2016 (4) TMI 848 - AT - Wealth-tax

Reference the matter to the DVO for proper valuation of the properties - Whether the Commissioner of Wealth Tax (Appeals) has erred in placing reliance on the valuation given by the assessee in the return based on Govt. ready reckoner by rejecting the valuation given by the Approved Valuer? - Held that - No error has been committed by the Commissioner of Wealth Tax (Appeals) in directing the Assessing Officer to obtain the report of DVO to ascertain the fair market value of properties under question. The assessee has offered his properties as co-lateral security for securing the loan from the bank. The value of the properties shown in the valuation report given by the Approved Valuer were deliberately taken on the higher side so as to obtain higher loan. This fact was disclosed by the assessee during the assessment proceedings. However, the Assessing Officer brushed aside the contention of the assessee and in an arbitrary manner adopted the value of the three properties mentioned hereinabove, as per the Approved Valuer s report. The DVO in his report has valued the properties after considering the sale consideration of the properties in the vicinity and the total built up area of the properties. Whereas, the approved valuer without considering any sale instances and the prevailing rates estimated the value at much higher unrealistic rates. The Commissioner of Wealth Tax (Appeals) after considering the report of DVO and comparing it with the value declared by the assessee as per Govt. ready reckoner accepted the value of properties declared by the assessee. The value declared by the assessee as per Govt. ready reckoner and the valuation report submitted by the DVO are almost in the same range, barring minor variations. We concur with the findings of the Commissioner of Income Tax (Appeals) in adopting the value of the properties declared by the assessee as per Govt. ready reckoner and excluding Agri. Land from the list of assets assessable under Wealth Tax Act.

Summary

Issues Involved:
1. Permissibility of referring to the valuation officer for the properties under section 16A after the completion of Wealth Tax.
2. Accuracy of the valuation shown by the assessee versus the valuation determined by the DVO.
3. Validity of the order of Commissioner of Wealth Tax (Appeals) and the restoration of the Assessing Officer's order.
4. Exclusion of agricultural land from the list of assets liable to Wealth Tax.

Detailed Analysis:

1. Permissibility of Referring to Valuation Officer Post-Completion of Wealth Tax:
The Revenue questioned whether it was permissible to refer to the valuation officer for the properties under section 16A after the completion of Wealth Tax. The Commissioner of Wealth Tax (Appeals) directed the Assessing Officer to refer the matter to the DVO for proper valuation. The DVO submitted the valuation report to the Assessing Officer, who forwarded it to the Commissioner of Wealth Tax (Appeals) without commenting on it. The Tribunal upheld that the Commissioner of Wealth Tax (Appeals) was competent to direct the Assessing Officer to obtain a DVO report to ascertain the fair market value of the properties, citing the decision of the Hon'ble Madras High Court in Commissioner of Income Tax Vs. Prasad Productions (P.) Ltd.

2. Accuracy of Valuation:
The Revenue contended that the valuation shown by the assessee was less accurate compared to the valuation determined by the DVO, which was based on the stamp duty valuation. The assessee argued that the valuation report from the Approved Valuer was obtained for securing a higher loan and did not represent the fair market value. The DVO's report, which considered specific sale instances in the area, was deemed more reliable. The Tribunal concurred with the Commissioner of Wealth Tax (Appeals) in accepting the value declared by the assessee based on the Government ready reckoner, as it was more accurate than the exaggerated valuation by the Approved Valuer.

3. Validity of the Order of Commissioner of Wealth Tax (Appeals):
The Revenue sought to cancel the order of the Commissioner of Wealth Tax (Appeals) and restore the Assessing Officer's order. The Tribunal found that the Commissioner of Wealth Tax (Appeals) had correctly directed the Assessing Officer to refer the matter to the DVO and accepted the DVO's valuation over the inflated valuation by the Approved Valuer. The Tribunal confirmed the orders of the Commissioner of Wealth Tax (Appeals) and dismissed the appeals of the Revenue as devoid of merit.

4. Exclusion of Agricultural Land from Wealth Tax:
The Commissioner of Wealth Tax (Appeals) excluded Agricultural Land No. 57/5 & 6 at Khedi Village, Jalgaon (1/4th Share of assessee) from the list of assets liable to Wealth Tax. The Tribunal upheld this decision, noting that the land was under cultivation, no NA permission was sought, and it fell outside the definition of assets liable to Wealth Tax as per the amendment by Finance Act, 2013, effective from 01-04-1993.

Conclusion:
The Tribunal upheld the Commissioner of Wealth Tax (Appeals)'s decision to rely on the valuation declared by the assessee based on the Government ready reckoner and to exclude agricultural land from the list of assets assessable under the Wealth Tax Act. The Tribunal dismissed the Revenue's appeals and confirmed the impugned orders. The Tribunal also noted the unethical practice of obtaining inflated property valuations for securing higher loans but clarified that accepting the assessee's contentions did not imply approval of such practices.