INCOME TAX OFFICER, WARD-1(2)(1), VADODARA vs. SHRI SURESHNHAI PADHIYAR LEGAL HEIR OF LATE SHRI MOTIBHAI MAGANLALBHAI PADHIYAR, VADODARA

PER ANNAPURNA GUPTA, AM:

The present appeal has been filed by the Revenue against the order of the National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “CIT(A)”) dated 29.03.2024 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”).

ITA No.1119/Ahd/2024 Shri Motibhai Mangalbhai Padhiyar - 2 – 2. Grounds of Appeal raised by the Revenue reads as under:- 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of Rs. 10,70,02,218/ made by the Assessing Officer being LTCG, without appreciating the fact the assessee officer has made the addition on the basis of the report of the DVO, which is binding on the assessing officer?

1.1 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of Rs. 10,70,02,218/ made by the Assessing Officer being LTCG, without appreciating the fact the valuation adopted by the assessee before different authorities was not reliable and therefore, the assessee officer has made the reference to the DVO?

1.2 Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) is justified in deleting the addition of Rs. 10,70,02,218/ made by the Assessing Officer being LTCG, without appreciating the fact that as the legislative intent is abundantly clear from the amendment in section 55A of the Act, which is only clarificatory in nature? 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in restricting levy of interest u/s 234A of the Act for 20 months as against the actual delay of 85 months, despite the fact the assessee had taxable LTCG for AY 2012-13 and as provided in Section 139 of the Act, the assessee was required to file his return of income within stipulated time provided in Section 139 of the Act?

It is prayed that the order of the CIT(A) on the above issues be set-side and that of the Assessing Officer be restored.

ITA No.1119/Ahd/2024 Shri Motibhai Mangalbhai Padhiyar - 3 – reason for the difference being that, while the assessee had estimated the Fair Market Value as on 01.04.1981 of the cost of acquisition of the impugned properties, at Rs.350/- per sq meter,the AO had referred the valuation of the same to the D.V.O. u/s 55A of the Act, who determined the value of the property as on 01.04.1981 at Rs.53/- per sq meter. 4. Before the Ld. CIT(A), the assessee contended that for the impugned year the AO could not have made reference to the D.V.O. u/s 55A of the Act, for determination of the value of cost of acquisition of the asset as on 01.04.1981, and therefore, the D.V.Os report could not have been taken cognizance of by the AO, for the said purpose. He referred to the decision of the Jurisdictional High Court in the case of Hiaben Jayantibhai Shah V/s ITO and Others reported in 310 ITR 31 (Gujarat) for the said proposition and the decision of the ITAT Ahmedabad Benches in the case of ITO Vs. Nitin Jayantilal Shah in ITA No.1988/Ahd/2009 dated 06.05.2011. The assessee further contended that the D.V.Os report could not be entertained also, for the reason that the D.V.O. had not considered the objections raised by the assessee, while determining the fair market value of the property at Rs.53/- per sq meter. The assessee further, pointed out to the Ld. CIT(A) that in the case of Smt. Jashodaben Jagdishbhai Patel, who was owner of property in the same area, identified as RS No.618, the D.V.O. had valued the land by taking rate of Rs.370/- per square meter as on 01.04.1981. All these contentions of the assessee were found to have merit by the Ld. CIT(A), who

