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TMI Blog2012 (5) TMI 441X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities adopted the sale price at Rs.6,31,69,000/-. The A.O. adopted the value as per the stamp duty authorities and reworked out the capital gain in the assessment order. The CIT was of the view that the cost of acquisition adopted by assessee at Rs.168/- per sq.ft. based on the valuation report dated 20th February 2006 was erroneous as the land at that point of time as per the Indian Valuers Directory and also supported by the stamp duty authorities was at Rs.72/- per sq.ft. and, therefore, he invoked the powers under section 263 to direct the A.O. to adopt the cost of acquisition at Rs.72/- per sq.ft. as prescribed by the stamp duty authorities. Assessee is questioning the jurisdiction of the CIT under section 263 to adopt the said rate. 4. Assessee has raised four grounds on the validity of show cause notice under section 263, valuation report of registered valuer, role of commissioner and valuation of local authority in its grounds which are without prejudice to each other. The learned counsel submitted that in the course of the assessment proceedings the Joint CIT vide his letter dated 21st January, 2008 sought the following information from the assessee firm:- & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plus building"for industrial use) See page 42 of said book. However, to derive "land value", one has to deduct cost of construction @ Rs.70/- per sq. ft. Normally this is the standard cost of construction [as per page 12 of said book.]. Further reduction has to be made normally between 20% for developer's margin. Therefore, rate per sq. ft. of land, based on its development potential is arrived as under:- Rs. Per sq. feet "Rate of land plus building (as referred and discussed above) 400 Cost of Construction (as referred and discussed above) 70 330 "Developers Margin @20% of 330 (as referred and discussed above) 66 264 "However as per said book i.e. "Indian Valuers Directory and Reference Book Market Value of Property in Mumbai as on 1.4.198 1". the value of land given is Rs.72/- per sq. ft. there being good variation between the two values, we adopt rate of Rs.168/- per sq. ft. i.e. average of Rs.264/- and Rs. 72/-. "Size of the plot of land under reference is 37350 sq. ft. Therefore, Value of the plot is 37350 sq.ft. X Rs. 168/- = Rs. 62,74,800.00" After considering the aforesaid Valuation Report of the Government Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... replied in detail as stated in the arguments with reference to the working of long term capital gain of lese hold land and relied on the valuer's report. As seen from the valuation report, the said valuer gave a sale instance relying on the Indian Valuers Directory and Reference Book for market value of property where it was clearly stated that value of open land given was Rs.72/- per sq.ft. He also referred to the rate applicable for property i.e. the rate of land and building for industrial was at Rs.400/- per sq.ft. and he arrived at the land value by taking the cost of construction and further developers margin to arrive at the derived value of land at Rs.264/-. Therefore, he adopted the rate of Rs.168/- per sq.ft. as an average of Rs.264/- and Rs.72/- to arrive at the cost of land at Rs.62,74,800/-. This report was placed before the A.O., who in the assessment order reworked out the capital gains by adopting the sale price as that of stamp duty authority at Rs.6,31,69,000/-. He also, vide para 3.2, disallowed certain expenses claimed by way of legal fees and brokerage. Accordingly the capital gains were reworked out at Rs.2,98,90,062/- as against the capital gain of Rs.2,93,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain calculations. It was also seen from the records that the land was purchased on 8.7.1974 @ Rs.1.67 per sq.ft. In other words, the increase in the FMV of the land in just about 6 years is from Rs.1.67 to Rs.168/- per sq.ft. and hence the value adopted by the valuer, M/s. V.S. Modi Associates is incorrect." (emphasis supplied) 9. As can be seen from the record the A.O., Assistant Commissioner of Income Tax 23(2) has issued a letter dated 03.02.2011 for which the office of the District Collector of Stamps, Kurla replied vide letter dated 09.02.2011. As per the free English translation provided of the letter received in Marathi it seems that the A.O. asked about the rates in 1981-82 and it was stated that the Government had not prepared Ready Reckoner in the year 1981. In the year 1989, for the first time Ready Reckoner was prepared and relevant instructions were issued in respect of how to adopt the valuation of properties of 1981 on the basis of the valuation adopted in the year 1989. According to the said rates the above open land was prescribed at Rs.72/- per sq.ft. and for residential building at Rs.240/- per sq.ft. and for shops and commercial premises at Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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