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2015 (7) TMI 78 - ITAT DELHI

2015 (7) TMI 78 - ITAT DELHI - TMI - Valuation of the property - CIT(A) has upheld the valuation made by Registered Valuer and discarded the DVO Report relied by the AO - Held that:- CIT(A) rightly repells the said reasoning of the DVO and opined that the valuation by the Registered Valuer was not made considering the structure as new one and held that it was an incorrect observation of DVO. The DVO further states in his letter that the cost of construction as on today i.e. in the year 2006 vari .....

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erty and the fair market value is always higher than the cost of construction. Ld CIT(A) takes into account that in any case the salvage value of the structure in comparison to the overall value of the property was much less and negligible and even if there is some variation, it would not substantially reduce the value of the entire property as a whole. Finally the DVO finds fault that the Registered Valuer had not given any sale instances for the land and has only stated that the rates availabl .....

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the observation of the Ld. CIT(A) that from the discussion in the foregoing para it would be clear that the basic purpose for which the case was remanded by the ITAT to the file of the Assessing Officer remained unfulfilled. The DVO ought to have controverted the report of the Registered Valuer's report, so it cannot be acted upon and the failure of the DVO as stated above, give us no other alternative but to uphold the valuation of the registered valuer for the purpose of computation of capital .....

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methods; and moreover the fact remains that he could physically examine the property, so it is more acceptable being nearer to correct estimate. - Decided against revenue. - ITA No. 3117/DEL/2007 - Dated:- 24-6-2015 - Shri N.K.Saini and Shri A. T. Varkey, JJ. For the Petitioner : Sh. B R R Kumar Sr. DR For the Respondent :Sh. K Sampath Adv, Sh. Raja Kumar, Adv ORDER PER A. T. VARKEY, JUDICIAL MEMBER This appeal filed by the Revenue is directed against the order dated 28.2.2007 passed by the Ld. .....

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the case, the Ld. CIT(A) has erroneously rejected the DVO s report in favor of the report of Approved Valuer of the assessee despite the fact that the latter had no basis in reaching the valuation of the land as on 1.4.1981 and valued the building on rental basis. (iii) On the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in holding that the assessment order of the AO was not correct and in accordance with the law. 3. The Ground no. 4 is general in nature and .....

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sessed the assessee on an income of ₹ 1,54,33,250/- vide orders dated 25.3.1996 made in terms of section 143(3) read with section 144A of the Income Tax Act, 1961 (hereinafter the Act ). The return of income as originally submitted by the assessee declared the capital gains on the sale of 1/3rd share in property no. 8/6, Alipore Park Road, Calcutta. But the AO had adopted the long term capital gains at ₹ 51,52,969/- as 1/3rd share of capital gains on the said sale of property. This o .....

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of the property as determined by the DVO and thereafter, the AO was pleased to uphold the valuation report prepared in the second round by the DVO as correct and adopted it for the purposes of computation of capital gains on the sale of such property and in the process debunked the Registered Valuer report harped upon by the assessee. The AO completed the assessment u/s. 143(3)/254 on 30.3.2005 and made the addition. 6. Against the aforesaid order of the Assessing Officer, the assessee appealed .....

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rtly allowed. 7. Aggrieved by the order of the Ld. CIT(A), now the Revenue is in appeal before the Tribunal. 8. Ld. DR relied upon the order of the AO and reiterated the contention raised in the grounds of appeal raised by the Revenue and want us to reverse the order of ld CIT(A) and uphold the order of AO . 9. On the contrary, Ld. Counsel of the assessee has relied upon the order of the Ld. CIT(A) and defended the same and does not want us to interfere in the same. 10. We have heard both the pa .....

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the valuation of the property was referred to the DVO at Calcutta by the AO and his report was provided to the assessee. It was further observed by the Assessing Officer that the Valuation thus determined by the DVO of assessee s 1/3rd share of the property was accepted by the AO as correct and the said value of property had been adopted for the purpose of computation of capital gains. The assessee also claimed legal expenses of ₹ 1,76,026/- which were on account of lawyer's fee and st .....

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ee before the Ld. CIT(A) that after the ITAT remanded the matter to the AO for determination of capital gains, the AO referred for the Departmental Valuation Officer s report and the assessee received on 11.01.05 a notice dated 4.1.05 under section 55A of the Act, read with section 16(A)(2) of the Wealth Tax Act, 1957 from Distt. Valuation Officer (DVO), Valuation Cell, I. T. Department, 54 RAK Road, Kolkatta, asking for certain information and documents to be submitted on 18.1.05 for valuation .....

