OBLIGATION OF ADJUDICATING AUTHORITY WHEN TWO VALUATION REPORTS ARE AVAILABLE

[Mr. M. GOVINDARAJAN]

In ‘Deputy Commissioner of Income Tax V. Bajaj Chemicals’- 2017 (8) TMI 1253 - ITAT KOLKATA the assessee filed return of income declaring a total income at ₹ 66,83,684 which was assessed at ₹ 1,31,53,007.  The different between the said amounts is due to the long term capital gain at ₹ 82,38,733/- by the Assessing Officer by invoking and applying the provisions of section 50C of the Income Tax Act, 1961.  The Assessing Officer noticed that a land was held by the assessee and his partners.  The sale value adopted by the stamp valuation authority for the entire plot of land was of ₹ 2,56,33,822/- where as the deed of conveyance reflected the sale consideration at ₹ 58,05,000/- only.  The Assessing Officer asked the assessee to explain as to why the stamp duty valuation should not be deemed to be the full value of consideration of transfer for the  purpose of capital gain under section 50C of the Act.

The Assessing Officer referred the matter to the District Valuation Officer who estimated the value of the impugned land at ₹ 2,52,13,000/- after observing due formalities.   The assessee objected the said valuation.  He contended  that the District Valuation Officer omitted to consider several factors and related documents furnished to him including the valuation report of the impugned land made by a registered valuer Shri A.K. Dey who valued the land at ₹ 58,05,000/-.  But the Assessing Officer considered only the value of District Valuation Officer.

The Assessee filed appeal against the order of Assistant Commissioner before Commissioner (Appeals) but he could not succeed.  He further filed appeal before the Tribunal.  The Tribunal held that the Assessing Officer had passed the assessment order just to comply with the statutory requirements for completing the assessment before 31.12.2007.  It was further held by the Tribunal that the materials brought on record by the assessee before the Assessing Officer has neither been considered by him nor by the Commissioner (Appeals).  Therefore in the interest of natural justice, the matter was set aside to the file of the Assessing Officer to redecide the issue as per law, after taking into consideration of the various materials filed by the assessee and affording reasonable opportunity of being heard.

On remand proceedings the Assessing Officer followed the same basis of valuation adopted in the original assessment proceedings and the value of the sale consideration was deemed to have been fixed at ₹ 2,52,13,000/- and the one third share of the appellant was ₹ 84,04,333 meaning thereby the long term capital gains was computed at ₹ 82,38,733 and the total income at ₹ 1,31,53,007.

The assessee filed appeal before Commissioner (Appeals).  The Commissioner (Appeals) considered various factors and other evidences furnished by the assessee, in support of his contention that the market value of the property in question was much lesser than the guidelines value fixed by Sub-Registrar office and granted relief.   Being aggrieved by the order of Commissioner (Appeals), the Revenue filed appeal before the Tribunal.

Before the Tribunal the Revenue contended that-

• The Commissioner (Appeals) did not have the power nor the expertise to determine the market value of the property on transfer;
• The Assessing Officer referred the matter to the District Valuation Officer who had after taking into consideration the details furnished by the assessee arrived at the total value of the impugned land at ₹ 2,52,13,000/-;
• At best the Commissioner (Appeals) ought to have referred the issue back to the District Valuation Officer and he should not have himself arrived at the present value;
• The issue should be restored to the file of the Assessing Officer, who shall refer once again to the District Valuation Officer for fresh adjudication.

The assessee contended before the Tribunal that-

• The assessee was the owner of one third of the land and the other two owners sold the land at the very same rate and the Revenue had accepted the sale rates in those cases;
• In the first round of the appellate proceedings the Tribunal had given certain directions and the Assessing Officer failed to consider the directions and repeated the assessment;
• The land was located in a slum area with families all along and primarily inhabited by working class people of the minority community known as Anjuman-e-Burhani;
• Among the various factors that depressed the value of the land and the officer of purchase of building of a mosque on the said land at the rate offered.

The Tribunal analyzed the order of Commissioner (Appeals).  The Commissioner (Appeals) held that the appellant also filed a valuation report from the Registered Valuer, during assessment proceedings.  The valuer visited the impugned land area in order to determine and assess valuation of the same as on November, 2004.   The registered valuer has incorporated the detailed basis of valuation, including the comparable sale transaction adjacent to the appellant’s impugned land and thus adopted the fair market value at ₹ 58,05,000/-.  The stamp duty valuation is four times higher that the fair value which appeared not reasonable.  The Assessing Officer has not discussed about the merits or demerits of the said valuation report.  The Assessing Officer could have discarded the report by adducing reason whatsoever and not being done, it is to be presumed that he has nothing to comment on the same.

The Tribunal held that this was a case where two valuation reports, one by the District Valuation Officer and the other by the Registered valuer of the Income Tax Department.  In such a situation, the Adjudicating Authority had to examine both the reports on the facts and come to a conclusion as to which report was more realistic on the facts of the case and then choose to adopt the report.   When the District Valuation Officer’s report had not taken into account vital fact, it could not be a basis for substituting the stamp duty valuation fixed by the registration authority of the State Government.   It was open to the appellate authorities to examine both the valuation reports and come to a conclusion as to which report gives the fair market value of the property.  The contention of the department that the valuation made by the District Valuation Officer could not be looked into or interfered with by the appellate authorities was not correct.  The issue of determination of ‘fair market value’ was a finding of a fact and the report of the District Valuation Officer was an opinion in arriving at the fact.   The Tribunal further held that the report of the Valuation Officer or the Registered Valuer was an expert opinion and it could be challenged and questioned by the parties before the Authorities.  When the District Valuation Officer’s report was proved wrong, then it was open to the authorities to reject it and adopt other methods for arriving at the ‘fair market value’.  Section 50C (3) provides that for adoption of the value ascertained as the full value of consideration.  Further the Department had not controverted the fair market value arrived at by the registered valuer and accepted by the Commissioner (Appeals).  Therefore the order passed by the Commissioner (Appeals) was a reasoned order.  The Tribunal dismissed the appeal filed by the Revenue.