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Income Tax Appellate Tribunal, DELHI ‘A’ BENCH,
Before: SHRI N.K. BILLAIYA, & SHRI LALIET KUMAR
PER N.K. BILLAIYA, ACCOUNTANT MEMBER,
1. This appeal by the assessee is preferred against the order of the Ld. CIT(A)-32, dated 18/01/2016, pertaining to Assessment Year 2010-11.
2. The solitary grievance of the assessee is that the Ld. CIT(A) erred in confirming additions made by the Assessing Officer adopting Fair Market Value of property at Rs.1,74,88,480/-as against sale consideration of Rs.1,51,20,000/-by invoking provisions of section 50C of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The brief, facts of the case are that the assessee filed return of income on 31/07/2010, declaring total income at Rs.75,75,430/-. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee.
4. The Assessing Officer noticed that the assessee has shown Long Term Capital Gain. On perusal of the details, the Assessing Officer found that the assessee has sold a property for an amount of Rs.1,51,20,000/- while the circle rate of the same property is Rs.1,74,48,480/-. The Assessing Officer was of the firm belief that the provisions of section 50C of the Act are clearly attracted.
5. The assessee was asked to explain why the sale consideration should not be taken as per section 50C of the Act. In its reply, the assessee stated that the it is provided in section 50C itself that in case the assessee claims before the Assessing Officer that the value adopted or assessed exceeds the fair market value as on the date of transfer, the Assessing Officer may refer the matter to a valuation officer. In support of his claim, the assessee filed valuation report by registered valuer valuing the property at Rs.1.22 crores. The assessee pointed out that the registered valuer has considered certain drawback in the property.
6. After considering the reply of the assessee, The Assessing Officer referred the matter to the DVO for determination of fair market value of the property. The DVO furnished his report and valued the said property at Rs.1,79,74,182/-.
The Assessing Officer confronted the valuation report of the DVO to the assessee and asked him to explain why the sale consideration should not be taken as per valuation report.
The assessee filed detailed reply and the same read as under:-
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That the valuation report determining the value of property at Rs.1,79,74,182/- is highly erroneous and should not be relied upon for the purposes of Capital Gain u/s 50C of the Income Tax Act, 1961 and instead the sale consideration of Rs.1,51,20,000/- received and declared by the assessee in the return of income should not be disturbed.
The method of valuation adopted by the ova is not justified as he has taken the comparable case of a property which was sold in December 2006 and that too of a commercial plot at Narela, New Delhi whereas the assessee has sold the residential plot at Village Hamidpur, New Delhi in May 2009. Thus, the location, type of property, size of plot as well as time period of sale are entirely. different and the sale instance relied by the OVO is erroneous. 3 No opportunity has been allowed by the ova for submitting the objections on the draft valuation report: In fact no draft valuation report has been provided by the DVO during the valuation proceedings far furnishing the objections. The legal procedure has no: been followed by the DVO as required under the Act.
The DVO has allowed deduction @ 15% on account of location and situation, whereas as per registered valuer report dated 07.12.2012, relied on by the assessee, the same should have been 30% on account of cremation ground adjacent to the plot and high tension wire over the -land DS well as no direct access/approach road to the plot.
The scheme of s. 50C can be summarised as follows: The normal rule thus is that where stamp duty valuation is higher than the stated consideration on transfer, the same is to be adopted for the purposes of computing capital gains. The exception is that in case the assessee can demonstrate that the fair market valuation is less than the stamp duty valuation, the fair market value is to be adopted. The safeguard is that assessee's challenge to the stamp duty valuation before the tax authorities cannot put the assessee to any disadvantage. In effect thus, when stamp duty valuation of a property is higher than stated value of sale consideration, only the onus to prove the fair market: value has shifted to the assessee. As long as assessee can reasonably discharge this onus, even under the scheme of s. 50C, the consideration stated by the assessee cannot be disturbed.
