VIJAY KUMAR SETH,NEW DELHI vs. ACIT, CIRCLE- 33(1), NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHE ‘F’, NEW DELHI Before Sh. H. S. Sidhu, Judicial Member And Sh. N. S. Saini, Accountant Member ITA No. 5244/Del/2018 : Asstt. Year : 2015-16 Vijay Kumar Seth, Vs Asstt. Commissioner of Income Flat No. 8, Vasant Enclave, Tax, Circle-33(1), New Delhi-110057 New Delhi-110002 (APPELLANT) (RESPONDENT) PAN No. ACXPS6514Q Assessee by : Sh. Karan Kumra, CA Revenue by : Sh. Surender Pal, Sr. DR Date of Hearing : 28.03.2019 Date of Pronouncement : 29.03.2019 ORDER Per N. S. Saini, Accountant Member:

This is an appeal filed by the assessee against the order of Commissioner of Income Tax (Appeals)-11, New Delhi dated 23.07.2018.

ITA No.5244/Del/2018 2 Vijay Kumar Seth (3) On the facts and in the circumstances of the case and in law and without prejudice to the other grounds, the Assessing Officer and CIT(A) have grossly erred in not relying on the valuation report of a government approved and registered valuer furnished by the appellant to determine the value of property as on 01.04.1981. (4) On the facts and in the circumstances of the case and in law and without prejudice to the other grounds, the Assessing Officer, the District Valuation Officer and the CIT(A) have grossly erred in computing the value of appellant’s share in land underneath the residential property in Vasant Vihar as on 01.04.1981. (5) On facts of the case and in law and without prejudice to the above grounds, the CIT(A) has grossly erred in upholding the valuation of DVO which is based on an auction rate of Safdarjung instead of an actual sale instance to determine the value of land in Vasant Vihar whereas the appellant had furnished an auction rate for Vasant Vihar. (6) On facts of the case and in law and without prejudice to the above grounds, the CIT(A) has grossly erred in upholding the approach of DVO of valuing Vasant Vihar (being a Category A colony) lower than Safdarjung (being a Category B colony). (7) On facts of the case and in law and without prejudice to the above grounds, the AO, DVO and CIT(A) have failed to deliberate and respond to the arguments raised by the appellant against the erroneous calculation of value of property as on 01.04.1981. (8) The CIT(A) has grossly erred in not granting relief to the appellant regarding the inadvertent claim of cost of acquisition of new property as Rs. 4,23,94,771 instead of Rs. 4,33,11,801 for computing the deduction u/s 54F, as supported by documents submitted before the AO.

ITA No.5244/Del/2018 3 Vijay Kumar Seth (9) The Appellant craves to add, alter, delete or modify any or all the above grounds of appeal.” 3. The sole issue involved in all the grounds of appeal in this appeal is that the Commissioner of Income Tax (Appeals) erred in confirming addition of Rs.38,17,523/- made by the Assessing Officer by relying on the report of the DVO in place of the report of the registered valuer submitted by the assessee. 4. The brief facts of the case are that the assessee sold a property situated at A-7/2, Vasant Vihar, New Delhi for a consideration of Rs.8,27,50,000/- showing long term capital gains of Rs.1,87,14,015/- in his return of income. The Assessing Officer found that the fair market value of the property on 01.04.1981 was shown by the assessee at Rs.7,02,345/- relying on the report of the registered valuer. The Assessing Officer referred the matter to the DVO to determine the value of the property as on 01.04.1981 u/s 55A of the Act. The DVO determined the fair market value on 01.04.1981 at Rs.3,29,540/-. The Assessing Officer relying on the same made addition of Rs.38,17,523/- to the income of the assessee. 5. On appeal, the Commissioner of Income Tax (Appeals) confirmed the action of the Assessing Officer by observing as under: “4.3 I have considered the facts of the case and the submission made by the AR. It has been contended that the AO has referred the property for the valuation to the DVO without any reason. It is further submitted that the DVO has estimated the value of the property by ignoring that Vasant Vihar is a posh colony as compared to Safdarjung Enclave. In this regard, I have perused the valuation report

