PRIYA RANJAN PANDIT,NEW DELHI vs. ACIT, CIRCLE- 33(1), NEW DELHI

The aforesaid appeal has been filed by the assessee against the impugned order dated 31.01.2017 passed by ld. CIT(Appeals)-XI, New Delhi for the quantum of assessment passed u/s.143(3) for the Assessment Year 2014-15. The effective ground pressed by the learned counsel before us is addition of Rs.83,80,455/- on account of difference in cost of acquisition of the asset as on 01.04.1981 relying upon the report of DVO.

The facts in brief are that assessee is an individual who had sold property for a sale consideration of Rs.16.35 crores during the year under consideration and has consequentially declared Long Term Capital Gain and claimed deduction u/s.54. The property under consideration was situated at 67, Paschim Marg, Vasant Vihar, New Delhi which belonged to Smt. Vidhya Wati Pandit, who vide her will dated 03.01.1992 bequeathed her entire one half undivided share in the said property equally in favour of her two heirs, namely, Shri Priya Ranjan Pandit and Shri Shiv Ranjan Pandit. The assessee’s share in the said property came to 25% of the undivided share. In response to the show cause notice to justify Long Term Capital Gain, assessee submitted the valuation report of the registered valuer and also the cost of acquisition of asset as on 01.01.1981 which was worked out at Rs.69,26,000/-. However, the Assessing Officer referred the matter to the DVO to ascertain the fair market value as on 28.11.2013. As per the report, FMV as on 01.04.1981 was estimated at Rs.34,43,800/-. The said dispute was with regard to the cost of acquisition. Accordingly in the computation of capital gain addition of Rs.83,80,455/- was made as per the working at page 3 of the assessment order.

Before the ld. CIT (A), assessee objected to the said valuation report of the DVO and submitted that the valuation of the immovable property done by the valuation cell is not correct, because no comparable sale instances have been given or identified of the same locality and catena of other objects have been raised which has been highlighted in the impugned appellate order from pages 4 to 8. The sum and substance of the assessee’s objection was that the ld. DVO has taken the rate on the basis of average auction price of the properties for a different area of Safdarjung whereas assessee’s property situated at Vasant Vihar which has been categorized as ‘A-category’ colony with a higher circle rate whereas Safdarjung Enclave was categorized as ‘B-category’ with lower circle rate.

Ld. CIT(A) held that DVO has taken into consideration all the objections of the assessee, however he sent the entire submission of the assessee to the Assessing Officer to send his remand report and also directed the Assessing Officer to call for the comments of the DVO. Accordingly, Assessing Officer has submitted the remand report vide letter dated 08.08.2017 after calling for the comments of the DVO with respect to objections raised by the assessee. The comment of the DVO reads as under: “3. In absence of the referred valuation reports, no comments can be offered. It ma however be said that Safdarjung Area was much more developed than Vasant Vihar during 1981. Hence valuation of a Vasant Vihar property can only be done on considering the land rate lower than the land rate of Safdarjung property. 4. The valuation of the property has been done as per guidelines. It has nothing to do with another case as referred for Shanti Niketan. The facts and circumstances at Shanti Niketan might have been different. Moreover, Shanti Niketan was a more developed area than Vasant Vihar during 1981. Further comments may however be offered on receipt of the referred valuer’s report amounting to Rs.69,26,000/- 5. This aspect is to be decided by the competent Income Tax authority. It may however be said that Nabhi’s rates are nothing but compilation of DDA’s auction rates based on reasonable estimation. This was a job assigned to the Assessors as per the Supreme Court judgement dated 12.12.1984.

Only the DDA’s auction rates during 1981 have been adopted from the Nabhi’s compilation. The Safdarjung rates have been suitably modified, keeping in view the advantages/disadvantages of the specific property under valuation, situated at Vasant Vihar.

In absence of the relevant papers and referred valuation report of 33 Poorvi Marg Vasant Vihar, no specific comments can be offered. It may however be said that during 1981, Vasant Vihar was not so much developed.

Ld. Assessing Officer in his remand report had also distinguished the judgment relied upon by the assessee especially in the case of CIT vs. Raman Kumar Suri and Raj Kumar Khosla vs. ITO of Hon'ble Bombay High Court wherein it was held that prescribed rate in Nabhi’s guide cannot be substituted for the valuation of the property in Delhi done by approved valuer.

Before us, learned counsel for the assessee submitted that there is inherent infirmity in the valuation of the DVO because he has taken the land rate of Safdarjung area as per the Nabhi’s guide which cannot be said to be applicable for Vasant Vihar area which is a much higher category colony. The DVO has taken the DDA’s auction rates for various years and the Safdarjung rates have been modified accordingly which cannot be said to be the proper parameter. Further, once assessee has filed the approved valuer report before the Assessing Officer then same cannot be substituted by the DVO’s report or can be held to be not applicable. In support of his contention, he has relied upon the following judgments. S. No. Particular

After considering the rival submissions and on perusal of the relevant findings given in the impugned orders, we find that Assessing Officer has recomputed the Long Term Capital Gain at Rs.10,84,67,878/- as against Rs.10,00,87,423/- shown by the assessee. The difference amount of Rs.83,80,455/- has been added solely on the valuation of the property as on 01.04.1981, as the assessee had shown at Rs.69,26,000/-, whereas the DVO has reduced to Rs.34,43,800/- which had the effect of indexation cost. From the perusal of the DVO’s report, it is seen that his report is based on average auction price of property situated in Safdarjung area during the year 1981-82 after taking the adjustment factors, has been stated Rs.3128 per sq. meter, whereas it is an admitted fact that the Safdarjung locality has been categorized as B-category which has a much lower circle rate as against Vasant Vihar locality which is an entirely a different place which has been categorized as A-category with a higher circle rate. The circle rates of the land are decided by the authorities taking into consideration several other factors in categorizing the locality, which is an important factor in valuing the property. Apart from that, the assessee has also highlighted the adjustment factor relating to location of the area in which property of the assessee was situated. Further, learned counsel has pointed out that Assessing Officer has valued the similar property at 33 Poorvi Marg, Vasant Vihar, which matter too was referred to the DVO, who has given the fair market value of the property at Vasant Vihar as on 1.4.1981 at Rs.5000 per sq. mtr. Once for the same area higher rate has been applied by the DVO, then we find it very difficult as to why rate of 3128 per sq. mtr. has been adopted by the DVO. In the case of CIT vs Raman Kumar Suri, 255 CTR 107, the Hon'ble High Court held that Nabhi’s guide to the house tax cannot be substituted for the valuation at New Delhi property done by the valuer for the purpose of valuation of the property. Further Court has held that empanelled registered valuer of the Income Tax Department and the valuation done by such Registered Valuer would take precedent over Nabhi’s guide to house tax which is generalized guide and does not take into account the peculiar features of the property being valued. Similarly, here in this case, also entire basis of the DVO is based on the value given in the Nabhi’s guide and thereafter, he has made certain adjustment which cannot be said to be a proper factor.

In the result, the appeal of the assessee is allowed.