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TMI Blog2019 (7) TMI 1573X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable inspite of best efforts put in by the DVO, in our view, he should consider specific adjustments to the DLC rate as the DLC rate is more like a guideline rate laid down by the stamp duty authority and may not in all situations consider the specific of a particular property in terms of location, size, shape, frontage, connectivity etc. or consider exploring other valuation methodology so specified as may be applicable in the facts of the present case. We therefore find that where the DVO has finally adopted the DLC value which at first instance has been disputed by the assessee, the whole purpose of reference of matter u/s 50C(2) has not been correctly appreciated by the DVO. Reliance solely on the DLC value of the land by the DVO is not appropriate and the DVO should have considered and adopted other valuation methods which are more appropriate and elaborately discussed in the guidelines laid down by the Income Tax Department for valuation of immovable properties. In this regard, our reference was drawn to development method which can be adopted (as stated in the Department s valuation guidelines) in situations where the comparable sales of large tracts of land are not ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PAL RAO, JM AND SHRI VIKRAM SINGH YADAV, AM For the Appellant : Shri Sidharth Ranka (Adv.) Shri Ashish Khandelwal (CA) For the Respondent : Shri Varindar Mehta (CIT) ORDER PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A)-2, Udaipur dated 12.02.2018 wherein the assessee has taken the following grounds of appeal:- 1. That on the facts and in the circumstances of the case, the ld. lower authorities grossly erred in invoking the provision of 50C of the Income-tax Act, 1961 and in adopting the total price of the property at ₹ 3,58,96,520/- as against actual sales consideration of ₹ 1,27,72,600/- shown by the assessee appellant and in making addition on account of long term capital gain on the differential value. 1.1 That on the facts and in the circumstances of the case, the ld. lower authorities grossly erred in relying upon the value adopted by the DVO which was arbitrary, excessive and do not present fair market value of the property and overlooked the valuation report of registered valuer, comparative sales instances and also overlooked the adverse factors which were attached to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excessive and do not represent the fair market value and also listed down specific instances where the assessee disagrees with the finding of the Valuation Officer. The Assessing Officer however rejected the objections taken by the assessee and stating that the assessee herself requested to refer to the case to the Valuation Officer and the DVO has intimated the fair market value of the properties after visiting the properties and as per norms and after considering the objections of the assessee. Therefore, the contentions of the assessee were not found acceptable by the AO. Against the said findings, the assessee moved in appeal before the ld. CIT(A). 4. As per ld. CIT(A), the reference to the Valuation Officer was made by the AO on the request of the assessee and now the assessee is challenging the report of the DVO. As per ld CIT(A), the whole stand taken by the assessee is out of context as per law it was mandatory for the AO to accept the DVO s report and therefore, the AO has been fair in computing the long term capital gain taking the lower of the valuation determined by DVO and the stamp duty authority and accordingly he confirmed the finding of the Assessing Officer. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated the same in right perspective. It was further submitted that the ld. CIT(A) has also not appreciated the aforesaid contentions and stated that since reference to DVO was made on request of the assessee. Therefore, no question/objection on report of DVO can be made by the assessee. In this regard, it was submitted that the ld. CIT(A) overlooked the settled law that the DVO report is not binding upon appellate authorities. The ld. CIT(A) was duty bound to consider the objections of assessee on DVO report point by point. In this regard, our reference was drawn to the Co-ordinate Bench decision in case of Suresh C. Mehta vs. ITO (2013) 35 taxmann.com 230 (Mumbai) for the proposition that valuation report is not binding upon appellate authorities. Further, reliance was placed on the Hon ble Madras High Court in case of M/s Jagannathan Sailaja Chitta vs. ITO [2019] 49 ITCD 121 (MAD) for the proposition that ld. CIT(A) was duty bound to consider point to point objection of assessee over DVO report. Further, reference was drawn to the Co-ordinate Bench decision in case of Ravi Kant vs. ITO (2007) 110 TTJ 297 for the proposition that sole reliance on DLC value by DVO will defeat the ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s plot in colony, on the contrary housing scheme colony itself. In this regard, our reference was drawn to assessee s paper book page No. 48 and it was submitted that the consideration of DLC rate for the undeveloped/semi developed land i.e. ₹ 670/sq yds was more realistic instead of new colony DLC rates considering the fact that there were no electricity, sanitation, market, water supply, community centre no development. 10. The next contention which has been raised by the ld. AR is that the evaluation of FMV by DVO by relying on DLC rates of Plots is like comparing raw materials value with finished goods without allowance for processing cost (Development Cost), wastage (earmarked facility land as per statutory provision processing time ( Interest factor for delay). It was submitted that the DVO overlooked that any colonizer will be bound to incur massive development cost in the form of road construction, laying water sewer lines, Electric Poles, Entry Gate, landscaping, plot demarcation, footpath parks etc. which probably amount 20-25% of project cost. It was further submitted that the DVO overlooked that for converting land into residential plots, 40% of entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds and community areas, parks/playgrounds and community areas, will have to be excluded from the total extent of the acquired land. The standard deduction in this behalf is one-third (33%). But merely deducting the areas required for roads, drains, parks and community areas, will not convert a large tract of agricultural or undeveloped land into a developed residential layout. For that, considerable financial outlay has to be made. All these expenditure and factors are standardized into another one-third (33%) deduction towards expenses of development. Thus, if the valuation of a large extent of agricultural or undeveloped land is to be based on the sale price of a small developed plot in a private layout, then the standard deductions should be one-third (for roads etc.) plus one-third (for expenditure of development) in all two thirds (or 67%), as development cost from the value of small plot. 14. Another contention raised by the ld. AR is that the DVO has not given any concession for IOCL pipe line passing from centre of land for which area of around 393 X 41.81/2 mtr i.e. 8214 sq mtr was unusable for plotting being Green Belt no construction zone. In this regard, it was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d i.e. land occupied by well portion at DLC rate for converted land. The same shows sole arbitrariness in the report of DVO while determining the FMV. 17. The ld. DR is heard who has vehemently argued the matter and submitted that once the assessee has raised her objection in terms of adoption of the stamp duty authority and thereafter the matter has been referred by the Assessing Officer to the DVO u/s 50C(2) of the Act, the AO is bound to follow the report so submitted by the DVO. Further our reference was drawn to the assessment order wherein AO has given the finding that the various objections raised by the assessee have been duly addressed by the DVO and there is nothing further which is left to the discretion of the Assessing Officer in terms of examining the contentions so raised by the assessee. He accordingly supported the findings of the Assessing Officer and requested for affirming the order of the ld CIT(A). 18. We have heard the rival contentions and perused the material available on record including the valuation report dated 16.03.2016 issued by the DVO u/s 50C(2) of the Act and the valuation report of the registered Valuer dated 18.01.2016 as submitted by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither of the parties before us. In such a situation, we are of the considered view that the reliance solely on the DLC value of the land by the DVO is not appropriate and the DVO should have considered and adopted other valuation methods which are more appropriate and elaborately discussed in the guidelines laid down by the Income Tax Department for valuation of immovable properties. In this regard, our reference was drawn to development method which can be adopted (as stated in the Department s valuation guidelines) in situations where the comparable sales of large tracts of land are not available but sales of small plots are available and secondly, where the land is ripe for use for building purposes and it possesses necessary potential for urban use. In our view, the fact pattern of the present case and even as per the findings of the DVO that comparable sale instances are not available and that the property is very big residential converted land and has good potential for group housing which can fetch the best value of the property, the development method seems to be more appropriate rather than land and building method as presently adopted, however, we find that there is nothi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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