ITA No.5244/Del/2018 4 Vijay Kumar Seth submitted by the DVO u/s 55A of the Act and it is observed that the DVO had called for the objections to the proposed FMV during the course of valuation proceedings and the same were submitted by the appellant vide his letter dated 15.12.2017 and the DVO has submitted the valuation report on 18.12.2017 after taking into consideration the objections submitted by the appellant. 4.3.1 From the report of the DVO, it is observed that the DVO has dealt with the various objections raised by the appellant in a rational manner. The DVO has applied the DDA Average Auctioned Rates of Safdaijung Enclave Area (as per Nabhi’s guide) in order to value the property as on 01.04.1981 and has clearly stated that Vasant Vihar Area was less preferable as compared to Safdarjung Enclave in 1981. In this context, the it is to be observed that the rates prescribed in Nabhi’s guide are nothing but compilation of the DDA’s auction rates for various years and the Safdaijung rates have been suitably modified keeping in view the advantages / disadvantages of the specific property under valuation, situated at Vasant Vihar. It is also seen that the valuation report of the DVO is a detailed report in which the DVO has explained the basis of rates adopted by him for making the valuation of the property which are as per the prescribed Rules & Guidelines. In view of these facts, I am of the opinion that the FMV of the property as on 01.04.1981 should be based on the report of the DVO. It also needs to be kept in mind that the DVO is a neutral Valuation officer who is not under any instruction/obligation to favour the Department and is duty bound to value the properties referred to him to the best of his judgement and in accordance with the duly laid down procedures and Guidelines. The DVO is not even expected to err in favour of Revenue. 4.3.3 As far as the contention of the AR that the AO has referred the property for the valuation to the DVO without any reason, is concerned, I am of the view that the decision of the AO to refer the property for valuation to the DVO carries implied

ITA No.5244/Del/2018 5 Vijay Kumar Seth satisfaction of the AO and reflects his opinion that the value claimed by the appellant on the basis of a valuer’s report is at variance with its fair market value. Nowhere in the provisions of section 55A of the Act, it has been stated that the AO needs to record his satisfaction in writing. In view of this, the contention of the AR is rejected. 4.4 Accordingly, the addition made by the AO by adopting the fair market value of the property as on 01.04.1981 on the basis of the report submitted by the DVO while computing long term capital gains, is upheld and the grounds of appeal are dismissed.” 6. Before us, the Authorized Representative of the assessee submitted that the appellant had duly discharged his onus by obtaining a valuation report from a government approved valuer for the purpose of valuing his residential property as on 01.04.1981 and submitting the same before the Assessing Officer during the course of assessment proceedings to substantiate his computation of capital gains. The Assessing Officer, on the other hand, did not identify any deficiencies or defects in the said valuation and instead mechanically referred the matter to the DVO for valuation without any application of mind by observing as under: "4.3 On perusal of the competition of the income for the year under consideration it was noticed that assessee has taken cost of acquisition of his share of property as on 01.04.1981 at Rs. 7,02,345/- and AR of the assessee submitted copy of sale deed and copy of valuation report as on 01.04.1981. 4.4 In order to ascertain the Fair Market Value of the property as on 01.04.1981 and as on the date of execution of sale deed that is 28.10.2014, a reference has been made to the Valuation Officer u/s 55A of the Act. In reply of the foresaid reference, the valuation report as determined by DVO was received in the office on 21.12.2016. As per the

ITA No.5244/Del/2018 6 Vijay Kumar Seth said report, fair market value of the share of the assessee (i.e. 35%) share on 01.04.1981 was determined to be Rs. 3,29,540 whereas the assessee has shown FM V on the same date at Rs. 7,02,345/- ...." 7. A perusal of the above order of the Assessing Officer shows that the Assessing Officer had no reason to refer the valuation of the said property to the DVO. She had no information available with her to prove that the valuation adopted by the appellant did not reflect the fair market value. Further, the Assessing Officer has not mentioned the particulars of section under which a reference was made by her to the DVO. Thus, the valuation of appellant’s share in property was arbitrarily referred to the DVO for valuation u/s 53A of the Act. He relied on the decision of Hon’ble Rajasthan High Court in the case of COMMISSIONER OF INCOME TAX (APPEALS) Vs Hotel Joshi (2000) 242 ITR 478 (Raj.) wherein it was held as under: “7. A plain reading of the provision shows that an Assessing Officer with a view to ascertain the fair market value of a capital asset, has a discretion to refer to the Valuation Officer, only in the eventualities provided in the said provision. One of the eventualities is where the value of the asset as claimed by the assessee is in accordance with the assessment made by the registered valuer and in the opinion of the Assessing Officer, the value so claimed is less than its fair market value. Thus, in a case where the value of the asset is claimed by the assessee on the basis of regular books of account maintained for the purpose of construction of the asset and not on the basis of the valuation of the registered valuer, it will not be open for the Assessing Officer to make a reference to the District Valuation Officer unless the Assessing Officer forms an opinion that having regard to the nature of the asset and other relevant circumstances, it is

ITA No.5244/Del/2018 7 Vijay Kumar Seth necessary to do so. Thus, the powers under Section 55A cannot be exercised in a routine manner. For invoking Sub-clause (ii) of Clause (b) of Section 55A, the Assessing Officer is required to form an opinion on the basis of the material on record that reference to the District Valuation Officer for ascertaining the fair market value of the asset necessary having regard to the nature of the asset and other relevant circumstances. It is also necessary to record as to why it is necessary to adopt such a course." 8. It was further submitted that moreover, it is settled law that the primary burden of proof to prove understatement or concealment of income is on the revenue and it is only when such burden is discharged that it would be permissible to rely upon the valuation given by the DVO.

