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2016 (7) TMI 838 - ITAT MUMBAI

2016 (7) TMI 838 - ITAT MUMBAI - TMI - Determination of FMV/cost of acquisition and sale value u/s 50-C and 55A - CIT(A) adopting mean value of the properties based on valuation reports submitted by the DVO and assessee valuer for the purpose of cost of acquisition of land as on 01.04.1981 - assessee is the co-owner of the land encroached and occupied by the slum dwellers and the said land is notified slum by State of Maharashtra - Held that:- CIT(A) was required to find out the fair market valu .....

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approved registered valuer , the best recourse was to find out mean so that a fair market value of the property is arrived at which in-fact the learned CIT(A) did to determine fair market value of the property as on 01-04- 1981 under the provisions of Section 55 and 55A of the Act. We donot find any infirmity in the order of the learned CIT(A) as the fair market value of the property is dependent on several factors which influence valuation and there is no scientific or straight jacket method t .....

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affirm/sustain, keeping in view factual matrix of the case. - Decided against revenue - I. T. A. No.5987 / Mum/ 2013 - Dated:- 12-7-2016 - Shri Saktijit Dey, Judicial Member And Shri Ramit Kochar, Accountant Member For the Revenue : Shri Sanjeev Kashyap, DR For the Assessee : Shri J.P. Bairagra ORDER Per Ramit Kochar, Accountant Member This appeal, filed by the Revenue, being ITA No. 5987/Mum/2013, is directed against the order dated 15-07-2013 passed by learned Commissioner of Income Tax (Appea .....

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d as under:- 1. On the facts and circumstances of the case and in law, Id. CIT(A) has erred in allowing relief to the assessee by adopting mean value of the properties based on valuation reports submitted by the DVO and assessee valuer for the purpose of cost of acquisition of land as on 01.04.1981 without giving credence to value adopted by District Valuation Officer u/s 55A. 2. On the facts and circumstances of the case and in law, Id. CIT(A) has erred in not appreciating the fact that the Inc .....

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from other sources. During assessment proceedings u/s 143(3) read with Section 143(2) of the Act, the assessee submitted all the supporting documents for computation of capital gains , like agreements, rates as per the ready reckoner, maps of the plot sold. The assessee has shown the sale consideration as per section 50C of the Act. However, the A.O. observed that the assessee has computed the cost of acquisition as on 1st April, 1981 as per the ready reckoner s rate for developed land . The A. .....

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as requested to pass a protective order as the case was getting time barred. The A.O. accordingly passed the assessment order dated 30-12-2011 u/s 143(3) of the Act based upon the information available on record and it is stated in the assessment order dated 30-12-2011 passed by the AO that the appropriate action will be taken once the DVO report is received. During assessment proceedings u/s 143(3) read with Section 143(2) of the Act, the assessee was asked by the AO to justify the adoption of .....

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ing and has facilities of road, electricity, drainage and water or has got non-agricultural permission . The A.O. did not accept the submissions of the assessee due to the reasons mentioned below against each property in the light of definition of developed land as indicated above, vide assessment orders dated 30-12-2011 passed by the AO u/s. 143(3) of the Act:- (i) CTS No. 7/1 of village Hariyali, Area of plot is 10,249.48 SQ Fts and Cost of acquisition was taken as ₹ 96 per SQ.Ft.(as dev .....

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es of Development Control regulation for Greater Bombay, 1991, 33(10), 33(14-D) of Mumbai Municipal Corporation and conformity with SRA(Slum Rehabilitation Authority) or any other scheme permissible by law by demolishing the existing structures and construction new building in its place as per Slum Rehabilitation Scheme under the Maharashtra Slum Area(Improvement, clearance and Re-development) Act, 1971". It is clear from the above facts, the land has been purchased for develop the same whi .....

