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Facts
The assessee sold a property during the Assessment Year 2018-19. The case was reopened under Section 147 as the original return was not filed. The fair market value of the property as on 01.04.2001 was determined based on a valuation report, which was accepted by the Assessing Officer.
Held
The Tribunal held that the Assessing Officer had not conducted adequate inquiries regarding the valuation report submitted by the assessee. The valuation report lacked basis and specific comparable instances, making the order of the Assessing Officer erroneous and prejudicial to the revenue.
Key Issues
Whether the Assessing Officer's acceptance of the property's fair market value based on a non-specific valuation report, without further inquiry, made the assessment order erroneous and prejudicial to the revenue under Section 263.
Sections Cited
147, 148, 144, 263, 142(1), 54B, 144B
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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH, AHMEDABAD
Before: SHRI SIDDHARTHA NAUTIYAL & SHRI NARENDRA PRASAD SINHA
O R D E R PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:
This appeal is filed by the assessee against the order of Principal Commissioner of Income Tax, Ahmedabad-3 (in short “the PCIT”) dated 29.03.2025 passed in the revisional jurisdiction under Section 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), for the Assessment Year (A.Y.) 2018-19.
(Assessment Year: 2018-19) Nitabahen Dineshbhai Bharwad vs DCIT Page 2 of 10 2. The brief facts of the case are that the assessee did not file return of income for the A.Y. 2018-19. The case was reopened under Section 147 of the Act on the basis of information that the assessee had sold a property during the year as a co-owner for a total consideration of Rs.3,70,00,000/-. In response to the notice under Section 148 of the Act, the assessee had filed return which was not verified and hence the return was treated as invalid. In the course of assessment, it transpired that the assessee was 1/8th owner of the property sold, which was purchased by her father in 1986 for a consideration of Rs.30,000/-. The value of the said property as on 01.04.2001 was worked out by applying rate of Rs.526/- per sq. mtr. which was accepted by the Assessing Officer. The assessee had also claimed exemption of Rs.3,03,940/- u/s 54B of the Act which, however, was disallowed by the AO. The assessment was completed u/s 147 r.w.s. 144 of the Act on 27.02.2023 at total income of Rs.4,53,940/-. Subsequently, the case record was called for examination by the Ld. PCIT. He found that the fair market value of the property as on 01.04.2001 was wrongly worked out by applying rate of Rs.526/- per sq. mtr. He found that the jantri rate of the land was revised in the year 2006, as per which the rate of land was Rs.220/- per sq. mtr. whereas the assessee had valued the property as on 01.02.2001 by applying rate of Rs.526/- per sq. mtr. In view of this fact, the Ld. PCIT held that the order of the Assessing Officer was erroneous and prejudicial to the interest of revenue. Accordingly, he passed the impugned order setting aside the assessment order with direction to pass fresh order after correctly ascertaining the fair market value (FMV) of the property as on 01.04.2001.
(Assessment Year: 2018-19) Nitabahen Dineshbhai Bharwad vs DCIT Page 3 of 10 3. Aggrieved with the order of the Ld. PCIT, the assessee is in appeal before us. The following grounds have been taken in this appeal: -
1. That the Ld. Principal Commissioner of Income Tax-3, Ahmedabad has erred in law and on facts while passing the order u/s.263 of the Income Tax Act, 1961 dated 29.03.2025 and hence it requires to be quashed.
That the Ld. Principal Commissioner of Income Tax-3, Ahmedabad has erred in law and on facts while initiating the proceedings u/s.263 of the I.T. Act, 1961 on the basis of wrong reasons which amounts to change the opinion and therefore, the proceeding itself is bad in law, illegal and void.
That the order passed by ITO, NFAC Delhi u/s.147 r.w.s. 144B of the Income Tax Act, 1961 dated 27.02.2023 after considering all the submissions and inquiry made by him, therefore the order passed was neither erroneous nor prejudicial to the interest of revenue, however Ld. PCIT-3, Ahmedabad has initiated proceedings u/s. 263 of the Income Tax Act, 1961 is against facts on record and requires to be quashed.
4. Your appellant craves leave to add, alter, amend or drop any of the grounds till the appeal is finally heard and disposed of.”
