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Income Tax Appellate Tribunal, MUMBAI BENCHES “A” MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year is 2006-07. The appeal is directed against the order of the Commissioner (Appeals) – 5, Mumbai and arises out of the order u/s 143(3) of the Income Tax Act, 1961 (the ‘Act’).
The grounds of appeal filed by the assessee read as under:-
1. Addition on account of alleged notional receipt of consideration for determination of Capital Gains – Rs. 34,09,300/- a. The Ld. CIT(A) erred in directing to determine the Capital Gains by adopting DVO’s Valuation (of Rs. 1,19,15,000/-) without appreciating that he himself had discarded the application of valuation as per Stamp Duty Authority (for Rs. 1,98,35,000/-) and on his failure to appreciate the practical, reasonable and scientific valuation determined by the Registered Valuer, the enhanced value of notional consideration of Rs. 34,09,300/- (1,19,15,000/- - 85,05,700/- as actually received) for determination of Capital Gains suffers from due merits and no justified. The same may be deleted. b. The Ld. CIT(A) erred in holding that DVO’s value be adopted for Capital Gains as there would be no end to the matter if Registered Valuer’s Valuation is accepted. c. Without prejudice to above, the Ld. CIT(A) ought to have considered the fact that on the face of Stamp Duty Valuation of Rs. 1,98,35,000/-, the DVO has valued the said properties at Rs. 1,19,15,000/- which indicates that properties which were beseized with rocks, all-round disfigurements leading to no clear passage on the interior parts of the village having no access to water supply, electricity, proper road and sewerage facilities and zig zag size of properties which could not factually command any higher value; therefore, the valuation as per the circular rate could not straight way be applied and the value of the Registered Valuer determined after study and analysis of practical factors of demerits (which had been ignored by the DVO) should be the value which may be adopted. d. Without further prejudice to above, mere written comment by DVO that after due consideration of objections raised by the Appellant without due exercise of care and caution would not suffice to justify his stated value of Rs. 1,19,15,000/-, therefore, the value as per Registered Valuer is the correct value which is determined after considering all positive and negative factors. The same may be accepted.
2. Disallowance of Bad Debts represent small sundry balances written off – Rs. 47,701/- a. The Ld. CIT(A) erred in confirming the disallowance without appreciating that there were small sundry account balances which were written off by the Appellant on account of business expediency and without violating to the norms of Sec. 36(1)(vii) r.w.s. 36(2)(i). b. Without prejudice to above, alternatively, the write off in the accounts may be allowed u/s 28.
Levy of Penal Interest The appellant, on merits, denies its liability to penal interest. 3. We begin with the 1st ground of appeal. Briefly stated the facts are that the assessee had sold two land properties – (i) one situated at village Vashiwali, taluka Khalapur, Dist. Raigad measuring 4.92 hectares and (ii) other also situated in the same village measuring 4.245 hectares. These were sold for Rs. 46,74,950/- and Rs. 38,32,750/- respectively, thus totalling to Rs. 85,07,700/-. The Assessing Officer (AO) found out the market value as per stamp duty agreement which is as under:
Property measuring 4.25 hectare Rs. 89,95,000/- Property measuring 4.92 hectare Rs. 1,08,40,000/- Market value as per Stamp Duty Rs. 1,98,35,000/- Agreement In response to a query raised by the AO to explain why sale consideration of Rs. 1,98,35,000/- should not be adopted as per the provisions of section 50C of the Act, the AR of the assessee filed a written submission dated 22.12.2008 which has been extracted at page 2-3 in the assessment order. The AO was not convinced with the said reply of the assessee and relying on the provision of section 50C(1) of the Act adopted Rs. 1,98,35,000/- (as per the stamp duty authorities) as the sale consideration of both the land and made the assessment u/s 143(3) of the Act on 23.12.2008.
3.1 The assessee preferred an appeal against the order of the AO before the learned CIT(A). The assessee made a specific request to the learned CIT(A) to refer the matter for valuation of the said properties to the District Valuation Officer (DVO). The learned CIT(A) directed the AO to refer the matter for valuation of the said properties to the DVO. The AO received the two valuation reports dated 23.12.2009 and 24.12.2009 from the DVO. As per the said valuation reports of the DVO, the market value of the above two properties were determined as under: Sr. Property Area in Consideration Value Value as per No Hector received by adopted by DVO report the appellant the A.O. 1 1st Land 4.921 46,74,950/- 1,08,40,000/- 63,97,000/- 2 2nd Land 4,245 38,32,750/- 89,95,000/- 55,18,000/- TOTAL 85,05,700/- 1,98,35,000/- 1,19,15,000/- After receipt of the valuation report of DVO, the learned CIT(A) sent a copy of it to the assessee for its comment / rejoinder. In response to it, the assessee filed a written submission before the learned CIT(A) stating that ‘the application of uniform rate of Rs. 130 per sq.mtr. is highly unjustified and incomparable to the similar land with similar adverse factors’. The assessee also submitted before the learned CIT(A) that the assessee be given an opportunity to file the valuation report from a certified valuer. However, the learned CIT(A) was not convinced with the same and relying on section 50C of the Act, directed the AO to take into account Rs. 1,19,15,000/- as per the valuation report of the DVO for working out the capital gains as against Rs. 1,98,35,000/- in the assessment order.
Before us, the learned counsel of the assessee submits that the assessee had made a request before the learned CIT(A) to refer the matter for valuation of the said properties to the DVO to arrive at the correct amount prevailing during the relevant period. It is stated that the DVO has not taken into consideration the following objections raised before him. i. The said property is undeveloped and having no water supply, no electricity and no sewerage line. ii. The said property is away from main road (very interior place) and is near to hill rock iii. The said property is spread out in hilly area and having lots of rocks which is not suitable for construction also (Uneven level of the plot). iv. The size of property is very large in size i.e. 4,921 hectares. v. The shape of the property is irregular.
Further it is submitted by the learned counsel of the assessee that (i) it was purely a kind of distress sale as during the time of sale, no buyer was available, therefore, the assessee sold it as per its registered valuer’s report, (ii) the sale took place on 26.05.2005 whereas the DVO report was obtained on19.07.2010 after gap of 5 years and (iii) no comparative rate chart was obtained by the DVO.
On the other hand, the learned DR supports the order passed by the learned CIT(A).
We have heard the rival submissions and perused the relevant material on record. The AO completed the assessment u/s 143(3) of the Act on 23.12.2008. We find that during the course of appellate proceeding, the assessee made a specific request to the learned CIT(A) to refer the valuation of said two properties to the DVO. The learned CIT(A) received a copy of the valuation report of the DVO from the AO and made available to the assessee the same for comment / rejoinder. We find that the objections raised by the learned counsel of the assessee have not been properly examined by the DVO or the learned CIT(A) or the AO. In view of the above, the order of learned CIT(A) on the above ground is set aside and the DVO is directed to examine the contention of the assessee as mentioned at para 4 here-in-above and give a reasonable opportunity to the assessee to explain its case and then send a report to the AO. The AO is directed to (i) send a copy of the said report of the DVO to the assessee and (ii) pass an order as per the provisions of the Act after giving a reasonable opportunity of being heard to the assessee. We order accordingly. Therefore, ground no 1 of the appeal is allowed for statistical purposes.
We now turn to ground no 2 of the appeal. As no details were filed before the AO or learned CIT(A), the disallowance of Rs. 47,701/- is confirmed. Therefore, ground no 2 of the appeal is dismissed.
The levy of interest is mandatory, though consequential. We order accordingly.
In the result, the appeal is partly allowed.
Order pronounced in the open court on 29/03/2017