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TMI Blog2017 (7) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... rvedi, AM Appellant by : Shri Pramod Shingte Respondent by : Shri P.L. Kureel ORDER Per Anil Chaturvedi, AM This appeal filed by the assessee is emanating out of the order of Commissioner of Income Tax (A) III, Pune dt.28.11.2013 for the assessment year 2008-09. 2. The relevant facts as culled out from the material on record are as under :- 2.1 Assessee is an individual who electronically filed his return of income for A.Y. 2008-09 on 28.07.2008 declaring capital gains of ₹ 4,01,580/-. The case was selected for scrutiny and thereafter the assessment was framed u/s 143(3) vide order dt.28.12.2010 and the total taxable income was determined at ₹ 1,81,70,880/- by considering taxable long term capital gains at ₹ 1,71,37,431/-. Thereafter an order u/s 154 of the Act was passed on 18.01.2011 and the total taxable long term capital gains was determined at ₹ 1,70,26,176/-. Aggrieved by the order of the AO, assessee carried the matter before ld. CIT(A), who vide order dt.28.11.2013 (in appeal No.Pn/CIT(A)-III/ITO Wd-2(3)/Sol/545/2010-11/561) dismissed the appeal of the assessee. Aggrieved by the order of ld. CIT(A), assessee is now in ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dibai, became the owner of the property. Smt. Trivenibai Anant Veerkar was aunt of the assessee and had bequeathed the property by registered Will dt.16.12.1984 amongst Raosaheb Babasaheb Mangire (assessee), Smt. Jaidevi Mallikarjun Warad, Shri Yogesh Sudhir Sopal and Shri Manoj Ratnakar Andikar in equal shares i.e., 1/4th share each. It was also noted that the shares were undivided and the demarcation of the individual share of each owner by metes and bounds was not practically possible. During the year, as agreed upon between UK Enterprises, Raosheb Mangire and Smt. Jaidevi Mallikarjun Warad, the property was sold for a consideration of ₹ 1,50,00,000/- (i.e., ₹ 75,00,000/- each) plus one plot each in the housing scheme at B Building, Kakade City, Higane, Karve Nagar, Pune at ₹ 10,34,700/- including stamp duty and registration expenses. Thus according to assessee the agreed sale price for each 1/4th share was ₹ 85,34,700 = (Rs.75,00,000/- + ₹ 10,34,700/-) With a view to arrive at a correct cost of land and the correct cost of acquisition as on 01.04.1981 the matter was referred by AO to Valuation Officer. The Valuation Officer determined the fair mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0C, it is clear that where the consideration declared to be received or accruing from the transfer of the land is less than the stamp duty value (as is the fact in this case) the stamp duty value shall be deemed to be the full value of consideration, and capital gains are mandatorily to be computed adopting the said value as the full value of consideration for the purposes of section 48. The constitutional validity of sec. 50C has been upheld by the Madras High Court in K.R. Palanisamy vs Union of India reported in 306 ITR 61 and by the Bombay High Court in the case of Bhatia Nagar Premises Co- operative Society Ltd. vs Union of India reported in 234 CTR 175 and it has been held that even though the section 50C applies only to capital asset and not to trading assets or stock in trade, the same is not discriminatory or violative of article 14 of Constitution of India. The transaction under consideration was admittedly undertaken in the previous year 2007-08, relevant to A.Y. 2008-09, which is well after the provisions of section 50C came into force. I have therefore, no hesitation in holding that the Assessing Officer has correctly invoked the provisions of section 50C in the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins. In such view of the matter, the matter is restored to the files of the Assessing Officer to work out capital gains by invoking section 50C(2). [Para 6] 5.3. Therefore, there is seen to be no infirmity in the Assessing Officer s action in referring the matter to the DVO u/s 50C(2) particularly in the background that the appellant objected to the stamp duty valuation during assessment proceedings. Having held so, the question that arises is that once the DVO has arrived at a particular valuation, whether the Assessing Officer is bound to accept that valuation or is obliged to adopt the value said to be received as per the sale deed. In this regard, it is seen that the Bombay High Court in the case of CIT vs. Prabhu Steel Industries Ltd. reported in 36 taxmann.com 393, has held that the Assessing Officer is bound to act in conformity with the valuation of the capital assets as arrived at by the DVO, reason being that the DVO is an independent and statutory for resolving such controversies. To quote from the High Court order :- It is apparent from section 16A of Wealth-tax Act that these provisions mandate that after the Assessing Officer receives report of Valuation O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing his objection to the preliminary report and each and every objection has been addressed by the DVO. Ground no. 1 fails. 6. The second ground of appeal relates to the specific issues, which as per the appellant, the learned DVO has not considered in arriving at the fair market value of the property and is being considered with the third ground since the issue relates to the most appropriate fair market value of the property. In this regard, the Bombay High Court in the case of CIT vs. Prabhu Steel Industries Ltd. reported in 36 taxmann.com 393 held that it was necessary to afford and opportunity of being heard to the District Valuation Officer in view of the obligation cast upon the appellate authorities by virtue of the proviso of sec. 24(5) of the Wealth Tax Act, 1957 r.w.s. 50C(2) of the IT Act. Accordingly, the learned DVO, Solapur Shri E.P. Dhane was requested to be present and was duly heard on the various objections raised by the appellant on 19.11.2013. The first objection is that the comparable sale instances relied upon by the DVO are not of the tenanted properties but they are freehold and under self- occupation of the owners without any encumbrances, as can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bhandari were distributed between the two sisters in 1957 and this property was given as the share of Smt. Ramkunwar Chandak. Property at Survey no. 138B was given to Smt. Ayodhyabai Lahoti. However, Smt. Ayodhyabai Lahoti s name remained to be removed from the property