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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED&
The instant appeal filed by the assessee is directed against the order dated 12.06.2017 passed by the Commissioner of Income Tax (Appeals) - Gandhinagar arising out of the order dated 30.03.2016 passed by the Learned ITO, Ward-4, Mehsana under section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) for the Assessment Year 2013-14.
The short point involved in this particular matter is this that as to whether without obtaining a valuation report from the DVO the capital gain of a particular property can be determined by the authorities below rejecting the valuation done by the registered valuer as relied upon by the assessee.
- 2 - Amirshbhai Prahaladbhai Patel vs. ITO Asst.Year – 2013-14 During the course of assessment proceeding, information regarding sale of land by the assessee was noticed by the Learned AO whereupon details regarding such sale of land in question was asked for. Pursuant to that the assessee submitted the details along with working of long term capital gain. The same was also supported by the valuation report prepared by the registered valuer whereby and whereunder the value of the property (3 lands) was determined at Rs.11,63,955/- as on 01.04.1981 by taking the rate of Rs.65/- per square meter for land which was ultimately disputed by the Learned AO and the assessment proceeding was finalized upon determining the valuation at the rate of Rs.1.07 sq. mts.; resultantly, long term capital gain was assessed at Rs.1,03,23,919/-. Since the assessee had shown the long term capital gain of Rs.28,75,411/- in its return of income, the balance amount of Rs.74,48,508/- was added to the total income of the assessee for the relevant assessment year, which was, in turn confirmed by the Learned CIT(A). Hence, the instant appeal before us.
At the time of hearing of the instant appeal, the Learned Advocate appearing for the assessee submitted before us that when the valuation was rejected by the Learned AO the valuation made by the sub-registrar office of the plot related to the land has been adopted instead of obtaining the report of a technical person being the DVO as the practice followed by the authorities below in terms of the provision of law. In support of his contention, the Learned AR relied upon the judgment passed by the Co-ordinate Bench in the matter of Smt. Pramila M. Desai, HUF-vs-DCIT in for A.Y. 2008-09. He, therefore, prayed for setting aside the issue to the file of the Learned AO to decide the issue afresh upon obtaining a copy from the concerned DVO. The Learned DR, however, has relied upon the order passed by the authorities below.
We have heard the rival contentions and perused the relevant materials available on record including the order passed by the Co-ordinate Bench. It appears that admittedly the Learned AO rejected the valuation made by the registered valuer as relied upon by the - 3 - Amirshbhai Prahaladbhai Patel vs. ITO Asst.Year – 2013-14 assessee but has failed to decide the issue upon obtaining a copy from the DVO regarding the valuation of that particular property which is now a settled legal position in view of the several judicial pronouncements including the order passed by the Hon’ble Jurisdictional High Court as relied upon by the Co-ordinate Bench. While deciding the issue the Co-ordinate Bench observed as follows: “8. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that there are three aspects to be decided by us. The first aspect is regarding fair market value as on 01.04.1981 of the assessee’s land. In 5 I.T.A.No04./Ahd/2012 this regard, the claim of the assessee is that the rates adopted by the registered valuer should be applied and not the rates adopted by the A.O. on the basis of single instance of a land which is situated at far away place. The second aspect is whether the quantity of land reduced by Ld. CIT(A) to the extent of 10% for common plot and 25% for internal roads/other development cost is justified or not. The 3rd aspect is whether the cost of acquisition as on 01.04.1981 of the assessee should be 18.10% of the total cost being the share of the assessee in the total land or whether it should be only 12.65% of the total cost as has been adopted by Ld. CIT(A) on the basis of net sale value of the assessee of Rs.421.52 lacs compared to Rs.3333.16 lacs being the total sale value. - Regarding the first aspect as to what is the fair market value of the land as on 01.04.1981, we find that the registered valuer had applied the rate of Rs.295.81 per sq. mtr. on the basis of average rate of 4 different plots of land. The A.O. has applied the rate of Rs.86.10 per sq. mtr. on the basis of a single sale instance collected form sub- Registrar office by the A.O. Ld. CIT(A) has adopted the rates of Rs.156.50 per sq. mtr by ignoring two sales instances adopted by the registered valuer i.e. of Rs.538.20 per sq. mtr. being the first sale instance and Rs.253.60 per sq. mtr. being the 3rd sale instance. These two sales instances were ignored by the Ld. CIT(A) on this basis that in both these cases, open plot of land was not sold but partially constructed area was sold and if the said rate is adopted after reducing the cost of construction already made before sale then it will be very low in the case of 1st instance and 3rd instance. For 3rd sales instance, it is also noted by Ld. CIT(A) that the date of sale is August 1982 being more than one year after the date of 01.04.1981. He has ignored these two sales instances adopted by the Registered valuer and by taking average sale price of the remaining two sales instances adopted by the registered valuer and the one sale instance adopted by the 6 I.T.A.No04./Ahd/2012 A.O., he has worked out average market value of the land as on 01.04.1981 at Rs.156.50 per sq. mtr. Before us, it was submitted that when the assessee has submitted a report of registered valuer, the same cannot be ignored or varied or substituted without obtaining valuation report form DVO. In support of this contention, reliance was placed on the Tribunal decision rendered in the case of Shri Rajendra H Seth Vs ACIT in I.T.A.No. 1495/Ahd/2007 dated 11.11.2011 and in particular, our attention was drawn to para 10.1 of this Tribunal order which has been reproduced by the assessee in the written submission. We find that admittedly, no report of the DVO was obtained and the A.O. obtained one sale instance from sub-registrar office but regarding - 4 - Amirshbhai Prahaladbhai Patel vs. ITO Asst.Year – 2013-14
