2023 (8) TMI 816 - AT - Income Tax

Capital gains - Addition u/s 50C - reference to the DVO to make valuation of the property - DLC rate valuation - assessee appellant had sold an agricultural land situated at Gram Kukas Tehsil Amer Jaipur - conditions on account of passing of IOCL gas pipeline in the middle part of his land and that pipeline is protected under the provision of section 9 of Petroleum and Mineral Pipelines Act 1962 - State Government placed restrictions on the assessee on the impugned land of the assessee and assessee was directed spare the 5 sq.ft. on both the side of pipe line and assessee directed to maintain that nothing long is growing on that part of the land - assessee submitted that the valuation report submitted by the assessee from registered valuer who is approved from the Income Tax Department wherein he has given 20% lesser amount prevailing DLC rate therefore the DVO s report is to the extent of not granting and rebate of 25% on the DLC rate contending that P MP Act do not put restrictions regarding use of land is contrary to the fact on record of the State Government produced by the assessee. HELD THAT - As in this case the assessee has before entering into a sale agreement obtained valuation report and therefore claimed by the assessee to the extent of 25% of the DLC rate is justified. The provision of section 50(2)(iii) of section 50C provide that where assessee claim before the ld. AO that the value adopted by the stamp authority u/s 50C(1) exceed fair market value of the property as on date of proceeding and unless such valuation is subject the matter of litigation before any authority or court. AO may refer the matter of determination of fair market value of property in question to DVO herein. We note that the ld. CIT(A) has already referred the matter to the DVO and DVO has also confirmed the DLC rate without considering the plea of the assessee. The assessee is at disadvantage on account of passing of gas pipeline restrictions put by provision of section 9 of P MP Act which the DVO has commented upon and the assessee in his affidavit submitted that due to disadvantage he was unable to find suitable buyer at the DLC rate and therefore as he was in need has sold property at Rs. 1, 25, 00, 000/-. He has obtained the valuation report before entering the transaction and sold the land at rate which in agreement with the valuation report obtained by the assessee. This conduct of the assessee itself shows that the assessee has acted with due care and concern for which the revenue cannot take undue benefit of the contentions placed on record by the assessee. The valuer while considering the relief @ 25 in the DLC rate noted that the assessee s land is suffering on account of the restrictions put forth by P M P Act and even by the State Government. This is more supported by an affidavit stating that the assessee was at disadvantage which the ld. CIT(A) has not considered though he referred the matter to DVO but DVO and ld. CIT(A) failed to consider the specific disadvantage and thereby the claim of 25% relief in that DLC rate considering overall fact placed before us stands justified Considering the restrictions placed in the middle part of the land and accordingly 25% deduction in DLC rate claimed by the assessee is found fair market and reasonable and does not require any adjustment to the return of income filed by the assessee. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Addition under Section 50C of the Income Tax Act.
2. Opportunity of hearing and objection to the valuation report.
3. Consideration of the IOCL Gas Line passing through the land in valuation.

Summary:

Issue 1: Addition under Section 50C of the Income Tax Act
The assessee filed an appeal against the addition of Rs. 44,13,704/- made by the Assessing Officer (AO) under Section 50C of the Income Tax Act. The AO observed that the property was sold for Rs. 1,25,00,000/-, while the DLC rate was Rs. 1,69,13,704/-, leading to the addition. The CIT(A) directed the AO to refer the matter to the DVO, who valued the property at Rs. 1,69,13,700/-. The CIT(A) upheld the AO's addition based on the DVO's report, which the assessee did not contest.

Issue 2: Opportunity of Hearing and Objection to Valuation Report
The assessee contended that the CIT(A) erred by not providing an opportunity to object to the DVO's valuation report dated 04.05.2018. The CIT(A) had forwarded the DVO's report to the assessee for comments, but there was no compliance from the assessee. The tribunal noted that the assessee had not objected to the DLC rate and had accepted it, thus dismissing this ground.

Issue 3: Consideration of IOCL Gas Line in Valuation
The assessee argued that the valuation did not consider the IOCL Gas Line passing through the middle of the land, which imposed restrictions under Section 9 of the Petroleum and Mineral Pipelines Act, 1962. The tribunal acknowledged the adverse conditions due to the gas pipeline and the restrictions imposed by the Act and the State Government. The tribunal referred to the jurisdictional High Court's decision in CIT vs. Rameshwar Prasad Kacholia, which allowed a rebate due to adverse factors affecting the property value. The tribunal found the assessee's claim for a 25% reduction in the DLC rate justified and allowed the appeal, stating that the DVO and CIT(A) failed to consider the specific disadvantages.

Conclusion:
The tribunal allowed the appeal, granting the assessee a 25% deduction in the DLC rate due to the adverse conditions caused by the IOCL Gas Line, and found the valuation report and the addition under Section 50C unjustified. The appeal was allowed, and the order was pronounced on 09/08/2023.