CHAND BEEBI,PALAKKAD vs. DCIT, CIRCLE INT.TAX, KOCHI, KOCHI

Brief facts of the case are that the appellant is a non-resident individual. No regular return of income for AY 2018-19 was filed. The DCIT (International Taxation), Kochi (hereinafter called "the AO"), based on the information that during the financial year 2017- 18 the appellant sold an immovable property for a consideration of Chand Beebi Rs. 1,03,70,000/- formed an opinion that income escaped assessment to tax. Accordingly notice u/s. 148 of the Income Tax Act, 1961 (the Act) was issued on 07.04.2022. In response to the notice u/s. 148 the appellant filed return of income belatedly on 25.07.2022 disclosing total income of Rs. 40,03,440/-. Against the said return of income, the assessment was completed by the AO u/s. 144C of the Act on 30.01.2024 proposing addition under the head ‘capital gains’ on sale of the said immovable property of Rs. 11,84,968/-. The addition under the head ‘capital gains’ arose on account adoption of fair market value of the property as on 01.04.2001 at Rs. 1,17,000/- per cent as against Rs. 10,00,000/- adopted by the appellant. On receipt of the draft assessment order the appellant filed objections before the DRP. The DRP had rejected the above objections by holding that the valuation report filed by the assessee is not from the District Valuation Officer (DVO). The AO passed the final assessment order on 06.11.2024 by making addition of Rs. 11,84,968/- under the head ‘capital gains’.

Being aggrieved, the appellant is in appeal before us in the present appeal.

The learned counsel for the assessee contended that the DRP ought not have upheld the action of the AO in adopting Rs. 1,70,000/- as fair market value of the property as on 04.01.2021 ignoring the fact that the appellant had incurred expenditure towards cost of registration and cost of construction of compound wall with Chand Beebi iron gate on front side and barbed wire fencing on the other three sides. It is further contended that the DRP ought not have rejected the valuation report of the registered valuer arbitrarily without making reference to the DVO.

On the other hand, the learned CIT. DR submits that no interference in the orders of the lower authorities is called for inasmuch as, the orders passed by them are reasoned orders.

We have heard rival contentions and perused the material available on record. The only issue that arises for our consideration is adoption of correct fair market value of the immovable property sold as on 01.04,2001. The appellant claimed the fair market value of the property as on 01.04.2001 at Rs. 10,00,000/-. Admittedly, no basis for adoption of such value was given before the AO. During the course of proceedings before the DRP, the appellant had filed valuation report given by registered valuer, the same came to be rejected by the DRP on the ground that the valuation report was not furnished by the DVO. We are of the considered opinion that the DRP ought not have rejected the valuation report given by the registered valuer without referring the same to the DVO or pointing out the defect, in the valuation report furnished by the registered valuer. Therefore, we are of the considered opinion that the interests of justice would be met, if the matter is restored to the file of the AO for de novo adjudication of the issue in accordance with law after affording reasonable opportunity of hearing to the appellant.