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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SMT.ANNAPURNA GUPTA & SMT.SUCHITRA KAMBLE
O R D E R
PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER Present appeal has been filed by the assessee against order passed by the ld. Commissioner of Income-Tax(Appeals), Gandhinagar [hereinafter referred to as “Ld.CIT(A)”] under section 250(6) of the Income Tax Act, 1961 ("the Act" for short) dated 14.08.2019 pertaining to the Asst.Year 2011-12.
At the outset, it was stated that the issue in the present appeal related to determination of fair market value of the cost of asset sold by the assessee as on 1.4.1981 for the purpose of determining the cost of acquisition thereof for computing the capital gain earned on sale of land. The ld.counsel for the assessee stated that several grounds had been raised by the assessee in his appeal, but before us arguments vis-à-vis only ground no.5 were being made.
The effective grounds raised by the assessee before us are ground no.2 to 5, which read as under:
“2. The ld.CIT(A) has erred in law and on facts in uphelding the validity of reopening of the assessment, though reasons recorded as vague.
3. The ld.CIT(A) has erred in law and on facts in considering value of land as on 1.4.1981 as per information received from SRO office as the fair market value of land ignoring value as per valuation report of government approved value.
The ld.CIT(A) has erred in law and on facts in upholding addition made by Ld.AO in taking share of land in jointly held property at 1/4th instead of actual share of assessee in property of 1/5th.
The ld.CIT(A) has erred in law and on facts in not admitting the value of land as per Government approved valuer for determination of FMV as on 1.4.1918 u/s.55A of the Act as on 1.4.1981 u/s.55A of the Act and thus made addition of Rs.33,75,025/-.
In view of the above, other ground nos.2, 3 and 4 are dismissed as not pressed.
4. Vis-à-vis ground no.5, the facts of the case are that the assessee had sold an immovable property along with other co- owners for value of Rs.1,40,00,000/- during the impugned year. This property was non-agricultural land situated at village Zundal having survey no.264/2 admeasuring 7335 sq.meters. Property was originally acquired/purchased in 1933 by Shri Chakubhai Mulji and forefathers of the assessee on 5.6.1950 through registered sale deed No.2341 of 1950. The assessee received his shares in the said land through inheritance as a straight line legal heir of his late father. The assessee’ share in the total land was taken at 1/4th by the AO which was subsequently rectified to 1/5th of which is not in dispute before us. The sale consideration accordingly was allocated to his portion of the land and for the purpose of determining cost of 3 acquisition of the land fair market value of the land as on 1.4.1981 was required to be considered as per law. The assessee had determined the same at Rs.19,07,000/- on the basis of valuation report of registered valuer who had valued it at Rs.260/- per sq.meter. The AO rejected this valuation noting that the valuer had not quoted any comparable instance ,simply stating that instances were not available. The AO further called for details of comparable instance from the SRO, Gandhinagar ,and quoted one sale instance wherein the rate of the land was recorded at Rs.2.35 per sq.meter. He took the said rate for the purpose of determining the cost of acquisition of the land which accordingly worked out to Rs.17,311/-. The cost of acquisition after indexation was taken at Rs.1,47,490/- The ld.CIT(A) however examined the act of the AO, in determining the cost of acquisition of the land as on 01-04-1981, as per the provisions of section 55A, 142A as inserted in the statute on 1.7.2010 and the substituted provision of section 142A made effective on Asst.Year 2015-16 by Finance (No.2) of 2014 and examining it from the perspective of these provisions under the statue, he held that the AO could not have taken assistance of section 55A for the purpose of arriving at his own value nor could the provision of section 142A, inserted in the statute w.e.f. 17.2010, have been resorted to. With respect to new inserted section 142A w.e.f. Asst.Year 2015-16, the ld.CIT(A) held that the AO ought to have resorted to the said section, but further noted that the said section required the AO to refer the matter to the DVO if he is not satisfied with the valuation of the assessee and noting no such reference being made by the AO, he rejected the valuation of the AO. Thereafter, he resorted to his own calculation of the value of the land on the basis of the facts before him and noted that the land at Zundal village, which was sold by the assessee ,was basically in an under-developed area and the valuer had made local inquiries and determined the rate at Rs.5 to Rs.7 lakhs per bigha, and accordingly he noted the valuation adopting rate of Rs.260/- per sq.meter as on 1.4.1981. The Ld.CIT(A) noted that there was no authentic record with the registered valuer as compared to the sale instance made available to the AO by the SRO, Gandhinagar which quoted the rate of Rs.2.36 per sq.meter, but he noted that there was vast difference in the rate quoted by the registered valuer and by the AO. He thereafter took the rate considered by the Land Acquisition Court as per the order in the year 31.1.2000 at Rs.85/- per sq.meter and applied reverse cost inflation index to the base year 1981-82 and he worked out the rate of Rs.21.85 per sq.meter. The ld.CIT(A) held that cost of the land in any case could not be assessed at less than Rs.25/- per sq.meter and accordingly rejected the valuation of the AO and assessee also, and applying this rate, he worked out the cost of acquisition at Rs.1,83,375/- and the indexed cost thereto at Rs.13,03,796/- as opposed to Rs.1,47,490/- taken by the AO. Thus, while the assessee had applied rate of Rs.260/- per sq.meter, the AO had valued at Rs.2.36 per sq.meter while the ld.CIT(A) applied rate of Rs.25/- per sq.meter.
