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TMI Blog2019 (11) TMI 1092X X X X Extracts X X X X X X X X Extracts X X X X ..... fair market value has to be determined based on the actual character of the property and the sale instances of the similarly situated property. In the case in hand, when the sale instances are available and which support the case of the assessee that the fair market value of the property cannot be more than the purchase consideration, then no addition is called for under section 56(2)(viii) of the Act. The addition by the AO and sustained by the ld. CIT (A) is deleted. - ITA No. 1137/JP/2018 (Assessment Year : 2014-15) - - - Dated:- 3-10-2019 - SHRI VIJAY PAL RAO, JUDICIAL MEMBER Assessee by: Rano Jain (Advocate) Revenue by: Shri A.K. Mahela (JCIT) ORDER PER VIJAY PAL RAO, JM : This appeal by the assessee is directed against the order dated 24.07.2018 of ld. CIT (Appeals)-1, Jaipur for the assessment year 2014-15. The assessee has raised the following grounds of appeal :- 1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax [CIT(A)] is bad both in the eye of law and on facts. 2. On the facts and circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition made by AO on the basis of wrong estimates without bringing forward any corroborative material/evidence in this respect. 12. The appellant craves leave to add, amend or alter any of the grounds of appeal. 2. The assessee is an Individual and filed his return of income on 30.03.2015 declaring total income of ₹ 4,93,170/-. During the year under consideration, the assessee has purchased a plot of land bearing no. 15A (East Part), Sanjay Nagar, Kalwar Road, Jhotwara, Jaipur for a consideration of ₹ 23,25,000/-. The AO issued a letter under section 133(6) of the IT Act to the Dy. Registrar-VII, Chitrakoot Stadium, Jaipur for providing copy of Registered Sale Deed as well as the Stamp Duty valuation of the property. The Sub Registrar-VII, Jaipur furnished the information that the property was valued for the purpose of stamp duty at ₹ 56,08,843/- though it was a revision of the valuation after the registration of sale deed. Since the valuation of the property for stamp duty purposes was revised from ₹ 25,98,265/- to ₹ 56,08,843/-, the AO invoked the provisions of section 56(2)(vii) and treated the differential amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property is situated on the road side and there are shopping malls in the surrounding areas. Therefore, the valuation was done by considering the property as commercial whereas the property in question was a residential plot of land as per the record of the JDA as reflected in the Lease issued by the JDA in favour of the owner from whom the assessee has purchased the property. She has referred to the Sale Deed vide which the assessee purchased this property as well as the sale deed vide which the remaining part of the property was sold by the owner. The ld. Counsel has also referred the sale deed dated 27th February, 2015 whereby the assessee sold this property for a consideration of ₹ 23,50,000/-. Thus the ld. Counsel has submitted that the assessee has established the fact that the fair market value of the property cannot be more than the purchase consideration shown in the sale deed and paid by the assessee. She has relied upon the following decisions :- Shri Vijay Kumar Patni vs. ITO 2019 (7) TMI 852-ITAT Jaipur. N. Revathi vs. ITO 2014 (4) TMI 387-ITAT Hyderabad. Ravi Kant vs. ITO (2007) 110 TTJ 297 (Delhi) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is manifest from the DVO s report that he has simply called for the DLC rate from the Sub Registrar and from the rates provided by the Sub Registrar, he has applied the commercial rate provided for the area in which the property is situated. Thus ignoring the fact that the property was not converted for commercial use cannot be equated with the commercial property despite its potential use may be for commercial purposes but that is all uncertain and a matter of future use.The valuation of the property has to be determined as on the date of transaction of purchase/sale. Thus, as on the date of purchase and even when the assessee again sold the property in the year 2015 it remains a residential property. The assessee has brought on record the sale instance and both the sale instances are in respect of the same property, one is the sale by the owner of the remaining half portion and another is sale by the assessee of the same property. Therefore, at the time of determination of fair market value by the DVO, both these sale instances were available. Ignoring these sale instances, determining the fair market value by the DVO is a serious irregularity and, therefore, the fair market valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value the property de novo, in the light of our above observations, and in case the valuation so arrived at by the DVO is less than ₹ 11,42,100, the AO shall adopt the fresh valuation so done by the DVO for the purpose of computing capital gains under s. 48 of the Act. We direct so. Thus the Tribunal has observed that the valuation determined by the DVO based on circle rate is a futile exercise instead of determining the fair