card, which dispute is still pending at the time of signing the development agreement. Therefore, it is seen from the registered sale deed itself that the property is disputed property and was jointly held by 08 co-owners, who have together sold/transferred the property to the developer. The last and fourth sale instance referred by DVO, appearing at Sl. No. 4 of the table pertains to land and building at survey no. 273, Narayanpeth, Pune, registered by document no. 4023 on 16.07.2004. At the time that the property was handed over to M/s J.J. Construction for development purposes, it is noticed that there were 8 tenants on the property, who were paying rent to the owner Shri N.B. Lahoti. However, since the rent collected was very negligible and Shri Lahoti could not paid corporation charges/taxes out of the rent so collected, he decided to hand over the property to M/s J.J. Construction for development. The sale dee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The land rate calculation as on the date of valuation/date of sale i.e. 21.04.2007 has been arrived at by the DVO as under : Sale Instance No. 1 Rate 14758 Add for time gap of 3 8854.8 years 11 months at 60% TOTAL 23612.8 Add for location at 20% 4722.56 TOTAL 28335.4 Sale Instance No. 2 Rate 19934 Add for time gap of 3 11960.4 years 10 months at 60% TOTAL 31894.4 Add for location at 15% 4784.16 TOTAL 36678.6 Sale Instance No. 3 Rate 18100 Add for time gap of 3 9050 years 2 months at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valuer s report in the form O-1 by one Mr. Shekhar L. Thite, whose registered number is quoted as CAT-A-22/1988. First of all the sale instances cited by you is of flat, which is not at all comparable. Further the regd. valuer has deducted the cost of construction and builders profit randomly without supporting documentary evidences. Moreover the builder charges on saleable area which is 25% to 30% more than the actual built up area. Thus the built up area excluding common circulating area, balcony area and terrace area etc. it works out to 70% of salable area. In city area the permissible FSI is 2 or more Considering FSI = 2, the land area appurtenant to the flat works out to be 35% of the salable area and the land rate works out to be much on higher side (in this case 1661X100/35 = 4756/- per sqft.) The logic of deduction of 50% for tenants is totally incorrect. As per rent control Act at best the tenants right is protected to the equivalent area in his possession while redeveloping the property with revised standard rent. The tenants cannot share 50% of the consideration. Further he states that the area in possession of the tenants in total is 7500 sqft. And adopt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the location of the flat cited for comparable sale instance is far inferior to the appellant s property, which is incidentally located on Hatti Ganpati Road, Opposite Bhave High School in Sadashiv Peth, Pune and therefore, is more centrally located than the sale instance cited. Therefore, it has to be held that the DVO has correctly considered them as nearby locations and adopted the value of the properties at these locations for comparable sale instances. So far as time gap is concerned, the appellant s registered valuer is himself relying on the sale instance of February 2001, which in fact predates the sale instances of the years 2003 and 2004 taken into consideration by the DVO. 6.7 The fifth and the final objection is that the sale instances that have been relied upon by the DVO are very small portions of land admeasuring between 100 to 500 sq.m., whereas in the appellant s case the land involved is more than 4450 sq.m. in total, which is about 9 to 44 times the size of the land relied upon. This objection is also not acceptable since firstly, the appellant share out of the total land of area of 4450 sq.m. is only 1112 sq.m. (being share). Secondly, the DVO S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... co- ownership, tenancy encumbrances, size and location of land. The comparative sale instances are also those relating to tenanted and disputed properties. It is also noted that the Karnataka High Court in V.C. Ramachandran vs CWT reported in 126 ITR 157, disagreed with the proposition that the principle applicable for the interpretation of taxing statute namely that if two opinions/interpretations were available, the one which is favourable to the assessee should be adopted and held that if there are more than one valuation of the same property, the one which is reasonable and nearest to the correct market value, having due regard to all the relevant facts and circumstances of the case alone should be accepted even if the said valuation is a higher valuation. Hence, there can be no infirmity in the Assessing Officer s action in adopting the DVO s report u/s 50C(2). Accordingly, Ground Nos. 2 and 3 stand dismissed. 7. Unnumbered ground of appeal says that appellant be allowed to add, amend, alter or delete any ground of appeal at the time of appellate proceedings. No such option has been exercised by the appellant during the appellate proceedings. Therefore, it is clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of land to M/s. Natu Developers. He also placed on record the copy of the aforesaid orders and registered sale deeds in the paper book. He therefore submitted that since the subsequent event as described hereinabove go to the root of the matter and since those were not before the AO, in the light of these developments the matter be re-examined and prayed that the matter be remanded to AO for fresh examination. He further assured of co-operating by furnishing all the necessary documents as required by the AO. Ld. D.R. on the other hand supported the order of ld. CIT(A) and did not seriously object to the prayer of ld.A.R. of remanding the matter to AO in the light of developments stated by ld.A.R. 6. We have heard the rival submissions and perused the material on record. The issue in the present case is with respect to computation of capital gains. Before us ld.A.R. has submitted that certain material developments had taken place like bequeathing assessee s share in land in favour of Dilip Sopal, City Survey Officer passing the order by replacing the name of assessee with that of Dilip Sopal, assessee obtaining stay against the inclusion of name of Dilip Sopal in place of assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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