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TMI Blog2019 (12) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT(A) is not convinced with the value determined by the DVO, as an extension of assessing authority, the CIT(A) ought to have referred the issue to the DVO again for reconsideration of the value. The valuation officer being expert, the CIT(A) is not allowed to tinker with the expert opinion without further reference to the DVO and in the process, the CIT(A) also has to give opportunity to the assessee to cross examine and to present his case before Departmental Valuation Officer along with the observations of the CIT(A). The entire process of examination, reexamination, reference was not conducted in the instant case. Therefore, there is no reason to not to accept the value determined by the valuation officer. Thus we are unable to sustain the order of the CIT(A) and hold that the assessing authority has no option except to accept the FMV determined by the DVO after making reference and proceed to compute capital gains by following provisions of sub section 50C(3) of the I.T.Act. Except the general remarks neither the CIT(A) nor the AO has found the specific defaults in the valuation report. Accordingly, we direct the AO to compute the capital gains adopting the value determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee admitted her 1/3rd share of ₹ 1,59,66,667/- for capital gains and after claiming the indexed cost of acquisition of ₹ 1,03,77,440/-, the assessee admitted the long term capital gains of ₹ 55,89,227/- as under : 1/3rd of Total consideration (4.79,00,000 x 1/3) ₹ 1,59,66,667/- Less Cost of Acquisition : 8210 sq.yards @200 = 16,42,000 (Market value taken @200 per square yard as on 1.4.1981. Therefore indexed cost of acquisition (16,42,000 x 632/100) ₹ 1,03,77,440/- Long Term Capital Gains ₹ 55,89,227/- 2.1. During the course of assessment proceedings, the Assessing Officer (AO) found that the co-owners have executed the sale deed for total sale consideration of ₹ 4,79,00,000/-, whereas, the guideline value of the property, as per Stamp Valuation Authority (SRO)was at ₹ 20,93,55,000/- and the co-owners have paid the stamp duty on the guideline ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Valuation Officer is incorrect and erroneous to the extent of allowances given in respect of the above factors and accordingly directed the AO to give allowance to the extent of 65% from the base rate and arrive at the full value consideration for the purpose of computation of capital gains. For the sake of clarity and convenience, we extract relevant part of the order of the Ld.CIT(A) in para No.5.3 to 5.4 which reads as under : 5.3. It is relevant to go into the valuation report, which has given the basis for arriving at the value as under : Rate Analysis based on Ground Reality of the Plot Rs. Base rate per one sq.yd = 25,000.00 Rate influencing factors 1. Location Add or medium commercial location on the building side 10.00% 2550.00 2. Lease Hold Reductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reduction of rate due to the presence of weaker section houses on the other side of the road at the frontage -2.50% -637.50 9. Irregular frontage Reduction due to short and irregular frontage -2.50% -637.50 Net adoptable rate after considering the influencing factors 7650.00 per sq.yd Fair market value as on 30.07.2009, 8210 sq.yds@7650 = 6,28,06,500/-. 5.4 From the perusal of the valuation report it could be seen that the valuation officer has taken the value determined by the stamp duty authority, as the base rate of the property and from that allowances/deduction have been made for various factors, such as leasehold right etc. The appellant's only objection to the stamp duty value was that her property was not freehold and was encumbered on account of the lease transactions entered with the purchaser in 1971, and as a result of which the market value would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld right etc. The appellant's only objection to the stamp duty value was that her property was not freehold and was encumbered on account of the lease transactions entered with the purchaser in 1971, and as a result of which the market value would be less. A perusal of the valuation report shows that allowance to the extent of 65% (refer items 2,3 4 of the table) has been given on account of encumbrance created by way of lease which can be considered justified in the facts of the case. The other factors (refer items 5,6,7,8 9 of table above) considered in the valuation report do not relate to encumbrance on account of leasehold right and are applicable to any property situate in that location or survey number and are not in any way unique or specific to the subject land. These factors are generally considered in fixing the market value for the purpose of stamp duty valuation. Therefore, apparently there is no justification for further allowance on account of these factors in the appellant's case. The value determined by the valuation officer is incorrect and erroneous to the extent that allowance was given in respect of these factors (items 5,6,7,8 9) and accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee s appeal required to be dismissed. 5. On the other hand, the Ld.AR submitted that the property was under litigation and also with leasehold right of 50 years upto 30.06.2021 vide registered lease deed dated 16.07.1971.Lots of litigations and complications were arose due to continuous possession and enjoyment of the land by the tenant and consequent to the compromise petition filed by the lessor and the lessee under Order-23 R-3 of C.P.C. dated 25.03.2005 and subsequent award of Lok Adalat in O.S. No.1279/2004 filed by the lessor and the lessee, before Lok Adalat, both the parties have agreed to transfer the property for a consideration of ₹ 2,62,35,000/- and sale deed was to be completed on or before 31.05.2005. However, due to the issues of Urban Land Ceiling Act, the assessee could not obtain the Urban Land Ceiling Certificate and meanwhile the rates have gone up and agreed to transfer the property for a consideration of ₹ 4,79,00,000/- in place of ₹ 2,62,35,000/-. Therefore, the Ld.AR submitted that the property was under dispute with pending litigation arising of lease hold rights given by the assessee and the location of the property wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.07.2009 and requested to adopt the actual sale consideration of ₹ 4,79,00,000/- as full value of sale consideration. Accordingly requested to set aside the order of the Ld.CIT(A) and delete the addition made by the AO. 6. We have heard both the parties and perused the material placed on record. In the instant case, the assessee has sold the property along with two other co owners situated at T.S.No.1176 (Part), Block 36, Allipuram Ward, Visakhapatnam to M/s Dolphin Hotels Ltd., vide sale deed dated 30.07.2009 for a sale consideration of ₹ 4,79,00,000/-. The said property was under lease to Sunbeam Hotels Pvt. Ltd., through lease deed dated 16.07.1971 registered as Document No.4409 of 1971 at Sub Registrar Office, Visakhapatnam. The said Sunbeam Hotels Private Ltd. was converted into public limited company by name Dolphins Hotels Limited which is the purchaser of this property. Disputes arose between lessor and the lessee and both of them have approached the Principal Senior Civil Judge, Visakhapatnam and filed suit in O.S.No.1279 of 2004. Later both the parties have entered into compromise agreement dated 25.03.2005 and the vendors have agreed to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... air market value of SRO. In a nut shell, the AO is required to take the fair market value as per SRO value or the value determined by the valuation officer whichever is less for the purpose of computing the capital gains as per the provisions of the Act. The section did not give any exceptions or discretion to the AO to reject the valuation report when the value determined by the valuation officer does not exceed the fair market value as per SRO. The Ld.CIT(A) was also not given any powers to do what the AO is not permitted to do in section 50C of the Act. In the instant case, the assessee has explained the reasons and disadvantages for getting the lesser rate. The property in question was in litigation and both the parties have agreed to transfer the property at the cost of ₹ 2,62,35,000/- before the Lok Adalat and both of them have agreed to complete the transaction before 31.03.2005. The purchaser has given advance for purchase of land and entered into an agreement on 06.08.2007 and the entire sale consideration was paid by the purchaser on 28.07.2008. All these facts were not considered by the Ld.CIT(A) while disposing the appeal. Since the property in qu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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