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t. As per the assessee, she received it only on 24.3.05 (a photo copy of valuation report dated 18.3.05 from DVO, Kolkata) estimating the market value of the property at ₹ 16,93,700/- and so the 1/3rd share of the assessee worked out to be at ₹ 5,64,566/- as against the value declared by the assessee at ₹ 77,23,000/- and her 1/3rd share at ₹ 25,74,333/- as on 1.4.81. According to the assessee, her FMV of the property was duly supported with the valuation report from the g .....

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luation report of the DVO dated 18.3.05 suffered from manifold defects and was not acceptable under the law. Before arriving at the figure of ₹ 16,93,700/. the DVO did not neither provide a single opportunity to the assessee nor was she confronted with the evidence collected by the DVO, before arriving at the valuation which according to Ld. Counsel for assessee, is in violation of the natural justice. It was pointed out by the Ld. Counsel that Assessing Officer after receiving valuation r .....

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the assessment order on 30.3.2005. The Ld. Counsel pointed out that the DVO on page 1 and on page 4 of his report stated" Having considered the statement of objections made by the assessee in writing and in person and having considered the evidence produced by the assessee and having taken into account all the relevant material gathered by the ld. CIT(A), he estimated the fair market value of the said property as under and as detailed in annexures". However, it was contended by the Ld. .....

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t was further contended that the DVO while giving his valuation report did not take into consideration the facts and figures given by the government approved valuer in his report. The Ld. Counsel assailed the value of the structure estimated by the DVO at ₹ 93,700/- as wrong and without any basis. And according to him, records will bear out that structure under reference was constructed somewhere in the year 1937-38, therefore, it was wrong to assume that the structure which was 40 years o .....

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boundary wall at ₹ 19,30,303/-. According to him, the structure under reference was double storied house and even the value of wood, used - sanitary fittings and electric fitting etc. itself was more than ₹ 8 to 10 lacs. It was further contended that the DVO had estimated the value of the land measuring 32 kattas at ₹ 16 lakhs i.e. @ ₹ 50,000/- per katta which was without any basis. According to him, the DVO himself had admitted that the property in question is in a posh .....

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ny benefit as described above except for the fact that they were located nearby and/or at Alipore Park Road, Kolkatta. Moreover, according to Ld. Counsel, prices of 1978-79 could not hold good to be the basis of valuation in 1981 in any manner. It was contended that the Government Approved Valuer (GAV) had estimated the value of land measuring 32 kattas at ₹ 64,00,000/- for the reason that the land of Alipor park road has two frontages one being the east and the other on south. The Ld. Cou .....

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nd round of litigation before us. During the first round, the Coordinate Bench of this Tribunal set aside the matter back to the file of the AO to counter the report prepared by the Registered Valuer (Govt. Approved Valuer) which assessee harps on to bolster her claim and to bring on record the Report of the DVO, so as to enable the AO to calculate the actual FMV of the property as on 1.4.81 on the basis of which the correct capital gain could be worked out. The Tribunal s order in ITA No. 738 ( .....

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action provided by law. The Assessing Officer thereafter would be required to reexamine the entire issue on merits, after giving a reasonable opportunity to the assessee ". 14. In the second round of appeal, the Ld. CIT(A) took note of the grievance of the assessee, that she had not been heard and her objections to the DVO vis-à-vis the GAV Report, has not been addressed by neither the DVO nor AO, prompted the Ld. CIT(A) to ask for a remand report from the AO vide letter dated 2.1.20 .....

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5. We find that the Assessing Officer vide his letter No.297 dated 12.2.07 furnished the reply of the DVO, Kolkata dated 26.12.06k to the objections raised by the assessee on the valuation determined by the DVO. The AO informed the Ld. CIT(A) that the final report as directed by him, was still awaited from ITO, Ward 29(4), Kolkatta. We find that the Ld. CIT(A) took note of the fact that more than an year has elapsed and despite that the AO failed to procure the report as directed by him, so he d .....

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, at Calcutta for ascertaining the FMV of the property at issue as on 1.4.81, it was incumbent-upon the DVO to point out shortcomings if any in respect to the Registered Valuer's report and also spell out the reason for arriving at his valuation of the property. We find that the AO has not given any reason to accept the DVO's report while simultaneously discarding the registered valuer s report and computed the capital gains. Ld. CIT(A) has acknowledged the fact that AO did not allow the .....

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given by the AO to the objections raised by the assessee vide letter dt. 28/03/2005, which is against natural justice and this ground is sufficient to say that the assessment order was vitiated and legally unsustainable. 17. Ld. CIT(A) has taken note of the DVO's report dated 18.3.05 wherein, it is stated by the DVO in Para 10.0 that he (DVO) has considered the statement of made by the assessee in writing and in person and he has estimated the fair market value of the said property which ac .....

