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TMI Blog2006 (11) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... lway Station on Devi Dayal Road. The land was sold during the relevant previous year and the assessee declared capital loss (long-term) of Rs. 44,57,635. The capital loss was arrived at by deducting from the sale price of Rs. 1,40,00,000 (assessee's share) the market value of the property as on 1-4-1981 which the assessee claimed at Rs. 71,26,500 the basis of a report of a registered valuer. Thereafter the assessee applied the indexation of the cost and declared capital loss. The Assessing Officer accepted the sale price declared but disputed the fair market value of the property as on 1-4-1981 as claimed by the assessee. He therefore referred the matter of valuation to the District Valuation Officer (DVO) under section 55A in the course of the original assessment proceedings. They were completed accepting the value claimed by the assessee since the DVO's report was not received before the completion of the assessment. On receipt of the report the assessment was reopened under section 148 and the value estimated by the DVO at Rs. 19,96,000 as on 1-4-1981 was adopted in the reassessment and the capital gains were computed, after cost indexation, at Rs. 88,30,360. The value having be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order. He has relied on section 55A(b)(ii ) which permits the Assessing Officer to resort to the reference procedure if "having regard to the nature of the asset and other relevant circumstances, it is necessary so to do". The Assessing Officer has stated that the land in question is agricultural land and therefore it was necessary for him to refer it to the DVO. (c)The registered valuer is not a qualified agricultural land valuer and hence his report commands no special acceptance. (d)The land remained agricultural till it was sold and was not converted into residential land fit for development for real estate. Therefore it could not have commanded the value claimed by the assessee as on 1-4-1981. This aspect has been brought out in the report of the DVO. Therefore, his report is to be preferred to that of the registered valuer where this aspect has not been touched upon. (e)The authorities cited by the learned counsel for the assessee are not relevant to the issue on hand and hence not applicable. 5. We have carefully considered the rival contentions and the facts brought on record. As far as the jurisdiction of the Assessing Officer to refer the matter of valuation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1981 any assessee would like to put it at a high figure since that will reduce the amount of capital gains. In such a case, it would be the attempt of the Assessing Officer to place a lower value than what has been declared by the assessee. In this situation, clause (a) of section 55A cannot apply because the primary condition for the application of the clause is that the Assessing Officer should be of opinion that the value declared by the assessee is less than the fair market value. In the present case, the Assessing Officer could not have invoked this clause because he was of opinion that the value declared by the assessee as on 1-4-1981 was more than the fair market value of the asset. 7. It now becomes necessary for us to see if clause (b) of section 55A is applicable. Section 55A, so far as it is relevant for our purpose, is as under : "55A. With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer- (a )in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not of the opinion that the value so claimed is less than its fair market value. Both these conditions, as already noted, are not present in the case on hand. Therefore, even sub-clause (ii) of clause (b) cannot validate the reference under section 55A. 10. On merits, we find that in the valuation report of the registered valuer (pages 38 to 45 of the assessee's paper book), the registered valuer has brought out the facts that the land is situated about 32 kms. from Bombay in a middle class locality, that it was agricultural land on which some old structures existed and later to be developed as per development plan, that civic communities like schools, offices, hospitals etc. were available within reasonable distance, that the land had potential for development, that it is assessed to land revenue etc. The registered valuer has valued the land after a personal inspection of the property on 18-3-1997. The land was purchased as agricultural land in 1942 by the late Shriman Bawa Maharaj Singh Ji and his elder brother the late Shriman Bawa Gurmukh Singh Ji. At that time it measured about 55 acres and 2 guntas. The lands were adjoining each other and were purchased under separate dee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areas aggregating 1,190 sq. yds. Rs. 6,42,600 Total : Rs. 1,42,53,040 Approximately : Rs. 1,42,53,000 11. As against this, the DVO has estimated the fair market value of the property as on 1-4-1981 at Rs. 39.92 lakhs at the rate of Rs. 21 per sq. ft. His report is dated 19 February, 1999 and a copy of the report is placed at pages 60 to 70 of the assessee's paper book. The assessee had submitted the registered valuer's report before him and other details, such as, copy of the 7/12 extract, plan of the land, copy of the certificate under section 269UL (3) of the Income-tax Act, etc. to the DVO. The DVO inspected the property on 13-7-1998 in the presence of the assessee's son. He noted that by a collaboration agreement dated 7-10-1994, the subject property was transferred to Shri Randhir Singh Bhatta and others for development for consideration of Rs. 2,80,00,000 plus 20 per cent of the balance net proceeds in excess of the figure. The DVO has also accepted that the land is an agricultural land surrounded by residential area and is situated in a middle class locality with all civic amenities available nearby. He has based his report on the two sale instances of properties on 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce method and the capitalization method. According to him, the value on the basis of capitalization method would come to Rs. 1,09,10,250 whereas according to the sale instance method (instances given in Annexure '3'), the value would be Rs. 1,39,65,003. The average came to Rs. 1,24,37,626 which has been rounded off to Rs. 1,24,00,000. In Annexure '3', he has given the sale instances which have been given by the registered valuer whose report was filed with the DVO. There is however a minor difference in the estimate between the two, hardly Rs. 3 lakhs. 13. The CIT (Appeals) preferred to follow the report of the DVO and thus confirmed the estimate of the fair market value as adopted by the Assessing Officer. 14. We have carefully considered the facts and the rival submissions. It is clear on the basis of the valuation reports perused by us that all the three valuers are agreed that the land at the material time was agricultural land and they are also agreed that it has huge potential for development since it is surrounded by lands which have already been subjected to development. It is, therefore, a reasonable inference that it was only a matter of time that the subject land woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20, 1201 etc., Plot No.1169 measuring 1,384 sq. yds. in all and a 44 per cent share in 1,365 sq. yds. of land fell to the share of the assessee and Bawa Abhai Singh, each having 50 per cent share. If a part of the entire holdings of late Shriman Bawa Maharaj Singhji, when sold on 24-3-1981, could fetch a price of Rs. 828 per sq. yd., we do not see why this sale instance cannot form the basis of the estimate of the fair market value of the assessee's land as on 1-4-1981. We are afraid that the DVO has not attached due importance and weight to this sale instance and has brushed it aside unreasonably. 15. Even if it is assumed that the land should be valued as an agricultural land, the assessee has sought to submit a report from one A.P. Jayaram, who is a Government registered valuer of agricultural lands and farms, before the CIT (Appeals) vide letter (dated nil), a copy of which is placed at pages 55-57 of the paper book. The CIT (Appeals) does not appear to have dealt with this report, and there is no reference to the same in his order. This is a detailed report as noticed by us earlier and therein the estimate of the fair market value of the land as agricultural land has been tak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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