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CTS No. 122(PT) of Village Hariyali. Area of plot is 8156.85 SQ FTS. Cost of acquisition taken by the assessee is ₹ 100/- per SQ FTS. (as developed land). The aforesaid property has been notified as slum area vide the Notification No. SLM-DC-K-11,77, Published in the Maharashtra Government Gazettee dated 8th February, 1979 issued by the Deputy Collector (ENC) & Competent Authority, Sub Division, Kurla-II. It is further found that the purchaser agreed and undertook to develop the said .....

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elopment) Act, 1971. In view of the above, the plot of land is encroached by the slum rehabilitant and it is undeveloped properties as on 0 l.04.1981, hence the cost of acquisition is taken as ₹ 26 per SQFT as for undeveloped land which comes to ₹ 2,12,078/ - . (iii) CTS No. 238, 239, 240, 241, 245, 214, 215, 216, 217, Area: 290,493.45 SQFTS, The assessee has only 2l.5% of shares in these property. As per para No. "N" of deed of conveyance that some portion of the said prop .....

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or meets the other criteria as per definition of developed land. Hence, the cost of acquisition is taken as ₹ 32/ - per SQFT as for undeveloped land which comes to ₹ 4,223 / -. (v) CTS No.62/39(part) of Village Hariyali, Area: 599.99SQFT. Cost of acquisition taken by the assessee is ₹ 112/- per SQ.FT. (as developed land). As per the deed of conveyance it is clear that this property is already encroached and was not having any approved buildings or meets the other criteria as pe .....

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eed of conveyance, the property has various reservations in force on various portion of the said property. Further, the property was sold to develop the slum area. In view of the above and also since it does not fulfill the conditions of developed land, the cost of acquisition is taken as ₹ 20/- per SQFT as for undeveloped land which comes to ₹ 8,82,648/-. (vii) CTS No. 215,221,231 of Village Hariyali, Area: 67045.73 SQFT, cost of acquisition taken by the assessee as ₹ 25/- per .....

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.O. that properties claimed to be present on the plots sold by the assessee are in the nature of slums/encroachments and are not approved building per-se. The A.O. observed that the assessee has also not proved the other conditions as per the aforementioned definition of developed land. It was also observed by the AO that some properties are under the force of reservations. Thus , the A.O. adopted the rate of undeveloped land for the purpose of valuation of cost of acquisition as on 01- 04-1981 .....

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he assessee has 1/3rd share. The assessee has declared the long term capital loss on the sale of these seven properties at ₹ 8,96,153/- and the statement of computation of capital gain was duly enclosed. It was submitted that these properties were inherited by the assessee which were purchased by the previous owner prior to 1-4-1981, the assessee has adopted cost of the properties as on 1-4-1981 by taking ready reckoner rates of developed land as on 1-4-1981, the ready reckoner rate list a .....

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A.O. has estimated the value on his own and held that appropriate action will be taken once the report from the DVO is received and in view of time barring date, the assessment order u/s 143(3) of the Act was passed based on the information available on record. In the absence of the DVO report, the A.O. finalised the assessment by estimating value and agreed to adopt the ready reckoner rate of 1-4-1981 but he had taken the rate of undeveloped land while the assessee has adopted the ready reckon .....

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on these lands structures created by the inhabitants called slum dwellers are existing, there are facilities like road electricity, drainage and water on these lands and these lands are non- agricultural lands as per non-agriculture permission issued by the authorities. The purchaser of the land has to develop the property by removing the structure and develop the property thereby settle the hutments dwellers and sell the balance property, meaning redevelopment of property. It was submitted by .....

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value as estimated by the A.O. in the assessment order , the value as made by DVO/Valuation officer and the value as per the assessee s valuer Shah & Shah which was submitted before the DVO/VO while raising the objection against the draft valuation reports , were all furnished before the ld. CIT(A) during appellate proceedings by the assessee. In the light of above, the assessee submitted before the learned CIT(A) that the value adopted by the A.O. as on 1-4-1981 by treating the land as unde .....

