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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’: NEW DELHI
Before: SHRI INTURI RAMA RAO & SMT. BEENA A. PILLAI
ORDER PER INTURI RAMA RAO, A.M.: The present appeals filed by the Revenue are directed against different orders of CIT(A), each dated 24.09.2013 passed for the assessment year 2010- 11. Since common issues are involved in both the appeals, we proceed to decide 2 the same by a consolidated order. The grounds of appeal
raised in are as follows:
1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in directing the AO to adopt, for computation of capital gains, the cost of acquisition as on 01.04.1981 as declared by the assessee on the basis of the Fair Market Value (FMV) estimated by a Registered Valuer, in precedence over the FMV as on 01.04.1981 as estimated by Departmental Valuation Officer (OVO).
2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred holding that there appears to be no reasons for not relying on the report of the registered valuer, ignoring the fact that the land rate and construction rates as on 01.04.1981 ad adopted by the registered valuer were completely arbitrary, without any reasonable basis and without any documentary support.
3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in observing that the registered valuer has adopted the land rate based on similar properties in the adjoining areas, a finding contrary to the facts on record in view of the categorical observations of the registered valuer in his report that there was no comparable sale instances in the locality.
4. Whether on the facts and in the circumstances of the case, the Ld CIT(A) has erred in not appreciating the fact that the OVO had estimated the FMV as on 01.04.1981 in an objective and scientific manner, adopting OOA land rates as available in Nabhi's guide to house Tax after duly considering the general as well as property specific locational features. 4.1 The Ld CIT(A) has erred in not appreciating the fact that the AO and OVO had duly considered the report of the registered valuer and disposed of the objections of the assessee to the OVO's report, besides pointing out specific defects in the methodology adopted by the registered valuer for estimating the FMV of the property.
5. Whether on the facts and in the circumstances of the case, the Ld CIT(A) has erred in relying on the judgment in the case of CIT v Raman Kumar Suri (ITA 6961 of 2010, Bombay High Court), not appreciating that the facts of the case are materially different. In the said case, the AO chose to himself apply the rates mentioned in the Nabhi's Guide to House Tax and estimate the FMV of the property, whereas in the case under consideration the valuation was arrived at by the OVO in an objective and scientific manner.
6. The appellant prays for leave to add, amend, modify or alter any grounds of appeal at the time or before the hearing of the appeal.
3 2. For the sake of clarity and convenience, the facts in are as under: 2.1 The respondent assessee is an individual. The return of income for the assessment year 2010-11 was filed on 14th July, 2010, declaring income Rs. 4,70,82,272/-, which includes long term capital gain of Rs. 4,20,84,000/- on the sales of house property located at B-59, Mayfair Garden, Hauz Khas, New Delhi. Subsequently, the case was taken for the scrutiny assessment and the assessment came to be completed under Section 143(3) of the Income-tax Act, 1961 (for short “the Act”) vide order dated 30th March, 2013 at a total income of Rs. 7,18,82,000/-. While doing so, the Assessing Officer made addition of Rs. 2,97,98,800/- under the head long term capital gains. The factual matrix leading to this addition is as under: (a) During the previous year relevant to the assessment under consideration, the respondent assessee sold house property located at B-59, Mayfair Garden, Hauz Khas, which was jointly held by her brother Sh. Anil T. Kriplani (50% each) for a total consideration of Rs. 15.8 crores vide registered sale deed dated 5th May, 2009. The respondent assessee in the return of income, disclosed the capital gains arising out of sale of this property at Rs. 4,70,84,000/- after claiming deductions of Rs. 50 lakhs under Section 54EC of the Act. While doing so, the respondent assessee adopted the fair market value as on 01.04.1981 for the purpose of cost of acquisition for determination of cost of acquisition and fair market value 4 was substituted in the place of actual cost as the asset of acquisition was acquired prior to that and the fair market value as per the report of Government Approved Valuer, R. L. Walecha & Associates Pvt. Ltd. (No. CAT.I-368/1997-98) was adopted at Rs. 1,01,00,000/- and after indexing the same, the cost of acquisition worked out at Rs. 6,38,32,000/- and surplus was offered to tax after claiming exemption of Rs. 50 lakhs under the provisions of Section 54EC of the Act. However, the Assessing Officer, based on the report of DVO obtained in the case of Sh. Anil T. Kriplani, adopted the fair market value of the property as on 01.04.1981 at Rs. 6,70,000/-. Accordingly, he computed the capital gains at Rs. 7,18,82,000/- and made addition of Rs. 2,97,98,272/-. Being aggrieved by this addition, assessee preferred an appeal before the CIT(A)-XXIX, New Delhi, who vide order dated 24th September, 2013 allowed the appeal relying upon the decision