this sale instance, it is the submission of the assessee before us that this sale instance is of a far away place whereas, the sale instance noted by the registered valuer is nearer to the land in question. This contention of the Ld. A.R. could not be controverted by the Ld. D.R. and hence, in our opinion, this sale instance obtained by the A.O. from sub-registrar office cannot be adopted because it is related to a land situated at far away place and moreover, when the assessee has submitted the report of the registered valuer, the same cannot be ignored or substituted without obtaining the report of a technical person viz. DVO or some other technical expert. The Tribunal order cited by the Ld. A.R. rendered in the case of Rajendra H Seth (supra) supports the assessee on this aspect. Relevant para of this Tribunal order i.e. para 10.1 is reproduced below:
“10.1. As regards valuation of flat as on 1.4.1981, the admitted facts of the case are that the value declared by the assessee is supported by valuation report of a Registered Valuer. The A.O. has taken a different valuation without obtaining valuation report from the DVO. The AO has taken value as on 1.4.1981 on other basis. We are of the view that assessee's valuation as on 1.04.1981 is supported by valuation by a technical person ie. report of registered valuer and contrary to that no such material or 7 I.T.A.No 04./Ahd/2012 departmental valuation report is available on record. Merely on the basis of other general enquiries the valuation declared by the registered valuer cannot be substituted. We therefore set aside the orders of Revenue authorities on this issue and direct the AO to adopt the valuation of the flats as on 1.4.1981 as declared by the assessee." Reference is also invited to decision of ITAT in ITO vs Smt Usha Ramesh 133 1TD 67 (Chennai) (TM) but since in the case of appellant, Registered Valuer's Report was furnished, there was no justification in relying on irrelevant sale instances from SubRegistrar's office and thereby rejecting the value as on 1st April, 1981 computed by Registered Valuer.”
- Regarding the action of Ld. CIT(A) of excluding two sale instances adopted by the registered valuer on this basis that these sale instances are in respect of partly constructed plot, we are of the considered opinion that generally, no buyer pay any price for a part construction on a plot unless it is seen that such part construction is useful to the buyer because if the part construction is not useful to the buyer and he wants to construct as per his own design and requirement then such part construction built by the seller is of no value to the buyer and generally, he does not pay any price for the same because in such a case, he has to demolish such part construction and rebuild the whole thing and this is not brought on record by the authorities below or by Ld. D.R. that such part construction was useful to the buyer and the value of the same was considered for the valuation of the property in those two instances. In the absence of any such finding on this aspect, the order of Ld. CIT(A) to ignore those two sale instances is not proper. Regarding the action of Ld. CIT(A) also, the same tribunal decision rendered in the case of Rajendra H Seth (supra), supports the case of the assessee because as per this tribunal decision, the report of registered valuer being a technical person, cannot be substituted without obtaining any DVO’s report or any other report of a technical person. In the present case, no such report of any technical person has 8 I.T.A.No04./Ahd/2012 been obtained by the authorities below and, therefore, for this reason also, the action of Ld.
- 5 - Amirshbhai Prahaladbhai Patel vs. ITO Asst.Year – 2013-14 CIT(A) cannot be sustained. Under these facts, we are of the considered opinion that the fair market value of the property in question as on 01.04.1981 as declared by the assessee on the basis of a report of the registered valuer, cannot be disturbed and the same has to be accepted. We hold accordingly. The first aspect is decided in favour of the assessee.”
Taking into consideration the entire aspect of the matter, we find that Learned AO has failed to obtain the DVO’s report which ought to have been done by the authorities below. Surprisingly, the Learned CIT(A) is also failed to perform such statutory duties conferred upon him. Hence, we find the decision made by the Learned AO, confirmed by the Learned CIT(A) is not in coherence adhere to the principle laid down by the different judicial pronouncement and having no other alternative, we quash the impugned order for the reason as discussed above. However, we find it and proper to remit the issue to the file of the Learned AO to decide the matter afresh upon obtaining a copy from the DVO to ascertain the fair market value of the property in question as on 01.04.1981 and also upon giving a reasonable opportunity of being heard to the assessee and to take into consideration any evidence that the assessee may choose to file at the time of hearing of the matter. Hence, the assessee’s appeal is allowed for statistical purposes.
In the result, assessee’s appeal is allowed for statistical purposes. This Order pronounced in Open Court on 18/10/2019 Sd/- Sd/- ( WASEEM AHMED ) ( Ms. MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 18/10/2019 Priti Yadav, Sr.PS - 6 - Amirshbhai Prahaladbhai Patel vs. ITO Asst.Year – 2013-14