Shri Jaimin Shah, Ld. AR of the assessee, submitted that the issue of cost of acquisition and the fair market value of the property as on 01.04.2001 was duly examined by the Assessing Officer in the course of assessment proceeding and the FMV of the land was accepted by the Assessing Officer after due application of mind. He submitted that the assessee had filed a valuation report from a Registered Valuer, which was duly considered and taken into account by the Assessing Officer while accepting the valuation as adopted by the assessee as on 01.04.2001. Under the circumstances, it was not open for the PCIT to impose his own views on the valuation report of the Registered Valuer. He submitted that the order of the Assessing Officer was neither erroneous nor prejudicial to the interest of revenue. The Ld. AR also relied upon the decision of Co- (Assessment Year: 2018-19) Nitabahen Dineshbhai Bharwad vs DCIT Page 4 of 10 ordinate Bench of this Tribunal in the case of Sejalben Patel, 2025 ITL 3815 in dated 28.07.2025 and also on the decision of Co-ordinate Bench of Delhi Tribunal in the case of Jitindar Singh Chadha vs PCIT - dated 31.12.2018.
Per contra, Shri R.P. Rastogi, Ld. CIT DR supported the impugned order of the Ld. PCIT. He submitted that in the course of assessment, the Assessing Officer did not examine the basis of FMV of the property as adopted by the Registered Valuer. He submitted that the Registered Valuer did not give any basis for adopting the value of the property at Rs.526/-per sq. mtr. and the Assessing Officer had accepted the same without application of mind. He submitted that when the jantri value of the property revised in the year 2006 was Rs.220/- per sq. mtr. only, there was no basis to adopt the land value at the rate of Rs.526/- per sq. mtr. in the year 2001. The Ld. CIT-DR submitted that the order of the Assessing Officer was thus not only erroneous and also prejudicial to the interest of the revenue. He, therefore, strongly supported the order of the Ld. PCIT.
We have carefully considered the rival submissions. The contention of the assessee is that the matter was duly examined by the Assessing Officer in the course of assessment and the valuation of the land as on 01.04.2001, as disclosed by the assessee, was accepted after due application of mind. The assessee has brought on record copy of the queries made by the AO in the course of assessment as well as the reply filed thereto. It is found that the Assessing Officer had made a query to “Provide details of movable/immovable properties purchased and sold by you during the year.” vide notice under Section 142(1) dated 09.11.2022. The assessee, vide letter dated 16.11.2022, had given the following reply in this regard: -
“ 7. With respect to the sale of immovable properly during the year under consideration, I am submitting the specified details as mentioned below i) Asset transferred during the year under consideration was an agricultural land situated in urban area which was received by me in inheritance. ii) I have already enclosed the copy of Computation of Total Income stating a detailed computation of capital gain from transfer of such assets during the year under consideration for your reference. I want to clarify that I had sold property during the year under consideration which was held jointly by 8 family members for total consideration of Rs.3,70,00,000/- out of which I am owning 1/8th share and therefore I have received consideration of Rs.46,25,000/- (Rs.3,70,00,000/8). Hence, I had filed my return of income stating sale consideration of Rs.46,25,000/- by claiming indexed cost of acquisition at Rs.43,21,060/-, iii) I am enclosing the copy of registered sales deed of assets transferred during the year for your kind consideration. iv) Value of the property for stamp duty purpose on the date of agreement was fixed to Rs.3,70,00,000/- (Rupees Three Crore Seventy Lac Only). v) We have orally agreed upon the sales consideration as mentioned in the sales deed and we have not done any written agreement fixing the consideration before the date of registration. vi) Value of consideration for assets transferred during the year under consideration was received through bank mode only. Further, the date wise details along with the amount received and name of bank of whom cheque was received along with the branch name and cheque number is already mentioned in the sale deed of the assets transferred during the year under consideration. vii) Value of property for the stamp duty purpose is