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ee before learned CIT(A) that while valuing the said land, the DVO/VO has accepted this land as developed land, however, they have not accepted the ready reckoner rate but adopted the valuation as per sale instances in the vicinity. Thus, the action of the A.O. in valuing the land as undeveloped land though agreeing with the Ready Reckoner rate is not justified. It was submitted that the DVO after rejecting ready reckoner rates as on 01-04-1981, has valued the land as on 1-4-1981 as per the shar .....

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Industries Ltd. v. ITO, 150 ITR 643 (Cal.) and in the case of Shahdara (Delhi) Sarangpur Light Railway Co. Ltd. v. CIT, 208 ITR 882 (Cal.). It was further submitted that all the lands are developed lands having structure, road, electricity, drainage and water facilities and are non agricultural lands as per non-agricultural permission and merely because they are occupied by hutments, it cannot be said that they are not developed lands. The ld. CIT(A) observed that the A.O. has made the addition .....

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loped land though they have not accepted the ready reckoner rates but adopted the valuation as per sale instances. Thus, it was submitted that the A.O. s action in valuing the land as undeveloped though agreeing with the ready reckoner rate is not justified. The ld. CIT(A) rejected the contention of the assessee observing that the A.O. has passed the order due to time barring of the assessment and there is no infirmity in the action of the AO keeping in view the factual matrix of the case. The l .....

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o.122(PT) Village hariyali 8,156.8 5 100.0 0 815,685. 00 26. 00 212,07 8.10 99.00 807,52 8.15 47.0 0 383,371. 95 3 CTS No.238,239,24 0,241,245,214, 215,216,217 290,49 3.45 88.00 25,563,4 23.60 24. 00 6,971, 842.80 92.00 26,725, 397.40 57.6 0 16,732,4 22.72 4 CTS 62/39 part Village Hariyali 132.00 112.0 0 14,784.0 0 32. 00 4223.0 0 105.00 13,860. 00 43.5 0 5,742.00 5 CTS 62/39 part Viilage Hariyali 599.99 112.0 0 67,198.8 8 32. 00 19,199 ,68 105.00 62,998. 95 43.5 0 26,099.5 7 6 CTS 1801 (PT) Vil .....

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831.33 4,957,2 08.17 2,936,67 8.77 The ld. CIT(A) held that after the receipt of the report of the DVO/VO there was no dispute that the capital assets in question were developed land and hence the value adopted by the A.O. was not correct method of estimating the fair market value as on 1-4-1981 as it suffered from a major fallacy. The major reasons for the difference in value adopted by the DVO/VO and the assessee s registered valuer as submitted by the assessee before the learned CIT(A) are a .....

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de on the Central Railway route while Bhandup and Mulund come after Vikroli and Kanjurmarg on the Central Railway route. Further, sale instances cited by the appellant's registered valuer are much closer to the appellant's properties i. e. less than 1 km while the sale instances cited by the DVO/VO are way beyond i.e. two railway stations beyond the area where the appellant's properties are situated. Accordingly, when the sale instances of Hariyali village are available, where the ap .....

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any method of computation to denote how he has arrived at a particular rate. (v) Though the DVO/VO had admitted to the fact that structures were existing in the properties in question, however, they have not assigned any value to these structures which form part and parcel of the properties while the appellant s registered valuer has taken into account the value of these structures which are existing on these properties. Further, in respect of the one property valued by the DVO, he has included .....

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sale instances cited by the assessee s valuer were much closer to assessee s properties. It was also observed that the DVO/VO had taken the sale instances of the year 1983 and 1985 whereas the assessee s valuer had taken the sale instances of the year 1982 which is much closer to 1-4-1981. However, neither the DVO/VO nor the assessee s valuer had given the exact sale instances of the areas in question or the date under consideration i.e.1.4.1981, thus, none of the two can be said to be the perf .....