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ort that the DVO indicated that the method of valuation adopted was "Land and Building method" and in Para 7.2 for reasons in support of the method he simply says "this is the most appropriate method" without neither assigning any reason as to this was the only most appropriate method nor he clarifies the defect of average method adopted by the Registered Valuer of the assessee . More over the Ld CIT(A) take note of the DVO report in para 5.6 wherein, the DVO states that &quo .....

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expired in 1981 and so the salvage value was adopted by him ie ₹ 93,700/-. Since the DVO was not in a position to ascertain what was the actual physical condition of the building, his finding was only a guess work. Pitched against the said report of DVO against the assessee s registered valuer report, which was prepared after physical inspection of the property commands and inspires more confidence and is more authentic and acceptable. The Ld CIT(A) has taken note that the assessee s Regis .....

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egistered Valuer's report inspires confidence because it was made after physical inspection of the building and so is acceptable than the report of the DVO which is based on Pure guess work and surmises only. Regarding valuation of land it has been reported by the DVO vide para 8.1 of the report that it is based on "land sale instances, given in Annexure-I of the report. The Ld CIT(A) after perusal of this Annexure-I has found that the sale instances adopted by the DVO are for the years .....

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to the assessee's plot, therefore, there would always be a difference in their sale rates and so cannot be compared. The Ld CIT(A) has taken into account the difference in these properties are situated in inner lane I8H & I8L, without the advantage of having two open sides and not in as prominent a place as that of the assessee and therefore they would fetch much less market rate than what the assessee's property would fetch. Thirdly as would be seen the rates in respect of the prop .....

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s to depend solely on these two very different rates in order to estimate the value of the property as on 1.4.1981, would be not correct. Ld CIT(A) takes note that the sale instances adopted by the DVO are for the year 1979 and as there was the price difference on the same date and wondered as to why no rate prevalent as on 1.4.1981 was adopted by the DVO? And the Ld CIT(A) infers that since no registry somewhere near 1.4.1981 was found by the DVO as well as the Registered Valuer therefore estim .....

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as ₹ 50,000/- per kattah as on 1.4.1981. Now if two years back the rate of a small size of plot, situated in an inner lane was as high as ₹ 37,728/- per kattah, how can be a plot having all the advantages as observed by the DVO himself, can be as low as ₹ 50,000/- per kattah after a gap of two years. 18. Since the cost of construction was worked out at ₹ 9,37,209/-by the DVO the salvage value was estimated at ₹ 93,700/-. According to him, as already discussed earli .....

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ort of the Registered Valuer of the assessee is based on physical verification of the property and therefore the same was more acceptable than the DVO's report. As regards to the fair market value of the land, the DVO says that sale instances were the basis for estimating the value of the land and that the land rates prevailing in Alipore Road area in the year 1978-79, 79-80 and 80-81 was ranging between ₹ 30,000/- to ₹ 38,000/-per kattah. However, as discussed in the forgoing pa .....

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controvert the valuation made by the Registered Valuer by stating as under: (i) The registered valuer considered ₹ 350/- per sq. ft. as cost of construction in the year 1981 for a load bearing structure whereas according to DVO load bearing prevailing rate was varying between ₹ 80-100/- sq.ft. As rightly pointed out by the Ld CIT(A) from the report of the DVO it should be discernible as to what was the basis on which the DVO was of the opinion that the prevailing rate was between  .....

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under:- "Present state of the structure although devoid of any maintenance with the orientation as shown in the drawing supplied to him but the condition is absolutely in repairable state of its use. This state of structure appears t be because of Nil maintenance ( i.e. on the date of inspection on 26.11.92) as the matter relates to as far back as in 1981, it is accepted that the condition of the structure was definitely much better and quite habitable". 19. He (Registered Valuer) furt .....

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DVO further states in his letter that the cost of construction as on today i.e. in the year 2006 varied between ₹ 550 to ₹ 650 for a load bearing G+1 structure and how the rate could be ₹ 350/- pr sq. ft. as on 1.4.81 for an old building which was built in and around 1940. The Ld CIT(A) takes notes that the DVO's finding that the cost of construction in the year 2006 was between 550 to 650 is not supported with any evidence. The Ld CIT(A) rightly observes that there is a b .....

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egistered Valuer had not given any sale instances for the land and has only stated that the rates available from the registrar were 4-5 times lower as compared to the actual sale rate and so his finding could not be accepted as FMV since it had to be supported by the evidence. Ld CIT(A) agrees to the said observation of the DVO but rightly observes that even the sale instances adopted by him (DVO) also did not serve any purpose for the same reason ; and therefore the valuation of the property wa .....

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