ITA No.5244/Del/2018 8 Vijay Kumar Seth Leave granted. In the present case, we find that the Tribunal decided the matter rightly in favour of the assessee inasmuch as the Tribunal came to the conclusion that the Assessing Authority (AO) could not have referred the matter to the Departmental Valuation Officer (DVO) without books of account being rejected. In the present case, a categorical finding is recorded by the Tribunal that the books were never rejected. This aspect has not been considered by the High Court. In the circumstances, reliance placed on the report of the DVO was misconceived. For the above reasons, the impugned judgment of the High Court is set aside and the order passed by the Tribunal stands restored to the file. Accordingly, assessee succeeds.” 10. It was argued that applying the above facts to the appellant's case, the books of accounts of the appellant or the valuation report submitted by the appellant were never rejected by the AO. In the absence of rejection of the books of accounts/ valuation submitted by the appellant and in the absence of any information or opinion that the value of immovable property sold by the appellant varied from its fair market value, the reference to the DVO was illegal and void ab initio. Similar findings on the principles relied above were also made by the following cases: � Hon'ble Supreme Court in the case of K.P. Varghese v. Income-tax Officer 11981] 7 Taxman 13 (SC)/[1981 ] 131 ITR 597 (SC)/[1981 / 24 CTR 358 (SC) � Hon'ble High Court of Delhi in the case of Commissioner of Income-tax v. Smt. Shakuntala Devi [2009] 316 ITR 46 (Delhi)/[2009] 224 CTR 79 (Delhi) � Hon'ble High Court of Delhi in the case of Commissioner of Income-tax v. Manoj Jain [2007]

ITA No.5244/Del/2018 9 Vijay Kumar Seth 163 Taxman 223 (Delhi)/[2006] 287 ITR 285 (Delhi)/[2006] 200 CTR 327 (Delhi) 11. It was therefore submitted that the appellant had rightly computed the value of the said property as on 01.04.1981 and in the absence of any deficiency or defect in the valuation obtained by the government approved valuer, the reference to the DVO by the AO was illegal, invalid and void ab initio.

ITA No.5244/Del/2018 10 Vijay Kumar Seth Officer to the DVO under section 55A is bad in law under the facts and circumstances of the case. This issue, in our considered opinion, is covered in favour of the assessee and against the Revenue by the judgment in the case of Ms. Rubab M. Kazerani v. Joint CIT reported in [2004] 91 ITD 429 (Mum) (TM). Further, the assessee also covered by the decision of the Pune Bench of the Tribunal, the case of Smt. KrishnabaiTingre v. ITO reported in [2006] 101 ITD 317 (Pune) wherein it has been held that reference to the DVO can only be made in cases where the value of capital asset shown by the assessee is less than its fair market value of land as on April 1, 1981, shown by the assessee on the basis of the approved valuer's report being more than its fair market value, reference under section 55A was not valid. Respectfully following the propositions laid down these two cases by the co- ordinate Benches we uphold the contention of the assessee and hold that the reference made by the Assessing Officer to the DVO under section 55A in the peculiar facts and circumstances of the case is bad in law. Thus, on the sole grounds of appeal of the assessee has to be allowed. 6. Before passing, we have to mention that the assessee has sub mitted the arguments. As on the basis of the legal aspects itself we have decided the issue in favour of the assessee, we refrain from undertaking this academic exercise of disposing this case on the merits." 5. In view thereof there is no merit in the appeal. The appeal stands dismissed.’” 16. Hence, respectfully following the above, we hold that the reference to the DVO was not correct and therefore, delete the addition of Rs.38,17,523/- made by the Revenue while calculating the long term capital gains of the assessee. Thus, the grounds of appeal of the assessee are allowed.

ITA No.5244/Del/2018 11 Vijay Kumar Seth 17. In the result, the appeal of the assessee is allowed. (Order Pronounced in the Open Court on 29/03/2019)

Sd/- Sd/- (H. S. Sidhu) (N. S. Saini) Judicial Member Accountant Member Dated: 29/03/2019 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR