9911796707
TMI Blog2009 (2) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... y sold was a tenanted property whose rental value as per the rent received was only ₹ 24,169; (b) that the property in question was governed by U.P. Rent Control Act; (c) that the provisions of s. 50C of IT Act, 1961 were not applicable to the property in question; (d) that the property in question was admittedly sold only for ₹ 1,20,00,000 (e) that it was a property owned jointly by four persons and could not be sold independently by any of them. 3. The learned CIT(A) further erred in not taking into consideration the additions made and improvements effected in the said property in years 1982-83, 1983-84 and 1990-91 with the expenditure of about ₹ 18,00,000 (indexed cost being ₹ 68,61,836). In his regard she illegally ignored to take into consideration the following evidences : (a) the valuation report by Shri Y.P. Mittal, registered valuer; (b) the affidavits of Kunwar Virendra Pratap Singh and Baleshwar Prasad who had special knowledge of the additions and improvements carried out to the property. 4. The report of DVO is not reliable and worthy of credence due to the following reasons : (a) no oral or documentary evidence is produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SVA, as sale consideration, in place of apparent sale consideration declared by the assessee at ₹ 1,20,00,000. In addition, the AO did not allow the claim of cost of improvement at ₹ 18 lakhs (at original cost prior to indexation) on the ground that no evidence was furnished to this effect. The assessee filed affidavits of two persons namely, Shri Kunwar Virendra Pratap Singh and Shri Baleshwar Prasad one of them claimed to be a friend, and subsequently relative, of Shri Vinay Kumar Singh. These two persons had stated in their affidavits that they have heard the matter of improvement in the above bungalow, from late Shri Vinay Kumar Singh and that it was further heard that handsome amount, in several lakhs, was invested. The AO sought supporting documentary evidence and when no supporting evidence came forth before him, he rejected these affidavits and thus claim of cost of improvement. The AO issued show-cause notice to the assessees, expressing his intention to adopt the valuation as per SVA in place of apparent sale consideration shown by the assessee. In response thereto assessee submitted a registered valuer's report according to which market value of the prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng reasoning : (i) The AO and DVO have stated that the cost of property in the area around the vicinity where the property was located was around ₹ 8,000 per sq. mtr. but the DVO has adopted the rate of ₹ 6,000 per sq. mtr. discounting the fact that the said property was occupied by a tenant. (ii) The rent capitalization does not give a fair market value as the area of 4312.26 sq. mtr. is situated in a prime locality. (iii) The AO and DVO had applied their mind to the issue. The valuation done by the DVO is more than as per SVA's valuation. (iv) DVO had given sufficient opportunity to the assessee and so the AO. (v) Further sufficient opportunities have been given to assessee at the appellate stage. (vi) Remands were given to the AO and AO's reports were given to the assessees but the specific findings of the DVO are not controverted. 6. Regarding confirming the disallowance of the claim of cost of improvement, the learned CIT(A) gave reasoning that-(1) No documents/ evidence such as bills, vouchers etc. are furnished. (2) A co-owner did not make such claim and when property was transferred, it was in a dilapidated condition as indicated in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Accordingly, she decided this issue against the assessee. Before us, the learned Authorised Representative submitted that as per s. 50C, once assessee objects to the valuation done by SVA then the AO is duty bound to refer the property to the DVO and once the property is referred to the DVO then provisions of s. 50C(1) has no role to play. The value/sale consideration which can be adopted for the purposes of calculation of capital gains could be according to s. 50C(1) or 50C(2) or 50C(3). As per s. 50C(3), if the valuation done by the DVO is more than the valuation done by SVA then apparent sale consideration would be replaced by valuation done by SVA. But according to s. 50C(2) if the valuation done by the DVO is less than the valuation done by the SVA then valuation done by the DVO would be adopted. In other words, according to learned Authorised Representative, the lower of the two valuations i.e. one by SVA or done by the DVO would be adopted in place of declared sale consideration. Therefore, according to learned Authorised Representative, the valuation done by the DVO assumes importance. If the valuation is not according to law then it cannot be relied upon and therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll become otiose. He further relied on the decision of this Bench in the case of Mohd. Shoib vs. Dy. CIT in ITA No. 431/Luck/2008 decided on 21st Nov., 2008 [reported at (2009) 29 DTR (Lucknow)(Trib) 306-Ed.] for the proposition that reference to Valuation Officer is not mandatory as the word used therein is 'may' and secondly that if valuation done by the DVO, indicates fair market value less than the valuation done by the SVA, then it is not the lesser value which should be adopted but it is only the valuation done by the SVA which would be adopted as per s. 50C(1). We have considered the rival submissions and perused the material on record. So far as facts are concerned, the undisputed facts are that assessees inherited in the