ITA No.1119/Ahd/2024 Shri Motibhai Mangalbhai Padhiyar - 4 – accordingly, held that, the reference u/s 55A of the Act, by the AO to the D.V.O. was not valid, and even otherwise, the D.V.O. in the case of a similar property having valued the property commensurate to the rate adopted by the assessee, the valuation of D.V.O. at a much lower rate, in the present case was not acceptable. His findings, in this regard, are contained at para 5.4 to 5.13 of his order as under:- 5.4 I have carefully considered the facts of the case, the submission of the appellant and evidences on record. The appellant along with other two Co- owners sold agriculture land Revenue Survey No. 654 & 655 of Jambuva, Vadodara. Details are given as under. 1. Revenue Survey No. 654 Jantri value (Stamp duty valuation) Rs.9,53,04,000 Sales consideration Rs.2,56,70,000 Stamp duty payable Rs.46,70,000 Sales consideration received by Motibhai M Padhiyar Rs.2,56,70,000 1. Revenue Survey No. 655 Jantri value (Stamp duty valuation) Rs.11,14,27,250 Sales consideration Rs.2,18,30,000 Stamp duty payable Rs.54,60,000 Sales consideration received by Motibhai M Padhiyar Rs.72,86,668 Sales consideration received by other two Co-owners is as under: Smt. Laxmiben M Padhiyar Rs.72,76,667 Smt. Shantaben M Padhiyar Rs.72,76,665 5.5 Shri Motibhai M Padhiyar received full consideration in respect of R.S. No. 654 of Rs.2,56,70,000 & other two co-owners (Sisters of Motibhai Padhiyar) received nil amount. In R.S. No. 655 is co-owners received 1/3 amount of sale consideration as stated above. The appellant submitted that the Incharge of Revenue Head (Collector of Vadodara) had given approval of sale of R.S. No. 654 & 655 by stating that premium payable to the Govt. is nill. After 1 month case was reviewed and approval given was cancelled

ITA No.1119/Ahd/2024 Shri Motibhai Mangalbhai Padhiyar - 5 – stating that premium @ 80% is payable on Jantri value of R.S. No. 654 & 655 as this land are new tenure and to convert it into old tenure, premium of 80% is payable on Jantri value to the State Government. It is submitted that by that time sale deed is already executed and the Purchasers of agriculture land have gone to the high court & matter is pending before Hon'ble Gujarat high court for premium payable.

5.6 The appellant has objected to the AO referring the matter to the departmental valuation officer u/s 55A of the Act on ground that Section 55A is amended by Finance Act, 2012 and amendment is effective from 1 st July 2012 i.e., effective from A.Y. 2013-14, While Assessee's case is for A.Y.2012-13. It was submitted that as per 55A of the Act for reference to valuation officer for lower valuation cannot be made up to A.Y.2012-13. The appellant also submitted that the value of the R.S. No. 654 & 655 as on 01-04-1981 is Rs.350 per Sq. Mtr. Appellant objected during the course of assessment proceeding that value of the property as on 01-04-1981 should be taken as per Approved Valuer report which is Rs.350 per Sq. Mtr. Inspite of that, AO has taken value of the property as on 01-04-1981 at Rs.53 per Sq. Mtr. as per Departmental Valuation Officer (DVO) and made the addition of Rs. 10,70,02,018. The appellant also submitted that the DVO has not considered the objections raised by the assessee and valued the property without considering the objection of assessee at Rs.53 per Sq. Mtr. It was further submitted that the DVO in case of Smt. Jashodaben Jagdishbhai Patel for R.S. No. 618 in same area valued the land by taking rate of Rs.370/- per Sq. Mtr. as on 01/04/1981 and appellant obtained report from an approved valuer who valued the land at Rs.350/- per Sq. Mtr.

5.7 Section 55A of the Act is reproduced as under: - With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer— (a) in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the Assessing Officer is of opinion that the value so claimed is at variance with its fair market value; (b) in any other case, if the Assessing Officer is of opinion— (i) that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf ; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do, and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clauses (ha) and (i) of sub-section (1) and sub-sections (3A) and (4) of section 23, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall with the necessary modifications, apply in relation to such reference as they

ITA No.1119/Ahd/2024 Shri Motibhai Mangalbhai Padhiyar - 6 – apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. 5.8 The Hon'ble Gujarat High Court in case of Hiaben Jayantilal Shah Vs. Income Tax Officer and others reported in 310 ITR 31 (Gujarat) held that,

"13. Therefore, It is apparent that the Assessing Officer had, at no point of time, formed an opinion that the fair market value, in substitution of the cost of acquisition, as claimed by the assessee was required to be disturbed because prescribed parameters were fulfilled. In fact, as can be seen from the affidavit-in-reply the only ground on which reference was made to the valuation officer was that the value declared by the assessee as on the date of the execution and registration of the sale deed was lower by more than 25 per cent. There is no provision in the Act which permits the Assessing Officer to disturb the sale consideration, at least section 55A of the Act cannot be invoked for the said purpose......."