Rs.3,70,00,000/- as already seen in the sale deed enclosed herewith. We have sold the property for a consideration of Rs.3,70,00,000/- and purchaser of the property had paid stamp duty on Rs.3,70,00,000/- @ 4.90% i.e., Rs.18,13,000/-. Thus, the value of property for stamp duty purpose and sales consideration received for the property sold by us during the year under consideration is same i.e. Rs.3,70,00,000/- (Rupees Three Crore Seventy Lakh Only). viii) The details of TDS deducted is as mentioned below below: Sr. No. Name of Deductor PAN of Total Transaction Date of Date of TDS Transaction Deductor Date Deposit Deduction Amount Amount 1 BHARATIBEN AKIPP7511P 1734375 24/08/2017 29/09/2017 24/08/2017 17344 NIRAVBHAI PATEL 2 GANDABHAI ACHPP0839M 578125 24/08/2017 01/09/2017 24/08/2017 5781 DALABHAI PATEL 3 VIPULBHAI AMLPS1952L 1156250 24/08/2017 03/10/2017 24/08/2017 11563 MANUBHAI SHELADIYA 4 CHATURBHAI AAXPP3089K 1156250 24/08/2017 13/10/2017 24/08/2017 11563 RAMJIBHAI PATEL Grand Total 4625000 46251 6.1 The assessee had claimed proportionate indexed cost of acquisition at Rs.43,21,020/- which was on the basis of valuation report dated 18.04.2022 of Government Registered Valuer Shri K.S. Patel. A copy of the said valuation report has been brought on record in the paper-book filed by the assessee. It is found that at Sl. No.27 of the said report, the Registered Valuer had observed that “No any property/comparable sale instance was available so not attached herewith”. Further at sl. No. 29 of the report, the Registered Valuer had valued the land by applying the land rate of Rs.526/- per sq. mtr. which was considered as prevailing market rate as on 01.04.2001. The basis of this valuation was explained by the Registered Valuer as under: -
“LAND VALUE: Since the land comparable sale instances for the year 2000-01-02 were not available in sub registrar office at Daskroi/Ahmedabad being old records. Proper sale of this Geratnagar areas were not available. All efforts are made to collect sale of the nearby vicinity area then only option remain that to collect land rates by market enquiry from old villages persons that the prevailed market rates as on 01/04/2001. (1) By considering an overall trend of the sales instances executed preceding from the date of valuation i.e. 01/04/2001.
(2) By making local inquiry and inquiries to the concerned Govt. Departments and Khatedars of the village etc. (3) Development and N.A. activities taken place around the lands. Considering the above factors and enquiry from market, It was recollected by personal enquiry that the land rate was varies from Rs. Ten Lakhs to Fifteen Lakhs per vigha (at that time land are sold on basis of vigha i.e. 2378 sq.mtr. per vigha) accordingly the land rate adopted in this P.U.C. was Rs.12,50,000/- per vigha = Rs.12,50,000/- 2378 Sq. mtr. = Rs.525.65 considering comparable sale instances method (market approach method) considering the situation and location of the property, development of surrounding area shape & size of the land, future, potentiality, demand of such type of land & prevailing market rate of the land in vicinity. I evaluate the land rate at Rs.526/- per sq.mt. on valuation date: 01/04/2001. Rev. Block/Sur. No.: 158, (Old Block/Sur. No.: 60) F.P.No.35, T.P.S. 116, Mouje: Geratnagar
Land area x Rate, per Sq. mt. = 24162 x Rs.526/- = Rs.1,27,09,212/- Say = Rs.1,27,09,000/- SUMMARY Rev. Block/Sur. No.: 158,(Old Block/Sur. No.: 60) F.P. No.35, T.P.S. 116, Mouje: Geratnagar Value of Land as on 01/04/2001 = Rs.1,27,09,000/-”[Emphasis supplied] The contention of the assessee is that the Assessing Officer had accepted the above valuation report of the Registered Valuer after due application of mind.
6.2 As per Explanation-2 of Section 263 of the Act, the order passed by the Assessing Officer shall be deemed to be erroneous and prejudicial to the interest of revenue if the order is passed without making enquiries or verification which should have been made. In the present case, the Assessing Officer had made enquiry about the cost of acquisition of the land sold and the assessee had filed a copy of valuation report in support of the FMV of the property as on 01.04.2021. The moot question to be (Assessment Year: 2018-19) Nitabahen Dineshbhai Bharwad vs DCIT Page 8 of 10 considered here is whether the FMV of the property as on 01.04.2021 as determined by the Registered Valuer was conclusive and could have been accepted or whether any further enquiry was required to made by the Assessing Officer in this respect.