market value on the basis of the comparable sale instances of the similarly situated property. Similarly in case of Chandra Bhan Agarwal vs. Addl. CIT (supra), the Kolkata Benches of the Tribunal has held in para 7 8 as under :- 7. In view of the above facts, now the question arises as to why the fair market value assessed by DVO as per the provision of sec. 50C(2)(a) of the Act be adopted. The expression fair market value , in relation to any immovable property transferred, meant the price the immovable property ordinarily fetch on sale in the open market on the date of execution of the instrument of transfer of such property. The fair market value is the best price which vendor can reasonably obtain in the circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions and germane considerations have not been considered while assessing the value. Hon'ble Supreme Court has ruled for determining the fair market value, no doubt in the context of Land Acquisition Act, 1894, but the same holds the field even in the case of valuation to be made by the DVO. Hon'ble Apex Court has considered the issue in Chimanlal Hargovinddas v. Special Land Acquisition Officer AIR 1988 SC 1652, 1656- 58, in Suresh Kumar v. Town Improvement Trust, Bhopal [1989] 2 SCC 329 (SC) and in Land Acquisition Collector v. Sukhdev Singh AIR 1995 HP 150, laid down following guiding factors:- (1) The market value of land under acquisition has to be determined as on the crucial date of publication of the notification under section 4 of the Land Acquisition Act (Dates of Notifications under sections 6 and 9 are irrelevant). (2) The determination has to be made standing on the date line of valuation (date of publication of notification under section 4) as if the value is a hypothetical purchaser willing to purchase land from the open market and is prepared to pay a reasonable price as on that day. It has also to be assumed that the vendor i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Narrow strip of land with very small frontage compared to depth. 4. Nearness to developed area. 4. Lower level requiring the depressed portion to be filled up. 5. Regular shape. 5. Remoteness from developed locality. 6. Level vis- -vis land under acquisition 6. Some special disadvantageous factor which would deter a purchaser. 7. Special value for an owner of an Adjoining property to which it may Have some very special advantage. (11) The evaluation of these factors of course depends on the facts of each case. There cannot be any hard and fast or rigid rule. Common sense is the best and most reliable guide. For instance, take the factor regarding the size. A building plot of land say 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Authority for charging stamp duty and his valuation is not based on any factors as enumerated by Hon'ble Supreme Court in the above-referred cases. These, above referred cases of Hon'ble Supreme Court, were confronted to DVO. Even Ld. Sr. DR, Shri S.K. Roy could not support the valuation report and fairly conceded that at the time of registration of sale deed of the assessee's property, there was no circle rates for assessing the fair market value for the purposes of collection or levy of stamp duty is fixed. In such circumstances, now we have to determine what should be the fair market value. As argued by ld. Counsel for the assessee, Shri S.M. Surana and the valuation report as assessed by the stamp valuation authority, the same property vide report dated 08.09.2008 assessing the market value at ₹ 76,18,872/- as filed before us can be considered. Hence, as directed by Hon'ble Calcutta High Court, considering the fair market value determined by A.D.S.R., Sutahata, Govt. of West Bengal, i.e. the valuation authority report dated 08/9/2008 assessing the fair market value of this property as on 08/9/2008 at ₹ 76,18,872/- seems to be fair and reasonable fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to such unauthorized used the Nagar Nigam issued a show cause issued dated 24.12.2012. The assessee has also filed the sanctioned plan of the property in question as additional evidence in support of the claim that at the time of sale the property was a residential one and subsequent misuse of the same for commercial purpose will not enhance the fair market value. It is pertinent to note that though the locational advantage and actual use of the property for commercial purpose are certainly relevant factors for determining fair market value of the property but this itself will not be a ground to reclassify the property from residential but commercial one. Therefore, the rates of the commercial property cannot be applied to a property which is unauthorisedly used for commercial purpose. Though the locational advantage and actual of commercial use are the relevant factor for determining the fair market value but these cannot be the basis for treating the property as commercial one. Therefore, the fair market value of the property has to be determined on the basis of the prevailing rate in the area as well as on the basis of sale instance which can be considered as comparable cases. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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