Further it is submitted that the circle rates adopt uniform rate of land for an entire locality, which inherently disregards peculiar features of a particular property. Even in a particular area, on account of location factors and possibilities of commercial use, there can be wide variations in the prices of land. However,
circle rates disregard all these factors and adopt a uniform rate for all properties in that particular area. 7. As demonstrated above the Fair Market Value of the property as on date of sale was less than the sale consideration of Rs.1,51,20,000/- as declared by the assessee. It is therefore requested that the capital gain as worked out and declared by the assessee in the return of income be accepted for the purposes of assessment.”
The reply of the assessee did not find any favour of the AO, who proceeded by adopting circle rate as the full value of consideration and added the difference of Rs.23,28,480/- and after recomputed the deduction u/s 54F of the Act and disallowed Rs.66,602/-.
The assessee carried the matter before the Ld. CIT(A) but without any success.
Before us, the Ld. counsel for the assessee drew our attention to the valuation report of the registered valuer and explained that the major drawback in the said property which have not been considered by the DVO but has been considered by the registered valuer go to the root of the matter. It is the say of the counsel that though the valuation report is binding on the Assessing Officer but the same is not binding on the appellate authorities.
Per contra, the Ld. DR strongly supported the findings of the Assessing Officer and reiterated that the valuation report is binding and provisions of section 50C of the Act are mandatory and hence there is no error in the findings of the Assessing Officer.
We have given thoughtful consideration to the orders of the authorities below. It is true that the assessee has shown the sale consideration at Rs.1.51 crores whereas stamp duty value of the said property is Rs.1.74 crores. It is an admitted fact that value of property vis-à-vis the fair market value depends upon many factors which have to be considered while determining the full value of the sale consideration. No doubt, provision of section 50C of the Act clearly mandates that the full value on sale consideration shall be stamp duty value if the actual sale consideration is less than the stamp duty value.
The peculiar fact of the case is that the adjacent land of the said property is a cremation ground. Across the said property high tension electrical line of 66 KVA is passing through. These two factors have not at all been considered by the DVO in his valuation report and these two factors, in our understanding, would reduce the fair market value to a considerable extent. Being a residential plot, no person would buy the said plot at its prevailing market value when the adjacent plot is a cremation ground. Moreover, if a high tension electrical line is passing through the plot, it would not be safe to construct a multi storey building.
We have carefully perused the valuation report of the DVO, in our considered opinion, the said report cannot be accepted for the following reasons:-
i. The DVO has based his valuation on sale instances taking a plot constituted at Narela Industrial Area, which was auctioned in 2006. Firstly, the property sold by the assessee is situated in Hamidpur and it was sold during Financial year 2009- 10, whereas, the DVO has taken the auction value of FY 2006-07 and that too of a plot which is situated far away from the impugned property. ii. The sale instance considered by the DVO is in respect of commercial property whereas the impugned property is a residential property. The DVO has made adjustment of time gap from 07/12/2006 to 05/05/2009, but we failed to understand what prevented the DVO to consider the sale instance at Hamidpur during the relevant point of time. iii. While making downward adjustment for the type of plot, category of plot, the DVO has made an upward adjustment considering the size of plot @ 25%.
Considering all these factors, we are of the view that valuation report of the DVO cannot be considered as the basis for determining the fair market value.
Coming to the valuation report of the registered valuer, it can be seen that registered valuer himself has determined the fair market value at Rs.1.74 crores but made adjustment which read as under:-
Considering the ultimate fair market value determined by the registered valuer at Rs.1.22 crores, we find that the sale consideration shown by the assessee is for Rs.1.51 cores. Though the mandate of section 50C is the law but then the law has to be applied on the facts of each case judiciously and considering the peculiar facts of the property as discussed hereinabove, we are of the considered view that the sale consideration shown by the assessee should be taken as full value of sale consideration for the determination of the capital gains liability of the assessee. We accordingly, direct the Assessing Officer to take Rs.1,51,20,000/- as the full value of sale consideration.
In the result, appeal filed by the assessee is allowed.
The order is pronounced in the open court on 25/07/2019