residential property however, the location of the property as well as the actual use of the property for commercial purposes has led to the stamp duty authority as well DVO to adopt commercial rates for the purpose of valuation. The stamp duty authority has initially applied the residential rate at the time of sale deeds but subsequently the value was revised by adopting commercial rates. This appears to be based on the actual used of the property in question. Even the assessee has not disputed the actual used of the property as for commercial purpose and due to such unauthorized used the Nagar Nigam issued a show cause issued dated 24.12.2012. The assessee has also filed the sanctioned plan of the property in question as additional evidence in support of the claim that at the time of sale the property was a residential one and Shri Vijay Kumar Patni vs. ITO subsequent misuse of the same for commercial purpose will not enhance the fair market value. It is pertinent to note that though the locational advantage and actual use of the property for commercial purpose are certainly relevant factors for determining fair market value of the property but this itself will not be a ground to reclassify the property from residential but commercial one. Therefore, the rates of the commercial property cannot be applied to a property which is unauthorisedly used for commercial purpose. Though the locational advantage and actual of commercial use are the relevant factor for determining the fair market value but these cannot be the basis for treating the property as commercial one. Therefore, the fair market value of the property has to be determined on the basis of the prevailing rate in the area as well as on the basis of sale instance which can be considered as comparable cases. The DVO has adopted the commercial rate for determining the fair market value of the property whereas the fact remains that the property is a residential area but is being used for commercial purpose. Thus applying the commercial rates on a residential property used for commercial purpose is not proper and justified. Though it may have a comparative advantage than the residential property which is also used for residential purpose but the Shri Vijay Kumar Patni vs. ITO said advantage will not convert it to commercial area. Accordingly, we are of the considered view that the determination of the fair market value by the DVO requires a fresh look based on the prevailing fair market price well as comparable sale instance. Since, the assessee has now filed the site plan as additional evidence, therefore, in the facts and circumstances of the case we set aside this issue of fair market value to the record of the DVO/AO for redetermination of the same as per above observations. It is also pertinent to note that for the purpose of computing the cost of construction the state PWD rates shall be applied as against CPWD rates as the property is situated in the jurisdiction of State PWD and not in the jurisdiction of CPWD. Hence, the DVO is directed to reconsider the determination of fair market value and after giving an opportunity of hearing to the assessee.

Ground no. 1(e) is regarding the determination of cost of acquisition of the property on 01.04.1981.

We have heard ld. AR as well as ld. DR and considered the relevant material on record. The assessee has declared the cost of acquisition of Rs. 23,07,171/- whereas the DVO has determined the same as on 01.04.1981 at Rs. 14,03,400/-. The ld. AR of the assessee has submitted that the DVO has determined the cost of acquisition as Shri Vijay Kumar Patni vs. ITO on 01.04.1981 on the basis of comparable sales but the same was not confronted with the assessee. Even otherwise the sale instances taking into consideration by the DVO are not comparable as there are in respect of area not similar to the property of the assesee. The AO/DVO has also made addition of 50% to the value as it was situated in the corner. All these facts were not confronted with the assessee.

On the other hand, the ld. DR has submitted that the DVO has considered all the relevant factors while adopting the fair market value as on 01.04.1981. He has relied upon the order of the authorities below.

Having considered the rival submissions as well as relevant material on record we find that the DVO has taken the fair market value as on 01.04.1981 by considering the comparable instances however, the assessee was not confronted with such comparable cases to be adopted by the DVO. Further, the DVO enhanced the value due corner location of the property this was also not confronted with the assessee.