NIKHIL PRATAP MOKASHI,PUNE vs. INCOME TAX OFFICER, WARD 3(3) PUNE, PUNE

Brief facts of the case are that the assessee is an individual and filed the return of income for A.Y. 2020-21 on 15.10.2020 declaring income of Rs.2,68,410/-. Case selected for Limited Scrutiny to examine the issue namely; sale consideration of property shown in income tax return is less than the value as per Stamp Valuing authority (as per return) (Business ITR). Ld. Assessing Officer observed that during the year assessee entered into an Agreement to sale of immovable property on 10.06.2019 and has shown the taxable capital gain at Rs.16,65,486/- and total sale consideration is shown at Rs.65,00,000/-. Ld. Assessing Officer noted that the stamp duty value of the said property is Rs.1,66,12,500/-. When the assessee was confronted with this fact, it was firstly submitted that the share of the assessee in this property is 50%; secondly the Divisional Valuation Officer (DVO) has valued assessee’s share at Rs.88,59,300/-. Accordingly, the difference between the valuation of DVO at Rs.88,59,300/- and sale consideration declared by the assessee at Rs.65,00,000/- amounted to Rs.23,59,300/- and 50% of the same being assessee’s share comes to Rs.11,79,650/- has been added by the Assessing Officer to the income declared by the assessee. It has been contended by the assessee during the course of assessment proceedings that the immovable property sold by the assessee was falling within the area of 500 yards from the outer parapet wall of High Energy Material Research Laboratory (in short ‘HEMRL’), Ministry of Defence, Government of India and there were various restrictions on the development in such notified area and no construction activity was allowed. Due to this reason the Fair Market Value of the property is 50% of the general market rate of the plot situated 500 yards from HEMRL. However, ld. Assessing Officer was not satisfied with the submissions and assessed income at Rs.14,48,060/-.

Aggrieved assessee preferred appeal before ld.CIT(A) and appeared before ld.CIT(A) and stated that DVO failed to provide reasonable opportunity of hearing and that the location of the assessee’s property within the vicinity of 500 yards from HERML has not been considered by the DVO as a result of which higher valuation has been made. However, ld.CIT(A) was not satisfied because the appellant could not furnish any communication addressed to the DVO seeking time to submit the evidence for explanation. Accordingly, the appeal of the assessee was dismissed. Now the assessee is in appeal before this Tribunal.

Ld. Counsel for the assessee reiterated the submissions filed before the lower authorities and also made reference to the paper book containing 119 pages which apart from the submissions filed before the lower authorities, copy of DVO’s report, also contains the valuation report by the Government Registered Valuer, copies of Index II of the properties sold in the same society by other sellers, copy of Notification issued by Ministry of Defence, copy of Unified Development Control and Promotion Regulations for Maharashtra and letter from Pune Municipal Corporation for removal of construction. He concluded his arguments stating that Government Registered Value has taken into consideration all the aspects giving rise to the lower market value of the immovable property and has valued it at Rs.47,06,875/- which is lower than the sale consideration declared by the assessee in the income tax return and therefore the impugned addition deserves to be deleted.

On the other hand, ld. DR supported the order of ld.CIT(A).

I have heard the rival contentions and perused the record placed me. The only issue for my consideration is that whether ld.CIT(A) erred in confirming the action of the Assessing Officer making addition for capital gain at Rs.11,79,650/- made on account of difference in the value of the immovable property sold by the assessee computed by DVO at Rs.88,59,300/- and the total sale consideration at Rs.65,00,000/- declared by the assessee in the income tax return. Admittedly, share of assessee is only 50%. I note that the controversy only relates to the valuation of immovable property. Assessee has been contending since the assessment proceedings that the immovable property in question is situated near the High Explosive Research Laboratory and is within 500 yards from its boundaries and which has been declared as ‘No Development Zone’ and therefore no construction activity is possible on the said plot and therefore the plot was not marketable at par with other properties situated in the said urban area. Divisional Valuation Officer has himself made observations namely; that the property is accessible through Motorable Kachha road (means no proper access through a Tar Road). It is situated in Agricultural and ‘No Development Zone’ plot is situated in Hill Top Hill Slop (HTHS) Zone as well as Red Zone earmarked for Armed Forces, Government of India. High Energy Material Research Laboratory issued notice to the society for ‘no construction activity’ as land is situated at Hill Top. Even though the DVO has valued the property at less than the valuation adopted by the stamp value authority however, DVO has not considered the fact that similar type of properties in the same society have been sold at much lower rate. There were various other reasons which also decrease the market value of the property.

I further note that the assessee has furnished the copy of valuation report by Government Registered Valuer placed at pages 73 to 100 of the paper book where the property is valued at Rs.47,06,875/- and the Government Valuer has taken into consideration all the points including the location of the property within 500 yards from HERML and also the notice issued by High Energy Material Research Laboratory and Pune Municipal Corporation for removal of construction for various other plot holders, geographical disadvantages, non availability of public and civil utilities for arriving at the Fair Market Value at Rs.47,06,875/-. I have gone through the report of the Government Registered Valuer and also gone through the other documents filed in the paper book and of the considered view that considering the constraints which have collectively devalued the immovable property in question, I find that the Government Registered Valuer has arrived at the correct Fair Market Value on consideration of various reasons mentioned by the assessee at various stages. Further, since the value adopted by the Government Registered Valuer at Rs.47,06,875/- is less than the sale consideration declared by the assessee at Rs.65,00,000/-, therefore, there is no requirement for invocation of section 50C of the Act and thus the capital gain declared by the assessee in the income tax return deserves to be accepted. Finding of ld.CIT(A) is set aside. Impugned addition of RS.11,79,650/- is deleted. Grounds of appeal raised by the assessee on merits are allowed.

In the result, the appeal of the assessee is allowed.

The Pr. CIT concerned. विभ गीय प्रतितनधि, आयकर अपीलीय अधिकरण, “SMC” बेंच, 4. पुणे / DR, ITAT, “SMC” Bench, Pune. ग र्ड फ़ इल / Guard File. 5. आिेश नुस र / BY ORDER,