co-ownership a bungalow No. 2, Faizabad Road, Opposite IT College, Lucknow. This was sold by these assessees vide sale deed dt. 20th Nov., 2003. Apparent consideration is declared at ₹ 1,20,00,000 whereas valuation as per SVA is ₹ 2,48,19,410. The assessees objected to the proposal of the AO to substitute valuation as per SVA for apparent sale consideration as per sale deed by submitting a copy of registered valuer's report showin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riend and as such I used to visit him frequently. That during the course of several visits and conversations with the said Vinay Kumar Singh it came to knowledge of the deponent that said Vinay Kumar Singh carried out several work of repairing/improvement /construction /renovation in the land and building situated at Opposite IT College, 2-Faizabad Road, Lucknow wherein Mr. D.N. Jha, Hon'ble Chief Justice of Allahabad High Court was tenant and the said building was fully occupied by said tenant. That said improvements were of different nature as sometime boundary wall, sometime general renovation, sometime flooring etc. were made. Said improvements were carried out as deponent can remember during the years 1981-82 to 1991-92. That said Vinay Kumar Singh so many times told the deponent that said Judge/tenant made breach of trust as he did not vacate the property despite the repeated promises. Said Vinay Kumar Singh also told the deponent that on the basis of assurance of said tenant/Judge for vacating the building shortly he invested huge amount in lacs in several times during the said period of years." These two affidavits show some details of improvement as heard by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he building. Connected persons would be either father of the assessee, who unfortunately is deceased, or the supervisors or the labourers or the suppliers of the material or even Justice D.N. Jha who was living in the building in which improvement was carried out. Further, the averments in the affidavits only indicate "hearsay facts". What they accepted in the affidavits is what they heard from Shri Vinay Kumar Singh or his wife. It cannot be equivalent to averting facts to which they are privy. It is the evidence of witness or their participation in an event or in the transaction that would be relevant. Only such affidavit cannot be brushed aside without the deponent is cross-examined. But where witness is not privy to the facts, his affidavits has no relevance. Cross-examination of such deponents is not legally necessary. Hearsay evidence or affidavits based on such hearsay are irrelevant and are not required to be given credence by AO. They are merely self-serving evidence to be outrightly rejected. The reliance by learned Authorised Representative on the judgment of Hon'ble Supreme Court in the case of Metha Parikh (supra) is misplaced. In that case, in addition t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pared to valuation done by SVA as per s. 50C(3), or less, is not acceptable. In this regard, detailed discussion has been made in the case of Jitendra Mohan Saxena's case (supra) wherein Explanatory Notes issued by the Government while introducing s. 50C by the Finance Act, 2002 w.e.f. 1st April, 2003 has been referred to. According to this, if valuation done by the DVO is less as compared to valuation done by SVA, then lesser value will be adopted. The Tribunal in the case of Mohd. Shoib (supra) also has followed the same conclusion, arrived at in the case of Jitendra Mohan Saxena (supra). These conclusions are as under : (i) Where sale consideration is less than valuation by SVA the valuation as per SVA would be substituted for sale consideration for the purposes of computing capital gains. (ii) Assessee claims before the AO that fair market value of the property under transfer is less than valuation made by SVA and further that he has not disputed the valuation by SVA before appellate authorities under Stamp Duty Act. When such claim is made before the AO then AO, if there is no material to the contrary, will refer the property to DVO for determining the fair market value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t value of the capital asset so sold is less than the valuation done by the SVA, then it would be entirely covered under sub-s. (1). 24. In the present case, the challenge by the assessees and their learned Authorised Representative is that DVO has not taken into consideration the rules made under WT Act for valuing the property as per s. 16A of the WT Act as provided in s. 50C(2)of the IT Act. For the sake of convenience, we reproduce below s. 50C(2) of the IT Act : "50C. Special provision for full value of consideration in certain cases.-(1) .................. (2) Without prejudice to the provisions of sub-s. (1), where- (a) the assessee claims before any AO that the value adopted or assessed by the stamp valuation authority under sub-s. (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed by the stamp valuation authority under sub-s. (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, Court or the High Court, the AO may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-ss. (2), (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the Valuation Officer to amend any order passed by him under s. 16A. Rules 3, 4 and 5 of Sch. III (rules for determining the value of assets : Part A) of WT Rules provide procedure for valuation of immovable property given on rent, by considering gross maintainable rent and net maintainable rent and multiplying it by certain factor as mentioned therein. Further, where there is unbuilt area then adjustments are required to be done as per r. 6. Rule 8 