5. The relevant findings of the Ld.CIT(A) at para 4.4 of his order is as under: “4.4 I have appraised all the facts afresh with reference to various documents made available during the course of appellate proceedings. It is noticed that the appellant was co-owner of the land situated at village Zundal admeasuring 7335 sq, mtrs, of non-agricultural land along with his four brothers viz, Svs Lalabhai B. Patel, Manibhai B, Patel, Kantibhai B.Patel, Babubhai B. Patei, The land was originally acquired in the year 1933 by one Shri Chakubhai Mulji and the forefathers of the appellant have purchased this tend on 05,06,1950 through registered sate deed No,2341 of 1950. The appellant has received his share in the said land through inheritance as a straight line legal heir of his late father. The appellant has received the amount of Rs.28,00,000/- being his 1/5th share in the said land. However, the A.O. has considered the appellant's share at 1/4th h by adopting the proportionate long term capital gain at Rs.34,63,128/- instead of Rs.27,70,502/-. The appellant has also raised this issue through ground no,6 of the appeal which has been withdrawn for the reason that the appellant has carried out necessary rectification in this regard. However, the core issue to be decided is as to whether the A.O. can exercise his powers to determine the lesser cost of acquisition as on 01.04.1981 in respect of the comparable sate instance as made available by the SRO, Gandhinagar. He has resorted to the provisions of section 55A of the Act which read as under-Section 55A of the Act:- .
Before us, the ld.counsel for the assessee has challenged this valuation by the ld.CIT(A) and for this purpose, has relied on the decision of Co-ordinate Bench of the ITAT in the case of ITO Vs. Gautambhai Babarbhai Patel, 6 2022 for the proposition that registered valuer’s report is to be adopted since there is no provision in law providing for any 9 independent valuation to be done by the Revenue authorities, and at best this matter can only be referred to Department Valuation Officer which reference was not available in law as per section 55A of the Act for the impugned year. A copy of the decision of the ITAT cited (supra) is placed on record by the assessee.
We have heard both the parties and have gone through the order of the authorities below as also the decision referred to before us.
The issue before us is determination of the fair market value of the cost of acquisition of land sold by the assessee as on 01-04- 1981, for the purposes of computing capital gain earned on the sale thereof in the impugned year. The assessee had determined the FMV of land on 01-04-1981 on the basis of report of registered valuer who had determined the same at Rs. 260/- per sq. mtr. The AO made his own valuation based on a comparable case and determined it at Rs.2.36 per Sq.mtr. The Ld.CIT(A) also adopted his own method, taking the value at which land ,in and around the area where the assesses land is located, was acquired by the government in 1987, at Rs.69 per sq. mtr and applying reverse rate formula, using cost inflation index, he worked out the rate of land on 01-04-1981 to be not more than 25 per sq. mtr.
While doing so, we have noted from the order of the Ld.CIT(A) himself, that he has analyzed the possible recourse available in law for determining the FMV of land and categorically arrived at the conclusion that the only recourse available in law to the Revenue, where the assesses valuation was not acceptable, was to refer the matter to the Departmental Valuer, DVO, for the purpose.
10 10. Ld.CIT(A) has exhaustively dealt with all the provisions of law applicable for determining FMV of land ,beginning with section 55A of the Act ,which he categorically held applied only for determining FMV of sale and not purchase. He dealt with the section 142A of the Act ,inserted w.e.f 01-07-2010 in the statute, and held the same also to not fit in the facts of the present case. He thereafter dealt with section 142A inserted w.e.f 01-10-2014 , made effective from A.Y 2015-16 ,and found the same applicable in the present case since the assessment order was passed on 18-12-2018 ,after the new provisions of section 142A became effective. He further held that as per the said section, the AO ought to have referred the valuation to the DVO when he was not satisfied with the valuation of the assessee. And surprisingly after having categorically so found the position of law to be ,he himself acted in contravention of law and determined the FMV of land on his own basis without making any reference to the DVO. This act of the Ld. CIT(A) is contrary to his own findings regarding the position of law on the issue. And the same is not sustainable for this reason.
Now the question arises whether the issue should be restored to the AO for determining the FMV of the land by referring its valuation to DVO . The issue before us relates to A.Y 2010-11 ,which is clearly more than 12 years old. To top it, the valuation of land to be referred to DVO is of 01-04 1981,i.e around 40 years back. Both the AO and the Ld.CIT(A) have made the same mistake in law of doing the valuation of the land themselves instead of referring it to DVO. Both being Revenue officers were required to Act as per law. The Ld.CIT(A) was very much aware of the position of law, as emanates from his order. But despite the same both acted contrary to law, dragging the case and the issue of valuation of land 40 years back, for 12 years. At this stage and in this background we do not think that the Revenue should be given any chance to correct its mistakes and now refer the matter to DVO. Having failed to avail two opportunities available to it to act in accordance with law, which was its bounden duty to do so, we are of the view that no further opportunity be given to the Revenue now to correct its mistake by restoring issue back to the AO/CIT(A) for referring the valuation of land to DVO. Where parties to litigation consistently fail to adhere to law, they cannot be given opportunities time and again to correct their mistakes.
We therefore set aside the order of the Ld.CIT(A) on the issue of valuation of land sold by the assessee on 01-04-1981 as being Rs.25 per sq. mtrs. The addition made to the income of the assessee by adopting this valuation is accordingly directed to be deleted.
Ground of appeal no.5 raised by the assessee is allowed. 12. In effect appeal of the assessee is partly allowed. Order pronounced in the Court on 15th September, 2022 at Ahmedabad.