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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
This appeal by the assessee is arising out of the order of Commissioner of Income Tax-28, Mumbai [in short CIT(A)], in appeal No. CIT(A)-28/IT-562/ACIT 17(1)/2015-16 dated18.08.2017. The Assessment was framed by the Asst. Commissioner of Income Tax, Circle-17(1), Mumbai (in short ‘ACIT’) for the A.Y. 2011-12 vide order dated 27.03.2015 under section 143(3) read with section 147 of the Income Tax Act, 1961(hereinafter ‘the Act’).
The only issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in assessing the long term capital gain without considering the DVO’s report estimating the fair market value of the property in term of section 50C(2) of the Act. For this assessee has raised the following ground No. 2: -.
(a) The learned Commissioner of Income Tax (Appeals) 28, Mumbai erred in upholding the action of the AO without appreciating the fact that once reference is made to the valuation officer, the AO is duty bound to wait for the report of the valuation officer before finalizing the assessment, without waiting for the report if AO completed the assessment then he has to rectify the assessment. Otherwise the order would be invalid.
(b) The learned Commissioner of Income Tax (Appeals)-28, Mumbai erred in upholding the action of the AO without appreciation the fact that if CIT(A)- 28 wished he would have directed the valuation officer to submit the Report at the appeal stage & passed an order accordingly.”
Briefly stated facts are that the assessee HUF is a co-owner of Flat No. 12-b, 100, Walkeshwar Road, Mumbai-400006 and this flat was acquired in the year of 1980-81. As per allotment letter from the Sunil Builders, the co-owners has purchases this property for an amount of ₹ 5,64,220/- inclusive of open parking for one car. According to assessee an amount of ₹ 20% of the purchase value of rights to be paid against the possession against the occupancy certificate and assessee already paid 80% of the value along with co-owner which comes to ₹ 4,51,376/-. The assessee has paid 50% of the paid value comes to ₹ 2,25,668/-. The assessee in FY 2001-02 sold the right of this property to one Khimchand Kothari with receipt of token money of ₹ 12.50 lacs and this deal could not materialize. Subsequently, in 2006, the society entered into development rights agreement with Vyankatesh Development Services Pvt. Ltd (Mantri Reality Group) wherein Vyankatesh Development
Services Pvt. Ltd. (Mantri Reality Group) agreed to pay a consideration of ₹ 1,12,50,000/- after deducting the amount of ₹ 12,50,000 to Khimchand on behalf assessee and other co-owner as an amicable settlement between the assessee and Khimchand on the assurance given to surrender his disputed rights as he had defaulted in making the balance payment earlier. Accordingly, the assessee sold this flat for a sum of ₹ 1 crore in the FY 2010-11. The AO received information that assessee entered into sale transaction of this immovable property for an agreement value of ₹ 1 crores, the fair market value as per circle rates i.e. ready reckoner rates of the area as estimated by Sub-Registrar of the Registration department at ₹ 2,23,00,000/-. The assessee computed the long term capital gain at ₹ 34,04,650/- by computing as under:- sale consideration 50,000,00/- Less: Indexed cost 1981-82 200000*711/100=14,22,000/-. Less: B/f Long term capital gain =1,73,450/- Total long term capital gains : ₹
But the AO referred the matter to DVO for ascertaining the fair market value of the property as on the date of sale vide letter dated 04/02/2015 Ref No. ACIT-17(1)/2014-15/CSBH/73A, the DVO has not determined the fair market value as on the date and hence, the matter was getting time barred, the AO treated the sale consideration at ₹ 2,23,00,000/- and computed the long term capital gain as at ₹ 1,11,50,000/- instead of capital gain declared by assessee at ₹ 34,04,650/- by observing as under: -
"5.7 In light of the discussion above the capital gains is calculated as mentioned below: Sales consideration/ FMV is higher: - Rs. 1,11,50,000/-. Less Cost of acquisition: NIL
Total long term capital gains: Rs. 1,11,50,000/-. It is seen that the assessee in its computation of income claimed brought forward losses of Rs. 1,73,350/- No proof for claim of brought forward loss has been submitted by the assessee. In the absence of proof for brought forward loss the amount of Rs. 1,73,350/- used as setoff is denied to the assessee. In its computation the assessee has claimed capital gains at Rs 34,04,650/-. However, as per the working shown above the new capital gains is computed at Rs. 1,1'50,000/-. Total addition therefore works out to ₹ 77,45,350/-.” Aggrieved, assessee preferred the appeal before CIT(A),
The CIT(A) simply dismiss the appeal by stating that the reference is technically defective and assessee has not made any compliance before the AO or before him and dismissed the appeal. Aggrieved, now assessee is in appeal before Tribunal
Before us, none is present from assessee’s side. When this was pointed out to the learned Sr. Departmental Representative that now DVO’s report has been obtained and the DVO valued the fair market price of the property at ₹ 1,09,43,900/- and the assessee has also filed rectification application before AO by providing the valuation report, the same shall be considered, he conceded the position.
After hearing the learned Sr. DR and going through the facts of the case, we find that the assessee has made submissions during the stay application that valuation report issued by DVO Mumbai dated 01.09.2015, wherein, the fair market value of the property is valued at ₹ 1,09,43,900/-. Accordingly, being 50% share of the assessee, the taxable sale consideration for the purpose of computation of long term capital gain shall be ₹ 54,71,950/-. Since now valuation report has come, let the matter referred back to the file of the AO, who will recompute the long
DVO’s report of fair market value of the property after verification of the facts. In term of the above, we set aside the orders of the lower authorities and matter is remanded back to the file of the AO for fresh computation of long term capital gain in term of value determined by DVO i.e. fair market value of the property as on the date of sale. The appeal of the assessee is allowed for statistical purposes.
In the Result, the appeal of the Assessee is allowed for statistical purposes.
Order pronounced in the open court on 21-03-2018.