provides an exception to r. 3 empowering the Valuation Officer to adopt land and building method in place of rent capitalization method in certain circumstances. The effect of these provisions in the procedure laid down under s. 50C would, in our considered view, be as under : (i) While determining the value of an asset on the date of sale within the terms of reference made by the AO, the Valuation Officer shall give an opportunity of being heard to the assessee by serving a notice, calling for accounts records or other documents, intimating to the assessee the value he proposes to estimate, inviting his objections and then adjudicating thereupon. Thereafter, Valuation Officer shall pass an order considering such evidence as he may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fects in the procedure or in the valuation or in the data used by the Valuation Officer which would convince the appellate authorities that valuation made by the Valuation Officer is defective and it requires reconsideration i.e. where valuation is required to be set aside or any reduction/enhancement is required to be made therein, then he will have to be called for by the learned CIT(A)/Tribunal. But, where no disturbance is to be made and order of the Valuation Officer is found in accordance with procedure and law then merely because assessee is objecting to the valuation so made, Valuation Officer need not be called by the appellate authorities. For our purposes, rules 3, 6 and 8 of WT Rules are important and therefore, they are reproduced as under : "Rule. 3. Valuation of immovable property.-Subject to the provisions of rr. 4, 5, 6, 7 and 8, for the purposes of sub-s. (1) of s. 7, the value of any immovable property, being a building or land appurtenant thereto, or part thereof, shall be the amount arrived at by multiplying the net maintainable rent by the figure 12.5 : Provided that in relation to any such property which is constructed on leasehold land, this rule sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt but does not exceed fifteen per cent of the aggregate area, by an amount equal to thirty per cent of such value; (c) where the difference between the unbuilt area and the specified area exceeds fifteen per cent but does not exceed twenty per cent of the aggregate area, by an amount equal to forty per cent of such value. Explanation -For the purposes of this rule and r. 6, (a) "aggregate area", in relation to the plot of land on which the property is constructed, means the aggregate of the area on which the property is constructed and the unbuilt area; (b) "specified area", in relation to the plot of land on which the property is constructed, means (i) where the property is situated at Bombay, Calcutta, Delhi or Madras, sixty per cent of the aggregate area; (ii) where the property is situate at Agra, Ahmedabad, Allahabad, Amritsar, Bangalore, Bhopal, Cochin, Hyderabad, Indore, Jabalpur, Jamshedpur, Kanpur, Lucknow, Ludhiana, Madurai, Nagpur, Patna, Pune, Salem, Sholapur, Srinagar, Surat, Tiruchirapalli, Trivandrum, Vadodara (Baroda) or Varanasi (Benaras), sixty-five per cent of the aggregate area; and (iii) where the property is situate at any other place, sev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -d) (f) 20% of aggregate area-20% of (a) 862.452 sq. mtrs. 36. This shows that difference between unbuilt area and specified area is 1094.291 sq. mtrs. whereas 20 per cent of aggregate area is only 862.452 sq. mtrs. Thus, the difference exceeds 20 per cent of aggregate area and therefore, as per r. 8(b) the provisions of r. 3 would not be applicable i.e. rent capitalization method cannot be applied. Therefore, other method being land and building mthod would be applicable. This has also been considered by the Valuation Officer in his report in para 3(c) as under : "It is also noted that the tenant was paying a rent of ₹ 161.13 per month for a property with a land area of 4312.26 sq. mtrs. and constructed area of 415.00 sq. mtrs. This cannot be the fair market rent of the property and therefore, the rent capitalization method cannot give the fair market value of the said property." Though he has not given the detailed reasoning but examination of the facts as above, indicates that the VO was justified in rejecting the rent capitalization method and adopting land and building method. While valuing the asset by land and building method it is found that rate of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B is consequential and will be worked out on the basis of assessed income. Therefore, no interference is called for. Initiation of penalty proceedings has to be dealt with separately and no prejudice can be caused by initiating the proceedings and it has no effect on the quantum of income computed by the AO, therefore, this ground is premature and only academic. It is rejected. In the result, appeal is dismissed. In the case of Manvendra Singh being ITA No. 77/Luck/2008, ground Nos. 1 to 4 relate to computation of capital gains. This has been discussed in detail in the case of Ramendra Vikram Singh and the issue is decided against the assessee. These grounds are, therefore, dismissed. Ground No. 5 relates to disallowance of ₹ 6,50,000 from capital gains. It was claimed that assessee had spent a sum of ₹ 6,50,000 on repairs and renovation of the property between January, 2004 to February, 2005. No evidence was submitted either before the AO or before the learned CIT(A) or before us. In the absence of any material, the claim cannot be allowed. Ground No. 6 relates to charging of interest under s. 234B and initiation of penalty proceedings under s. 271(1)(c) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
