2016 (7) TMI 838 - AT - Income Tax

Determination of FMV/cost of acquisition and sale value u/s 50-C and 55A - CIT(A) adopting mean value of the properties based on valuation reports submitted by the DVO and assessee valuer for the purpose of cost of acquisition of land as on 01.04.1981 - assessee is the co-owner of the land encroached and occupied by the slum dwellers and the said land is notified slum by State of Maharashtra - Held that - CIT(A) was required to find out the fair market value of the property as on 01-04-1981 as per provisions of Section 55 and 55A of the Act and in-fact while computing the fair market value , an element of estimation is always involved as the value cannot be determined with the exact precision. The sale instances relied upon by DVO/VO as well as of the assessee s valuer has some inherent weaknesses and under the factual circumstances of the case , keeping in view of the availability of the data with the DVO/VO and also with the assesee s government approved registered valuer , the best recourse was to find out mean so that a fair market value of the property is arrived at which in-fact the learned CIT(A) did to determine fair market value of the property as on 01-04- 1981 under the provisions of Section 55 and 55A of the Act. We donot find any infirmity in the order of the learned CIT(A) as the fair market value of the property is dependent on several factors which influence valuation and there is no scientific or straight jacket method to value the property at a particular point of time and somewhere estimation element will definitely creep in while determining the fair market value of the property as on date keeping in view the mandate of Section 55 and 55A of the Act We are inclined to accept the valuation as adopted by the learned CIT(A) by following mean of the valuation adopted by DVO/VO and the assessee s government approved valuer who is a and we donot find any infirmity in the order of the learned CIT(A) which we affirm/sustain, keeping in view factual matrix of the case. - Decided against revenue

Summary

Issues Involved:
1. Determination of the cost of acquisition of land as on 01.04.1981 for the computation of long-term capital gains.
2. Adoption of mean value of properties based on valuation reports submitted by the DVO and the assessee's valuer.
3. Rejection of the value adopted by the District Valuation Officer (DVO) under Section 55A of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Determination of the cost of acquisition of land as on 01.04.1981:
The assessee, an individual deriving income from house property, capital gains, and other sources, computed the cost of acquisition as on 01.04.1981 using the ready reckoner’s rate for developed land. The AO referred the matter to the DVO for determination of the FMV/cost of acquisition and sale value under Sections 50C and 55A of the Income Tax Act. The AO adopted the rate for undeveloped land, arguing that the properties were declared as slums and did not meet the criteria for developed land. The AO's assessment was based on the information available on record due to the time-barred nature of the case.

2. Adoption of mean value of properties based on valuation reports:
The CIT(A) observed that the DVO/VO and the assessee’s valuer had different valuations for the properties. The DVO/VO used sale instances from areas like Mulund, Ghatkopar, and Bhandup, while the assessee’s valuer used instances from Hariyali Village, closer to the properties in question. The CIT(A) decided to adopt the mean value of the valuations provided by both the DVO/VO and the assessee’s valuer to arrive at a fair market value as on 01.04.1981. This approach was deemed appropriate given the lack of exact sale instances for the area and date in question.

3. Rejection of the value adopted by the DVO under Section 55A:
The Revenue challenged the CIT(A)'s decision to adopt the mean value, arguing that the DVO's valuation should be given credence. However, the Tribunal upheld the CIT(A)'s decision, noting that both the DVO/VO and the assessee’s valuer had inherent weaknesses in their valuations. The Tribunal agreed that the mean value method was appropriate to determine the fair market value, considering the factual matrix and prevailing circumstances of the case.

Conclusion:
The Tribunal found no infirmity in the CIT(A)'s order, which adopted the mean value of the valuations provided by the DVO/VO and the assessee’s valuer. This method was considered fair and reasonable given the lack of exact sale instances and the need for an element of estimation in determining the fair market value. The appeal filed by the Revenue was dismissed, affirming the CIT(A)'s approach to compute the cost of acquisition as on 01.04.1981.