of the Hon’ble Bombay High Court in the case of CIT Vs. Raman Kumar Suri (ITA No. 6962 of 2010), 27.11.2012, vide pars 5.4 & 5.5, which read as under: “5.4 Regarding adopting of land rates as per Nabhi' s Guide to House tax in Delhi, the contentions raised by the appellant have force. It will not be proper to apply mechanically the land rates as prescribed by some private agency without considering peculiarities of the property in question. In present case, the property is located in Hauz Khas area of Delhi which is very well developed and high class posh area. It is a park facing free hold property. The registered valuer has mentioned that he has adopted land rate based on that for similar properties in the adjoining areas. Before DVO, the appellant has taken an objection that since the sale value as on 05.05.2009 has been accepted, land value as on 01.04.1981 can be worked out by backward indexation and it comes out to be Rs. 54,365 per sq meter (3,43,590 * 632/100). The DVO has 5 rejected this objection by simply saying that land rate adopted by him is more reasonable. On the face of it, there appears to be no reasons for not relying upon report of registered valuer. Further, the appellant has relied upon Hon'ble Bombay High Court decision in case of CIT v Raman Kumar Suri (ITA 6962 of 2010). I have gone through the said judgment copy of which has been furnished by the appellant. The facts of that case are essentially similar to facts of the present case under consideration. 5.5 In view of above discussion, I hold that the appellant deserves to succeed. The AO is directed to adopt cost of acquisition as on 01.04.1981 at Rs. 1,01,00,000 as declared by the appellant in accordance with registered valuer's report. The grounds of appeal are allowed.” Being aggrieved, the Revenue is before us with the present appeals.
3. The learned Sr. DR vehemently argued that the CIT(A) was not justified in not taking into cognizance of DVO’s report and such report is based on the comparable instances, therefore, there was no basis to ignore the report of the DVO. Hence, he submitted that the report of the DVO should be adopted for the purposes of ascertaining the fair market value of the property sold as on 01.04.1981 and not the value as per report as it was made arbitrary.
4. On the other hand, learned counsel for the respondent assessee submitted that the very reference to the DVO is unlawful. The report of DVO cannot be the basis for making addition and he further submitted that for the purpose of valuation of the property, the valuation as per the ‘Nabhi’s Guide to House Tax’ publication cannot be the basis. Hence, he submitted that the CIT(A)’s order is as per the law and he relied upon the following decisions: i. Haiben Jayantilal Shah Vs. Income Tax Officer and Another, [2009] 310 ITR 31 (Guj.) ii. CIT Vs. Daulal Mohta (HUF), [2014] 360 ITR 680 (Bom.); 6 iii. CIT Vs. Gauranginiben S. Shodhan, [2014] 367 ITR 238 (Guj.); iv. ACIT Vs. Sh. Raman K. Suri, ITA No. 4242/Mum./09, AY-2006-07, Dt. 30.04.2010 5. We heard the rival submission and perused the material on record. At the first instance, we shall deal with the validity of the reference made to DVO under Section 58 of the Act. The respondent assessee has challenged the validity of the reference made to the DVO before the CIT(A) on the ground that the Assessing Officer had not formed an opinion that the fair market value of the property sold is less than the estimate made by the registered valuer. On this ground, the CIT(A) held that the respondent assessee could not establish that no such prior opinion was formed by the Assessing Officer. Hence, this ground of appeal was dismissed. Against this dismissal, the respondent assessee had neither filed any appeal, nor cross objection before this Tribunal. Hence, finding of the CIT(A) on this issue attained finality. Therefore, we are now required to adjudicate as to which report to be adopted either of DVO or of Registered Valuer. To adjudicate this issue, we had gone through the reports, we find that both the registered valuer as well as the DVO had not referred to any comparable instances and simply adopted the value without any reference of the supporting material. The term ‘fair market value’ has been defined under the provisions of Section 2(22B) of the Act to mean that the fair market value to the value which asset would ordinarily fetch on the sale in the open market on the relevant date. In our opinion, the concept of fair market value envisages of hypothetical seller and hypothetical buyer in hypothetical market. The value 7 assessed by registering authorities for stamp duty purpose cannot be the basis for estimating the fair market value. Therefore, any valuation report based on the value as per the register maintained by the Registering Authorities cannot be taken as the basis for the purpose of valuing fair market value. Hence, we are of the considered opinion that interest of justice would be met, if the matter is restored back to the file of the Assessing Officer for de novo assessment. Accordingly, the matter is restored back to the file of the Assessing Officer for de novo assessment, after affording reasonable opportunity of being heard to the assessee.
6. In the result, both the appeals filed by the Revenue are allowed for statistical purposes. The decision is pronounced in the open court on 23rd September, 2015.