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2018 (12) TMI 639 - AT - Income TaxCapital Gain computation - rejecting the valuation report and estimating Fair Market Value(FMV) as on 01.04.1981 at ₹ 1750 per sq.ft. as against value considered at 2200 by the assessee based on the Registered Valuer valuation report, and directing the AO to adopt such value in respect of 1675 sq.ft. of carpet area - Held that - The assessee has shown FMV as on 01.04.1981 @2200 per sq.ft., on the basis of registered valuers report it is more than the FMV estimated by the AO. Therefore, the AO is not entitled to make a reference to DVO u/s.55A. AO can make a reference in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by the registered value, is less than the FMV, in the opinion of the AO. The estimated value considered by the AO @1750 per sq.ft. is less than the FMV computed by the assessee by taking the rate of 2200. AO is not a technical person, as held by the various decision cited to compute fair market value his own. Therefore, he cannot determine the valuation of property, hence, in the light of these facts, we direct the AO to consider the rate at 2200 per sq.ft. for considering the FMV as on 01.04.1981 in respect of built-up area 1675 sq.ft as considered in the valuation report and as shown in the sale deed. This ground of appeal of the assessee is allowed. Therefore, the direction of the CIT(A) to the AO to consider the area at 1675 sq.ft. are upheld department s ground No.1 of appeal is dismissed. Disallowance in respect of cost of improvement - Held that - Assessee has not been able to furnish any details of cost of renovation carried out in respect of the properties sold under consideration. Therefore, the CIT(A) has rightly disallowed the same, accordingly this ground of appeal is therefore dismissed. Disallowance of deduction u/s.54 on alleged ground that house boat is not a residential property within the meaning of section 54 - Held that - We find that the assessee has not produced the registered sale deed for purchase of house boat, therefore it cannot be said that the assessee has purchased a residential house. Further, there is a ban in purchase of immovable property as well as boat by the non-sate subject of the J & K State. Therefore, the assessee is not legally entitled to purchase house boat, which is a movable property, but held to be land by J & K Land Revenue Act, 1939. Hence, same cannot be equated with the residential house which is an immovable property. Therefore, in these circumstances and considering the letter of the Assistant Commissioner (C), Government of Jammu & Kashmir dated 05.07.2013 we are inclined to hold the findings of the Lower Authorities are correct, accordingly this ground of assessee is dismissed. Consider the value 1675 sq.ft against 1340 sq.ft and then take rate of 1750 per sq.ft. - Held that - As regards, the contention of the Revenue that 25% increase in carpet area to line at built-up area is without any basis, however, we find that assessee has sold the property by taking the carpe area, which has been mentioned in the sale deed as well as registered valuers report. Therefore, we do not find any merit in the contention of the Revenue. This ground of appeal of the Revenue is dismissed.
Issues Involved:
1. Validity of notice issued under Section 148 of the Income Tax Act, 1961. 2. Rejection of the valuation report and estimation of fair market value (FMV) as of 01.04.1981. 3. Disallowance of cost of improvement. 4. Disallowance of deduction under Section 54 of the Income Tax Act for the purchase of a houseboat. 5. Direction of CIT(A) regarding the consideration of area and rate per square foot. Issue-wise Detailed Analysis: 1. Validity of Notice Issued Under Section 148: The Assessee's ground regarding the validity of the notice issued under Section 148 of the Income Tax Act, 1961, was not pressed before the Tribunal and was therefore treated as dismissed. 2. Rejection of the Valuation Report and Estimation of FMV as of 01.04.1981: The Assessee contested the AO's rejection of the registered valuer's report, which estimated the FMV at ?2200 per sq. ft., and the adoption of ?1750 per sq. ft. instead. The Tribunal observed that the AO had no authority to refer the matter to the DVO under Section 55A since the FMV claimed by the Assessee was higher than the AO's estimate. The Tribunal directed the AO to adopt the rate of ?2200 per sq. ft. for the built-up area of 1675 sq. ft., as shown in the sale deed and the registered valuer's report. Consequently, the Assessee's appeal on this ground was allowed, and the Revenue's corresponding ground was dismissed. 3. Disallowance of Cost of Improvement: The Assessee claimed a disallowance of ?1,90,000 for renovation costs. The Tribunal upheld the CIT(A)'s decision to disallow the claim, as the Assessee failed to furnish any details or evidence of the renovation expenses. Thus, this ground of appeal was dismissed. 4. Disallowance of Deduction Under Section 54 for Houseboat Purchase: The Assessee claimed a deduction under Section 54 for purchasing a houseboat in Srinagar. The CIT(A) disallowed the claim, reasoning that houseboats are typically used for tourism and not as residential properties. Additionally, the Tribunal noted that non-state subjects cannot legally purchase property in Jammu & Kashmir, including houseboats classified as land. The Tribunal upheld the CIT(A)'s decision, dismissing the Assessee's appeal on this ground. 5. Direction of CIT(A) Regarding Consideration of Area and Rate Per Square Foot: The Revenue challenged the CIT(A)'s direction to consider the area at 1675 sq. ft. and the rate at ?1750 per sq. ft. The Tribunal found that the Assessee had sold the property based on the carpet area mentioned in the sale deed and the registered valuer's report. Therefore, the Tribunal dismissed the Revenue's appeal on this ground, affirming the CIT(A)'s direction. Conclusion: The Assessee's appeal was partly allowed, specifically regarding the adoption of the FMV rate of ?2200 per sq. ft. for the built-up area. The Revenue's appeal was dismissed in its entirety. The order was pronounced in the open court on 11.12.2018.
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