5.9 I find that the Hon'ble ITAT Ahmedabad in the case of ITO Vs Nitin Jayantilal Shah in ITA No 1988/Ahd/2009 Dated 06.05.2011 related to A.Y 2006-07 has held as udner:- 11. Above section clearly has two limbs provided in clause (a) and clause (b). Clause (a) can be invoked when fair market value of the property is more than the valuation done by the registered valuer. In the present case assessee has submitted a valuation report of the approved valuer who has determined the fair market value at Rs.26,24,269/-. According to the AO fair market value as on 1.4.81 is less and DVO has determined the same at Rs.15,78,000/- as on 1.4.81. Thus clearly estimate made by registered valuer is not less than the fair market value as adopted by AO on the basis of DVO's report. Under these circumstances, the AO cannot make any reference under clause (a) of section 55A.

ITA No.1119/Ahd/2024 Shri Motibhai Mangalbhai Padhiyar - 7 – circumstances. Our view is supported by the decision of Hon. Gujarat High Court in the case of Hiaben Jayantilal Shah vs. ITO & Anr. (2009) 310 ITR 31 (Guj). The head notes from that decision are as under :-

"Capital gains -Computation - Reference to Valuation Officer-Value estimated by Valuation Officer less than fair market value shown by assessee as on 1.4.81 -estimate by registered valuer -Reference under section 55A not valid -Reference to Valuation Officer can be made only after AO records opinion that value had been underestimated by assessee- Reference before filing of return by assessee- Not valid -Income-tax Act, 1961 s.55A."

Similar view was adopted by ITAT Mumbai Bench in Sajjankumar M. Harlalk vs. Jt. CIT (2006) 284 ITR (AT) 156.

In the case of Ms. Rubab M. Kazerani v. Jt. CIT [2004] 91 ITD 429 (MUM.) (TM) it is held that the reference to DVO cannot be done for determining value as on 1.4.81 if approved valuer's value was on higher side.

In Smt. Sarla N. Sakraney vs. ITO (2010) 10 taxmann.com 99 (Mum - ITAT) similar view was held. The head notes from this decision are as under:-

Asst. Year 2006-07 "Section 55A of the Income-tax Act, 1961- Capital gains - Reference to valuation officer - Assessment year 2006-07 - Assessee were co-owners of a property -They sold said property for a sale consideration of Rs. 4.05 crores In support of computation of capital gain, assessee had filed report of Government registered valuer valuing property as on 1-4-1981 at Rs. 27,29,600 - Assessing Officer, however, was of view that FMV of property as on 1-4-1981 adopted by assessee based on estimate by Government registered valuer was high and he, therefore, referred matter to valuation officer of Department (DVO) for determination of FMV as on 1-4-1981 - DVO estimate FMU of property as on 1-4-1981 at Rs. 18.41 lakhs - Assessee had raised objection to valuation of FMV as on 1-4-1981 as adopted by DVO - Assessing Officer was of opinion that valuation as given by DVO had to be accepted since it met with all objections raised by assessee with regard to valuation as done by DVO - Whether reference by Assessing Officer to DVO under section 55A for valuation of FMV of property as on 1-4-1981 was not valid for reasons that FMV declared by assessee as per Government registered valuer's report was more than FMV as estimated by DVO - Held, yes

ITA No.1119/Ahd/2024 Shri Motibhai Mangalbhai Padhiyar - 8 – Whether, therefore, estimation of FMV of property as on 1-4-1981 as made by assessee was to be accepted- Held, yes"

5.10 I find that the AO has relied on the Hon'ble Calcutta High Court in the case of Nirmal Kumar Ravindra Kumar-HUF Vs CIT reported in 70 Taxman.com 359 (Calcutta) and of Hon'ble Delhi High Court in the case of ACC Ltd Vs DVO reported in 21 taxman.com 488 (Delhi). However, in the case of the appellant, the decision of the jurisdictional Hon'ble Gujarat High Court in the case of Hiaben Jayantilal Shah vs. ITO & Anr. (2009) 310 ITR 31 (Guj) is binding and will apply and not the decision of the Hon'ble Kolkata or Delhi High Court even if they are favorable to the department. In the present case, appellant has submitted a valuation report of the approved valuer who has determined the fair market value at Rs. 350 per sq mtr. According to the AO fair market value as on 11.04.1981 is less and DVO has determined the same at Rs.53 per sq mtr as on 01.04.1981. Thus clearly estimate made by Registered Valuer is more than the fair market value as adopted by AO on the basis of DVO's report. Under these circumstances, the AO cannot make any reference under clause (a) of section 55A of the Act. Clause (b) can be invoked only when valuation report from Registered Valuer has not been filed. The opening phrase is clause (b) is 'in any other case if the AO is of the opinion'. In other words, a case which does not fall in clause (a) can only be considered under clause (b). Where a case falls under clause (a) i.e. the Registered Valuer has determined the value as on 01.04.1981 and which is not less than the fair market value of the property as on 01.0419.81, then sub-clause (b) cannot be invoked. In any case clause (b)(i) can be invoked only if FMV of the asset exceeds the value as claimed by the assessee by such percentage as may be prescribed.

