TMI Blog2014 (8) TMI 751X X X X Extracts X X X X X X X X Extracts X X X X ..... tain specific issues raised by the assessee in this regard, he has not properly given discount towards the same - the value of the property on the date of sale of comparable cases cannot be applied to the assessee's property, which was sold on 29/09/2006 - assessee's objection is valid. If at all the DVO is to consider comparable sale instances, then, he has to consider the sale instances of the relevant date when the assessee sold property or dates proximate to that date - considering the appreciation in value of the property as per the SRO guide line the discount given by the DVO on backward calculation is not fair - the value determined by the DVO cannot be treated as the fair market value of the property - the sale consideration shown by the assessee in absence of adequate evidence cannot be accepted - As it appears neither any physical verification has been done at any stage to ascertain the exact extent of land nor any conclusive evidence has been brought on record to establish such claim – thus, the matter is to be remitted back to the AO for ascertaining the fair market value of the property as on the date of sale – Decided partly in favour of Assessee. - ITA N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh is 623 sq.yards, but, physical availability of land was 580 sq.yards with a shortage of 48 sq.yards. 2. due to severe vaastu defect, area of 125 sq.yds was not usable for construction purposes. 3. vendee had paid the consideration after deducting the amounts towards above defects. In view of the objection raised by the assessee in respect of valuation made by the SRO, AO in terms with section 50C(2) of the Act, made a reference to the DVO for ascertaining fair market value of the property. The DVO called for the objections of the assessee and after considering the same, determined the fair market value of the property at ₹ 1,75,32,364/- vide his valuation report dated 29/12/2011. Though, the assessee objected to the fair market value determined by the DVO, but, the AO rejecting objections of the assessee, adopted the fair market value determined by the DVO at ₹ 1,75,32,364/- as the deemed sale consideration received by the assessee and, accordingly, computed the short term capital gain at ₹ 78,58,884/-, as a result of which, the total income was determined at ₹ 78,68,220/-. Being aggrieved of the assessment order, so passed, the assessee preferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue for the reasons that the plot sold had severe 'Vasthu' defects and on the physical measurement, the area of the plot was short by 43 sq.yards. 3. The learned CIT(A) ought to have appreciated that the method of valuation done by the DVO is not acceptable and cannot be taken as evidence. 5. As can be seen from the additional ground, Ground No. 1 is challenging the validity of proceeding u/s 147 of the Act, whereas, ground Nos. 2 3 are more or less off-shoots of the main ground. Therefore, ground Nos. 2 3 of additional grounds can be considered along with the main grounds. 6. So far as additional ground No. 1 is concerned, there is no dispute to the fact that the assessee neither at the stage of assessment nor before the CIT(A) has raised any issue with regard to validity of proceeding initiated u/s 147 of the Act. However, considering the fact that the issue being raised in the aforesaid ground is a purely legal and jurisdictional issue going to the root of the matter and can be decided on the basis of facts available on record, we admit the same by following the ratio laid down by the Hon'ble Apex Court in case of NTPC Vs. CIT, 229 ITR 383 and propose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions in case of Indian Oil Corporation, 159 ITR 956 and 103 ITR 437 9. It was submitted, the provision contained u/s 50C can be the starting point of an enquiry but cannot be the sole concluding reason to hold that there was understatement of sale consideration which can lead AO to believe that income has escaped assessment. For such proposition, learned AR relied upon the decision of Hon'ble Delhi High court in case of CIT, Delhi-II Vs. Khoobhsurat Resorts Pvt. Ltd., 211 Taxman 510 (Delhi) 10. The learned DR, on the other hand, submitted that provision contained u/s 50C(1) is a deeming provision. Since the AO was in possession of information to show that fair market value adopted by the SRO for stamp duty purposes was much more than the registered sale consideration there is escapement of assessment in terms with section 147, hence, exercise of power u/s 147 is valid. 11. We have considered the submissions of the parties and perused the materials on record as well as the decisions cited. The reasons recorded by the AO for reopening the assessment is as under: It is found during the course of scrutiny proceedings that during the FY 07-08, the a has sold a property v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is prima-facie established. In that view of the matter, the AO was justified in forming belief that income has escaped assessment in terms with section 147 of the Act. It is neither necessary nor mandatory that at the time of recording of reasons itself the AO should come to a conclusion that there will be addition of the escaped income as per the reasons recorded. The only requirement in law is, the AO prima facie must have reason to believe, on the basis of material in his possession, that income has escaped assessment. In the facts of the present case, the fair market value adopted by the SRO for stamp duty purposes was neither disclosed by the assessee in the return filed for the impugned assessment year nor was available before the AO when the return was processed. Undisputedly, this information came to the possession of the AO subsequently in the course of the scrutiny assessment proceeding for AY 2008-09 when he examined the registered sale deed. In that view of the matter, since there was a fresh material which came to the possession of the AO, subsequently, which revealed understatement of sale value, the AO is empowered under the Act to reopen the assessment u/s 147. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t value of a capital asset could always involve an element of estimation based on relevant factors. It was submitted, the valuation report based on the value register maintained by SRO for stamp duty cannot be taken as a basis for the purpose of valuing fair market value. In support of such contention, the learned AR relied upon a number of decisions as mentioned in his written submissions. It was submitted that though the assessee in course of proceeding before the DVO as well as subsequently before the departmental authorities pointed out various defects and deficiencies in the report of the DVO and raised specific issues on discount to be given on various counts, the DVO has given discount of 5% only, which was sustained by the AO and CIT(A) without proper application of mind. Reiterating the submissions made before departmental authorities, it was submitted that buyer had incurred nearly ₹ 30 lakhs towards leveling of the land and due to shortage of land and vaastu defects land to the extent of about 168 sq.yds. could not be used which considerably reduced the sale consideration. In this context, learned AR referred to the letter of the buyer confirming these facts. It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /09/2006 within a period of 9 months from the date of purchase. Therefore, if the value of the property can appreciate by 150% i.e. from purchase value of ₹ 12,000/- per sq. yard to deemed sale value of ₹ 30,000/- per sq. yard as per SRO, then, the same logic will also apply to the comparable sale instances considered by the DVO, which are in the FY 2007-08 i.e. more than seven months after the sale of property by the assessee. Therefore, the value of the property on the date of sale of comparable cases cannot be applied to the assessee's property, which was sold on 29/09/2006. In this regard, we are of the view, assessee's objection is valid. If at all the DVO is to consider comparable sale instances, then, he has to consider the sale instances of the relevant date when the assessee sold property or dates proximate to that date. He cannot take comparable instances of sale which happened 7/8 months after the date of sale of property by the assessee. Further, considering the appreciation in value of the property as per the SRO guide line the discount given by the DVO on backward calculation, in our view, is not fair. In the aforesaid view of the matter, in our op ..... X X X X Extracts X X X X X X X X Extracts X X X X
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