TMI Blog2006 (11) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... ach 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. In our view, there is no justification for adopting the fair market value of the land as on 1-4-1981 at Rs. 19,96,000 being 50 per cent of the estimated value of Rs. 39.92 lakhs as per the DVO. Taking into consideration all the circumstances and the factors stated elaborately in the two valuation reports filed by the assessee and having regard to the huge potential of the land for being converted into residential use and being fully aware of the fact that as on 1-4-1981, the land has not been officially converted into non-agricultural use, we are of the view that a reasonable estimate of the fair market value would be that estimated by the registered valuer at Rs. 1,42,53,000 on the basis of the sale instance dated 24-3-1981 of a part of the lands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 been confirmed by the CIT(A) the assessee is in further appeal before the Tribunal. 3. In support of the grounds, the learned counsel for the assessee submitted as follows : ( a )That the Assessing Officer lacked the jurisdiction to refer the valuation to the DVO under section 55A. ( b )He made the reference to the DVO "surreptitiously" without informing the assessee or making an endorsement in the order sheet. ( c )Section 55A does not apply to the case of the assessee. It applies only if the fair market value of the asset is more than what is declared by the assessee. In this case the fair market value as on 1-4-1981 as declared by the assessee is more than what is estimated ultimately by the DVO and to such a situation the section in terms does not apply. ( d )Even section 55A( b ) is not applicable because this is a case where the assessee s valuation is supported by the report of a registered valuer. ( e )The valuation report of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed 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 the DVO under section 55A is concerned, a few aspects have to be noticed. It was during the original assessment proceedings that the Assessing Officer made the reference, but since the report of the DVO was not received by him before the completion of the assessment, he completed the assessment as per the value declared by the assessee and reopened the assessment on receipt of the DVO s report. The assessee challenged the notice of reassessment by filing a writ petition before the Hon ble Delhi High Court but the same was dismissed by the Hon ble Court and the decision in Bawa Abhai Singh v. Dy. CIT [2002] 253 ITR 83. Rightly therefore the assessee does not wish to press the grounds challenging the jurisdiction of the Assessing Officer to reopen the assess-ment. So far as the validity of the reference under section 55A is concerned, the fact that the assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. 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 Assessing Officer is of opinion that the value so claimed is less than its fair market value; ( b )in any other case, if the Assessing Officer is of opinion ( i )that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf; or ( ii )that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do," From the above it is clear that clause ( b ) will not apply to a case where the value of the asset as claimed by the assessee is on the basis of an estimate made by registered valuer and the Assessing Officer is of the opinion that the value so claimed is less than its fair market value. This is the import of the words "in any other case" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 deeds of conveyance. Both were members of a larger joint family and there were disputes amongst the members of the family which were ultimately settled under an arbitration award passed by Hon ble Justice Meherchand Mahajan, retired Chief Justice of India in 1956. As per the award, about 1,75,000 sq. yds. of agricultural land fell to the share of late Shriman Bawa Maharaj Singh Ji. Disputes arose amongst the legal heirs of Bawa Maharaj Singh Ji also and were compromised in 1991. The assessee is the grand-daughter-in-law of Bawa Maharaj Singh and received the land under a family settlement arrived at in 1992. The land is located in Mulund, which is a part of the Municipal Corporation of Greater Bombay. Though rapid urbanization and construction activity all around the land took place, the land in questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement 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 18-12-1982 and 29th October, 1984. These are given in Annexure X to his report. It is seen therefrom that the sale instance of 18-12-1982 is of a flat in Niranjan Building, Mulund West. The area of the flat is 450 sq. ft. and the land rate has been shown at Rs. 175 per sq. ft. The second sale instance is of land bearing Survey No. 147 at Nahur Village, Mulund West. It was transferred at the rate of Rs. 34 per sq. ft. The DVO has stated that these sale instances best reflect the value of the subject property on the date of valuation. He has commented that the sale instances quoted by the registered valuer were not substantiated by any evidence and at any rate, the value was very high particularly in view of the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 would also be developed as residential use after obtaining the necessary approvals from the concerned authorities. It is significant that the land was sold to an uncle of the assessee who was in the business of property development. The indications are clear that the land was no longer to be treated as agricultural land in the real sense but was looked upon by everyone concerned as a land fit for development. In this situation, the estimate of the fair market value as on 1-4-1981 cannot ignore the ground realities and due weightage should be given to them. On this basis, if we approach the three valuation reports, we find that the report of the DVO does not take due notice of the ground realities though he ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 taken at Rs. 1,24,00,000 as on 1-4-1981. This valuer has adopted the average of the income capitalization method and the sale instance method and the sale instances relied upon by him are the same as those relied upon by the registered valuer whose report was considered by the DVO. In our view, therefore, there is no justification for adopting the fair market value of the land as on 1-4-1981 at Rs. 19,96,000 being 50 per cent of the estimated value of Rs. 39.92 lakhs as per the DVO. Taking into consideration all the circumstances and the factors stated elaborately in the two valuation reports filed by the assessee and having regard to the huge potential of the land for being converted into residential ..... X X X X Extracts X X X X X X X X Extracts X X X X
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