2017 (12) TMI 1777 - AT - Income Tax

Capital gain computation - FMV determination - reference to DVO - Adoption of fair market value @ ₹ 300/- per sq. yard as on 01-04-1981 - HELD THAT - There is a wide gap in land rate as given by Registered Valuer and actual sale instances cited by the DVO. Registered Valuer had simply stated in the Valuation Report that the rate of land as on 01-04-1981 is ₹ 1400/- per sq. yard based on local survey. No sale instance is quoted to arrive at such rate by Registered Valuer. Registered Valuer s valuation of land @ ₹ 1400/- per square yard is not based on any independent supporting document. It is simply mentioned in the valuation report that rate is based on local survey. However, what evidences were gathered in the survey to arrive at such rate is not provided. Therefore, in my considered view the value adopted by the Registered Valuer at ₹ 1400/- per sq. yard is very high and unreasonable. The DVO had given sale instances of the same locality. The assessee relied on sale instances which are from far away areas from the location of concerned property. Keeping all these relevant facts in view, the rate adopted by ITAT, Jaipur bench in first round at ₹ 300/- per sq. yard is quite fair and reasonable. Hence, the Bench directs to adopt the fair market value @ ₹ 300/- per sq. yard as on 01-04-1981.

Summary

Issues Involved:
1. Whether the CIT(A) erred in confirming the order passed by the AO without following the ITAT's directions.
2. Whether the CIT(A) erred in computing the long-term capital gain by taking the fair market value (FMV) of land as on 01-04-1981 at ?200 per sq. yard instead of ?1,400 per sq. yard as claimed by the assessee.
3. Whether the CIT(A) erred in adopting the FMV based on non-comparable properties and ignoring the ITAT's previous determination of ?300 per sq. yard.

Issue-wise Detailed Analysis:

1. Error in Confirming AO's Order Without Following ITAT's Directions:
The assessee contended that the CIT(A) confirmed the AO's order without adhering to the ITAT's directions to consider comparable cases. The ITAT had set aside the original assessment order, noting that a comparable case cited by the assessee had not been considered. The AO, upon reconsideration, arrived at the same capital gains as in the original proceedings, leading to the assessee's appeal.

2. Computation of Long-term Capital Gain:
The CIT(A) confirmed the AO's computation of long-term capital gain by taking the FMV of the land as on 01-04-1981 at ?200 per sq. yard, based on the DVO's opinion. The assessee had claimed the FMV at ?1,400 per sq. yard based on a registered valuer's report. The AO had initially taken the land rate at ?140 per sq. yard, which was later adjusted to ?154 per sq. yard considering it was a corner plot. The CIT(A) increased the FMV to ?200 per sq. yard, while the ITAT had previously determined the FMV at ?300 per sq. yard.

3. Adoption of Non-comparable Properties for FMV:
The CIT(A) and AO relied on sale instances from Shiv Marg, Bani Park, and Madho Singh Road, which the assessee argued were not comparable to the land at Ghiya Marg. The ITAT had previously determined the FMV at ?300 per sq. yard, considering the property was on a main road and a corner plot, which would fetch a higher price. The DVO's report provided sale instances with varying rates, which were considered by the CIT(A) and AO. The assessee's contention was that these instances were not comparable and that the ITAT had directed to consider the sale instance of Bhawani Singh Road, which was ignored by the lower authorities.

Conclusion:
The ITAT, after considering the submissions and evidence, found that the CIT(A) and AO did not properly follow the ITAT's directions and did not adequately consider the comparable sale instance of Bhawani Singh Road. The ITAT reiterated that the FMV of the land as on 01-04-1981 should be ?300 per sq. yard, which was fair and reasonable given the circumstances. The appeal of the assessee was allowed on these terms. The order was pronounced in the open court on 26/12/2017.