6.3 It is found from the report of the Registered Valuer that no comparable sale instances were adopted to determine the FMV of the property as on 01.04.2001. The Registered valuer had stated that overall trend of sale instances preceding the date of valuation was considered by him. But not even a single sale instance prior to valuation date was brought on record and considered in his report. Further, the Registered Valuer had mentioned that personal enquiries were made to find out the land rate and on enquiry he had found the value of the land to be varying from Rs.10 Lakhs to Rs.15 Lakhs per vigha. However, no specific instance of any such enquiry for the land sold at a rate of Rs.10 Lakhs to Rs.15 Lakhs per vigha was given in the report. It was also not disclosed in the report as to from whom the local enquiry was made by the Valuer. In the absence of any such specific details and any specific instance of sale being considered in the valuation report, the value of Rs.526/- per sq. mtr. adopted by the Registered Valuer was without any basis. Considering the nature of report as submitted by the Registered Valuer; the Assessing Officer should have enquired about the specific sale instance or details of the local enquiries on the basis of which the value was adopted by the Registered Valuer at Rs.526 per sq. mt. Further, in the absence of any specific sale instance to arrive at the value of the property at the rate of Rs.526/- per sq. mtr. as on 01.04.2021, the Assessing Officer could have referred the matter to the DVO to find out the FMV of the property as on 01.04.2021. It is thus found that the assessment was completed by the (Assessment Year: 2018-19) Nitabahen Dineshbhai Bharwad vs DCIT Page 9 of 10 Assessing Officer without making enquiries or verifications which was required to be made, considering the bland nature of the valuation report of the Registered Valuer which was without any basis. Therefore, the assessment order was rightly held as erroneous and prejudicial to the interest of revenue by the Ld. PCIT, as the AO had failed to make enquiries or verifications in the matter, which was required to be made considering the nature of the valuation report filed by the assessee.
6.4 The Ld. PCIT has also given a finding that the jantri rate of the land was revised in 2006 at Rs.220/- per sq. mtr. only. Considering this fact, the valuation of the property as on 01.04.2001 at the rate of Rs.546/-per sq. mtr. without any comparable instance of sale, was excessive and the report of the Valuer was not reliable. The Assessing Officer had failed to consider this aspect while completing the assessment. Therefore, the Ld. PCIT had rightly held that the order of the Assessing Officer was not only erroneous but also prejudicial to the interest of the revenue.
6.5 The assessee has relied upon the decision of Co-ordinate Bench of this Tribunal in the case of Sejalben Patel (supra). It is found that the facts involved in that case were totally different. The Ld. PCIT had invoked the revisional jurisdiction u/s 263 of the Act in that case for the reason that though the Assessing Officer had referred the matter to the DVO to find the FMV of the property as on 01.04.2001, the final assessment order did not contain any discussion for reference to the said DVO report. The Tribunal had given a finding that the reference to the DVO was made after the completion of assessment. Thus the facts of that case are found to be different. In the case of Jitindar Singh Chadha (supra), the Ld. PCIT had invoked jurisdiction under Section 263 of the Act on the basis of DVO report for the subsequent year. Thus, the facts involved in that case is (Assessment Year: 2018-19) Nitabahen Dineshbhai Bharwad vs DCIT Page 10 of 10 also found to be different. Therefore, the ratio of the decisions relied upon by the assessee cannot be applied to the facts of the present case.
6.6 As already discussed earlier, the assessment order in the present case was completed by the Assessing Officer without making enquiries or verification which was required to be made vis-à-vis the valuation report of the Registered Valuer filed by the assessee. Therefore, the Ld. PCIT had rightly held that the order of the Assessing Officer was erroneous and prejudicial to the interest of the revenue. Accordingly, the order of the Ld. PCIT is upheld.
In the result, the appeal of the assessee is dismissed.
Order pronounced in the open Court on this 17th November, 2025.