RUKMANI DEVI GANWANI,JAIPUR vs. ITO, JAIPUR

Brief facts leading to the controversy are that the assessees were joint owner of a property bearing shop No. 261, Chandpole Bazar, Jaipur. During the year under consideration the assessees have sold the said immovable property for a total consideration of Rs. 26,00,000/- and Rs. 13,00,000/- for each ½ share of the assessee. The AO referred the valuation of the property to the DVO and after receiving the valuation from the DVO has adopted full value consideration U/s 50C of the Act at Rs. 15,14,934/- of each ½ share as against Rs. 13,00,000/- declared by the assessee. Apart from adopting the full value consideration the AO has also disallowed the claim of cost of renovation, legal fees and expenses incurred towards payment of brokerage. The assessee challenged the action of the AO before the ld. CIT(A) but could not succeed.

The ld. AO erred in law as well as on the facts of the case in charging interest u/s 234B & 324C. The appellant totally denies it liability of charging of any such interest. The interest, so charged, being contrary to the provisions of law and facts, kindly be deleted in full.

Ground No. 1 is regarding the validity of reassessment. At the time of hearing, the learned counsel for the assessees have stated at bar that the assessees does not press ground no. 1 and the same may & 450/JP/2018 Smt. Rukmani Devi Ganwani & Others vs. ITO be dismissed as not pressed. The ld. DR has raised no objection if ground no. 1 of the assessee’s appeals are dismissed as not pressed.

Ground No. 2.1 is regarding adoption of full value consideration as per the stamp duty valuation U/s 50C of the Act. The assessees have declared sale consideration of Rs. 13,00,000/- for each ½ share however, the Assessing Officer has referred to the value to the DVO who is had determined the fair market value at Rs. 15,33,800/- of each ½ share. Since, the fair market value determined by the DVO is more than the stamp duty valuation therefore, the AO adopted the full value consideration at Rs. 15,14,934/- for each ½ share. The assessee challenged the adoption of full value consideration U/s 50C of the Act and submitted that the sale consideration declared by the assessee is correct market value property in question. In support of his contentions they have filed Valuation Report of registered valuer who has determined the value of the property at Rs. 13,22,227/- for each ½ share of the assessees. The ld. CIT(A) has not accepted the contention of the assessees and confirmed the action of the AO in adopting the full value consideration as per section 50C of the Act. & 450/JP/2018 Smt. Rukmani Devi Ganwani & Others vs. ITO

Before us, the ld. AR of the assessee has submitted that the registered valuer has given the specific reasons for taking the fair market value at lower rate due to various factors affecting the value of the property. He has pointed out that particular property valuation is factored mainly on the “economic obsolence” categorized as “lesser width & greater depth” “improper place to move within the shop part area”, “non physical partition/devidation with next half part”, & finally the “restriction to use the premises. The registered valuer has also given various peculiar factors affecting the valuation and accordingly he took a factor of 15% each and applied as 60% valuation in comparison to a normal property. Therefore, he has submitted that the valuation determined by the registered valuer is near about the value adopted by the assessee therefore, no addition is justified in this respect. The difference in the value adopted by the assessee and full value consideration adopted by the AO is less than 15% which is within tolerance range up to 15% as considered by various courts. In support of his contention, he has relied upon the decision of Hon’ble Delhi High Court in case of CIT vs. Nilofar I. Singh 309 ITR 233.

On the other hand, ld. DR has submitted that the AO duly complied with the provisions of Section 50C of the Act as the issue of & 450/JP/2018 Smt. Rukmani Devi Ganwani & Others vs. ITO value was referred to the DVO and after considering the report of the DVO the AO has adopted lesser value as per the provisions of Section 50C of the Act. He has relied upon the orders of the authorities below.

We have considered the rival submissions as well as relevant material on record. The assessees have declared the sale consideration of Rs. 13,00,000/- for each ½ share though the stamp duty valuation of the property is Rs. 15,14,934/-. The Assessing Officer after getting the fair market value determined by the DVO had adopted the full value consideration as per the stamp duty valuation. The assessee has objected to the adoption of full value consideration U/s 50C of the Act and submitted that the registered valuer has given the specific reasons for lesser value of the property in question. We find that the DVO has determined the fair market value of the property at Rs. 15,33,800/- whereas the registered valuer has determined the fair market value of the property at Rs. 13,22,227/- for each ½ share of the assessees.

Ground no. 2.2 is regarding disallowance of cost of renovation and brokerage charges.

We have heard the ld. AR as well as ld. DR and considered the relevant material on record. Each of the joint owner has claimed renovation expenses of Rs. 1,06,500/-. On perusal of the relevant record, we find that the assessee has claimed expenditure towards the renovation work carried out in the year 2002. Thus, it is clear that this expenditure was incurred by the assessee just after purchasing the shop in question and thereafter the assessees have used this shop for their own business purpose. Accordingly, once the shop was used after the renovation for business purpose and the nature of expenditure is not any addition to the shop but it is an ordinary and repair work therefore, the current repair charges cannot be allowed as cost of acquisition. As regards the brokerage charges of Rs. 81,000/- we find that the assessee has produced a receipt from the broker however, the charges of Rs. 81,000/- each are very high in comparison to the prevailing rate of brokerage in the real estate transaction. Accordingly, having regard to the facts and circumstances of the case we allow 2% & 450/JP/2018 Smt. Rukmani Devi Ganwani & Others vs. ITO of the sale consideration declared in the sale deed as brokerage charges which comes to Rs. 26,000/- each for both the assesseess. Accordingly, the brokerage charges are allowed partially to the extent of 2% of the sale consideration declared by the assessee. In the result, both the appeals of the assessees are partly allowed. Order pronounced in the open court on 28/02/2019.