2015 (8) TMI 1087 - AT - Income Tax

Valuation of agricultural land and commercial land - book value v/s market value - CIT (Appeals) held that the AO had wrongly applied the circle rate of commercial land without evidence in valuing the value of land at ₹ 20,82,712 and that the circle rate for agriculture land was to be taken, ignoring the fact that the land was being used for commercial purposes and that circle rate of ₹ 900 per sq.yd. which is applicable to commercial buildings was to be taken for valuation of land.Held that - Commissioner of Income-tax (Appeals) has correctly decided the issue because he has correctly noted that 6 per cent. stamp duty was applicable to agricultural land and commercial land and he has also noted the facts that circle rate was ₹ 12 lakhs per acre which would come to ₹ 244 per sq.yd. and therefore, the value of the land would have been ₹ 5,64,616 which is less than the book value whereas the land and building has been transferred at a consideration of ₹ 25 lakhs in September, 2008. The learned Commissioner of Income-tax (Appeals) has given logic why the valuation adopted by the Assessing Officer for valuing the building at ₹ 30 lakhs is not correct because buildings would generally depreciate over a period of time. He has also rightly observed that if depreciation at 25 per cent. was granted, then the value of the machinery would be ₹ 41,13,281 which is less than the value for which the machinery has been transferred. Further perusal of the assessment order clearly shows that the Assessing Officer has substituted his valuation without referring the matter to the Valuation Officer or bringing any material on record to show that the assessee has received any consideration in excess of the amount shown in the sale deed which is not permissible under the law. - Decided against revenue.

Issues Involved:
1. Valuation of land using circle rate for commercial land versus agricultural land.
2. Valuation of land and building registered by the Registrar.
3. Excessive valuation of land by the Assessing Officer.
4. Reliance on valuation report submitted to the bank.
5. Valuation of machinery.

Detailed Analysis:

1. Valuation of Land Using Circle Rate for Commercial Land Versus Agricultural Land:
The learned Commissioner of Income-tax (Appeals) held that the Assessing Officer erroneously applied the circle rate of commercial land without evidence, valuing the land at Rs. 20,82,712. The Commissioner found that the land was agricultural, not commercial, and the circle rate for agricultural land should be applied. The Commissioner referenced the purchase deed dated December 17, 2002, which indicated the land was agricultural, as evidenced by the 6% stamp duty applicable to agricultural land.

2. Valuation of Land and Building Registered by the Registrar:
The Commissioner of Income-tax (Appeals) noted that the land and building were registered by the Registrar at Rs. 25,00,000 in September 2008. The Commissioner found that the value of the land could not be taken at Rs. 20,82,712 in April 2005, as the land and building were purchased together for Rs. 17,60,000 in December 2002 and transferred together for Rs. 25,00,200 in September 2008. This indicated that the Assessing Officer's valuation was incorrect.

3. Excessive Valuation of Land by the Assessing Officer:
The Commissioner of Income-tax (Appeals) found that the Assessing Officer's valuation of the building at Rs. 30,00,000 was highly excessive. The building was constructed long ago and had depreciated over the years. The Commissioner noted that the valuation report submitted to the bank was inflated for obtaining higher bank limits and could not be relied upon for the actual value of the asset.

4. Reliance on Valuation Report Submitted to the Bank:
The Commissioner of Income-tax (Appeals) observed that the valuation report submitted to the bank was for the purpose of showing higher net worth to obtain bank limits. The Commissioner relied on various decisions, including CIT v. Sidhu Rice and General Mills, to conclude that the valuation report for the bank could not be used to determine the actual value of the assets for transfer purposes.

5. Valuation of Machinery:
The Assessing Officer valued the machinery at Rs. 66,00,602, while the Commissioner of Income-tax (Appeals) found this valuation to be excessive. The Commissioner noted that the machinery was valued at Rs. 58,50,000 in a report dated December 30, 2008. The Commissioner adopted a reasonable value of Rs. 55,00,000 for the machinery, considering the depreciation and the facts presented.

Conclusion:
The Tribunal upheld the decision of the Commissioner of Income-tax (Appeals), confirming that the Assessing Officer had incorrectly valued the assets without sufficient evidence. The Tribunal noted that the Assessing Officer did not refer the matter to the Valuation Officer or provide material evidence that the assessee received any consideration in excess of the amount shown in the sale deed. The appeal was dismissed, and the order of the Commissioner of Income-tax (Appeals) was confirmed.

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