5.11 Even otherwise on merits, the appellant submitted valuation report of the property as on 01/04/1981 taken from Shri P.K.Desai Ahmedabad Government approved valuer and he has valued the property at Rs. 350 per sq mtr. It is further seen that valuation cell, of the Income Tax Department, Vadodara, Valuation Officer, in valuation of the property as on 01/04/1981 for R.S No 618 Jambuva, Vadodara took the average rate Rs. 370 per sq mtr. The AO made the reference to the DVO to value the property as on 01/04/1981 u/s 55A of the Act and got the valuation report of the property at Rs. 53 per sq mtr. The previously DVO valued the property R.S No 618 of Jambuva Vadodara at Rs. 370/- per sq mtr as on 01/04/1981. The property R.S No 654 and 655 are situated at same area. Therefore, it is surprising as to how the DVO in the case of the appellant valued the property at Rs. 350 per sq mtr. which is miles apart from earlier valuation of the DVO. I find from perusal of the Valuation Report

ITA No.1119/Ahd/2024 Shri Motibhai Mangalbhai Padhiyar - 9 – that in the case of the appellant, the DVO has used comparables of the following location i.e 1. R.S.No 385, T.P Scheme No 19, F.P.No 345, Manjalpur, Vadodara. 2. R.S.No 424, Paiki-1, Majalpur, Vadodara 3. R.S.No 81, Plot No 3, F.P No 227, T.P.S No 18, Manjalpur, Vadodara. 5.12 A quick search on Google will reveal that the distance between Manjalpur and Jambuva is more than 8 kms. Therefore, the valuation was made basing on comparables at different locality and therefore is not a right valuation. Therefore, I find merit in the objection of the appellant of the DVO calculating long term capital gain value at Rs. 53 per sq mtr. 5.13 In view of the above facts and discussion and respectfully, following the decision of the jurisdictional Hon'ble Gujarat High Court in the case of Hiaben Jayantilal Shah vs. ITO & Anr. (2009) 310 ITR 31 (Guj)., I am of the considered view that the reference under section 55A of the Act by the AO to the DVO is not valid and therefore, the computation of long term capital gain of Rs 10,70,02,018 on the basis of such valuation is not sustainable and is directed to be deleted. The appeal on Ground Nos 1 to 3 is thus allowed. 5. We have heard both the parties. The solitary grievance of the Revenue in the present case, is against the findings of the Ld. CIT(A) holding that the D.V.O’s report could not be relied upon in the facts of the present case for estimating the fair market value of the property as on 01.04.1981.

ITA No.1119/Ahd/2024 Shri Motibhai Mangalbhai Padhiyar - 10 – (Supra) categorically holding so and also the decision of ITAT Ahmedabad Benches in the case of Nitin Jayantilal Shah (Supra) in this regard.

ITA No.1119/Ahd/2024 Shri Motibhai Mangalbhai Padhiyar - 11 – per sq meter. The Ld. CIT(A) therefore, we hold has rightly held that the valuation by the D.V.O. of the impugned land at a substantial low rate at Rs.53/- per square meter as compared to the valuation by D.V.O of similar land at Rs.370/- per sq meter was not justifiable.

Sd/- sd/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 13/07/2026 Mittali आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��यथ� / The Respondent. 2. संबं�धत आयकर आयु�त / Concerned CIT 3. आयकर आयु�त(अपील) / The CIT(A)- 4. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad