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Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI
Before: Sh. Kul BharatDr. B. R. R. Kumar
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by assessee against the order of ld. CIT(A)-42, Delhi dated 17.06.2022.
Following grounds have been raised by the assessee:
“1. The Ld CIT(A) has erred in law and facts by ignoring the violation of principles of natural justice by the AO by not providing a reasonable opportunity of being heard, without providing the valuation report and erred in passing the order under section 154 of the Act by taking FMV of the property C-44 South Extn., Part-II, New Delhi as on 01/04/1981 at Rs 17,50,850/- (as assessed by the VO u/s 55A of the Act) against returned cost of Rs 28,97,254/- in order to derive the figure for capital gain on the sale of said property. The action of the Ld. CIT (A) is arbitrary, unjustified and against the provisions of the law and such order shall be treated as null and Pramila Gupta void. All grounds of appeal are interlinked/same therefore, have tax effect of Rs. 3055310/- in aggregate/all.
2. Without prejudiced to the above provision, the Learned Commissioner of Income Tax (Appeals)-Delhi 42 has furthermore erred in law and facts by confirming the increase in the capital gain by Rs 1,28,97,046/- by the Assessing Officer on the sale of house property no. C-44 South Extn., Part-II, New Delhi by taking the fair market value as on 01/04/1981 of the said property at Rs 17,50,850/- (as assessed by the Valuation Officer under section 55A of the Act) against the value taken in the income tax return at Rs 28,97,254/- as per the valuation done by the approved valuer. The action of the Ld. CIT (A) is arbitrary, unjustified and against the provisions of the law and such order shall be treated as null and void. All grounds of appeal are interlinked/same therefore, have tax effect of Rs. 3055310/- in aggregate/all.
3. The VO did not provide the full copy of the valuation report to the assessee at the time of filing objections to the said report. The Learned CIT (A) has erred in law and facts by ignoring the disparities adopted by the Valuation Officer which were duly addressed in the written submissions dated 13th May 2022 filed with him during the course of hearing in respect of valuation of property C-44 South Extn., Part-II, New Delhi. Had the valuation report been provided in full to the assessee at that time, these disparities would have been pointed out to the Valuation Officer at that time only and even the Learned CIT (A) ignored the same. The action of the Learned CIT (A) is arbitrary, unjustified and against the provisions of the law and such order shall be treated as null and void. All grounds of appeal are interlinked/same therefore, have tax effect of Rs. 3055310/- in aggregate/all.
4. The Learned Commissioner of Income Tax (Appeals)- Delhi-42 has erred in law and facts by confirming the addition made by the Assessing
Pramila Gupta Officer in the capital gain arisen on the sale of property C-44 South Extn., Part-II, New Delhi and thereby completely ignoring the submissions made by the assessee and the valuation report of the approved valuer submitted by the assessee. The action of the Learned Commissioner of Income Tax (Appeals)-Delhi 42 is arbitrary, unjustified and against the provisions of the law and such order shall be treated as null and void. All grounds of appeal are interlinked/same therefore, have tax effect of Rs. 3055310/- in aggregate/all.”
3. Pertinent facts culled for adjudication of the issue are that the assessee is a non-resident Indian living in USA filed return of income for A.Y. 2017-18 on 27.05.2015 declaring total income of Rs.3,97,590/-. During the year, the assessee sold residential property at C-44, South Extn., Part-II and declared long term capital gains (LTCG) of Rs.2,52,72,100/- while computing the LTCG. The assessee has taken the Fair Market Value (FMV) of the property as on 01.04.1981 at Rs.28,97,250/- based on the approved valuer report. The Assessing Officer referred the matter to the DVO who determined the value of the property at Rs.17,50,850/- and re-computed the indexation of the cost of acquisition from Rs.3,25,94,108/- to Rs.1,96,97,000/-. The difference of the amount of Rs.1,28,97,000/- has been further added by the AO to the LTCG already disclosed by the assessee.
The ld. CIT(A) confirmed the addition made by the Assessing Officer.
Aggrieved, the assessee filed appeal before the Tribunal.
Pramila Gupta 6. Heard the arguments of both the parties and perused the material available on record.
The provisions of Section 55A reads as under:
“55A. With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer— (a) in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the Assessing Officer is of opinion that the value so claimed is at variance with its fair market value; (b) in any other case, if the Assessing Officer is of opinion— (i) that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do, and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clauses (ha) and (i) of sub- section (1) and sub-sections (3A) and (4) of section 23, sub- section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall with the necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act.
Explanation.—In this section, "Valuation Officer" has the same meaning, as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).
As per the provisions of the Act, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer for ascertaining the fair market value of a capital asset, if the Assessing Officer is of opinion that the value claimed by the assessee is at variance with its fair market value. In this case, we have gone through the order of the Assessing Officer and find that no justification has been given by the Assessing Officer while referring the matter to the DVO. The AO mentions that he was not satisfied about the correctness of the report without brining any material on record as to how the valuation report given by the assessee is not acceptable. Hence, at the outset, the reference to the valuation officer by the Assessing Officer cannot be upheld.
Further, we have gone through the valuation report submitted by the assessee. The FMV has been determined by the registered valuer taking into consideration, the sale deeds from the Income Tax Department auction and from the other comparable registries. The land rate has been determined at Rs.11,157/- per sq. yards and cost of construction is determined at Rs.120/- per sq. ft. as on 01.04.1981. On the other hand, the departmental valuation officer determined the cost of land at Rs.6,895/- per sq. yards and cost construction was determined at Rs.53/- per sq. ft. The DVO has not considered any comparable cases of the relevant year while
Pramila Gupta determining the value. Further, the DVO has worked backwards deducting 1.5%/month for 27 months from the value of 1983 rates. Thus, the DVO deducted 41.41% from the value of the properties in 1983 for determining the value in 1981. In other words, the DVO assumed a rise of 41% from 1981 to 1983. Hence, the methodology applied by the DVO has got inbuilt incongruencies, hence cannot be validated.
Ergo, we hold that the re-computation of the long term capital gains made by the AO as confirmed by the ld. CIT(A) cannot be sustained.
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 03/08/2023.