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- Sr No Description of the property Address Area in sq. mtr. Area in sq. feets. Valuation as per Assesse valuer Per Sq Total Feet value Valuation as per VO & DVO Per sq. Total Value Ave. Total Avg. Rate value 1 CTS No. 7/1 Village Hariyali 952.20 10,249.4 8 99.00 1,014,698. 52 52.20 535,022.86 76 778960.48 2 CTS No. 122(PT) Village Hariyali 757.79 8,156.85 99.00 807,528.15 47.00 383,371.95 73 595450.05 3 CTS No. 238,239,240,2 41,245, 214,215,216,2 17 26,987.5 0 290,493. 45 92.00 26,725,397 . .....

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of item No. 3 5,745,960. 44 3,597,470.8 8 - 4684206.8 8 Gross total 14,871,624 .51 8,810,036.3 0 - 11872828. 36 1/3 share of assessee 4,957,208. 17 2,936,678.7 7 - 3957609.4 5 6. Aggrieved by the appellate orders dated 15-07-2013 of the ld. CIT(A), the Revenue is in appeal before the Tribunal whereby Revenue has challenged adopting of mean value of the properties based on valuation reports submitted by the DVO/VO and the assessee s valuer for the purpose of cost of acquisition of land as on 1-4 .....

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the AO adopted ready reckoner rates as on 01-04-1981 of undeveloped land based on the premise that the land is notified slum by State of Maharashtra and which does not have approved building. The ld. D.R. referred to the order of the A.O. and submitted that the A.O. referred the matter to the DVO Mumbai for determination of cost of acquisition and sale value u/s 50C & 55A of the Act on 22nd November, 2011. He submitted that since the matter was getting time barred, the DVO wrote to the A.O. .....

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koner rates for developed land , whereas the A.O. has adopted the ready reckoner rates for undeveloped land as on 01-04-1981. It is submitted that as per the assessee s valuation, total valuation comes to ₹ 4,386,338/-, while as per the A.O. s valuation comes to ₹ 1,421,831/-. The valuation as per the assessee s valuer was at ₹ 4,957,208.17 while the valuation as per the DVO/VO s comes to ₹ 2,936,678.77. It was submitted that no valuation report was furnished by the asses .....

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the assessee submitted that the mean of the value adopted by the different experts i.e. DVO/VO on behalf of the revenue and the registered valuer of the assessee was the method adopted by the ld. CIT(A) which under the circumstances was rightly done by learned CIT(A) to arrive at fair market value of the land as on 01-04-1981 u/s 55 and 55A of the Act. He submitted that it is a developed land which is accepted by the DVO/VO. 1/3 share is owned by the assessee and 2/3 share is owned by the co- o .....

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ered the rival contentions and also perused the material on record. We have observed that the Revenue is aggrieved by the decision of the ld. CIT(A) with respect to the adoption of mean of the value taken by the DVO/VO on behalf of the Revenue and the government approved registered valuer M/s Shah & Shah on behalf of the assessee. We have observed that the assessee is the co-owner of the land situated at Vikhroli at Hariyali Village. The said land was encroached and occupied by the slum dwel .....

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lers and does not have approved building as per definition of developed land, while the assessee contended the same to be developed land as it was notified slum by State of Maharashtra having structures built by slum dwellers . The AO did not had the benefit of valuation determined by DVO/VO report , nor the valuations as per sale instances submitted by the assessee vide objections filed before DVO/VO of the assessee s government approved registered valuer. The assessee has submitted comparative .....

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o be in the vicinity of the said land , but the assessee is contending that the DVO/VO has relied upon the sale instances which are far-away from the property under consideration and are of period 1981,1983 and 1985 while the assessee submitted that valuation of its relied upon properties are from Hariyali village itself in Vikhroli West on LBS Marg of the period December 1982 and December 1985 and are closer to 01-04-1981 . It was also submitted before DVO/VO that structures existing on the pro .....

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and hence the assessee is not prejudiced . The learned CIT(A) went ahead to determine the value of the property as on 01-04-1981 being fair market value based on mean of the valuation adopted by the DVO/VO and the assessee s valuer which in our considered view was appropriate keeping in view the factual matrix and prevailing circumstances of the case as no exact sales instances in the area were available . Thus, the learned CIT(A) was required to find out the fair market value of the property a .....

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d valuer , the best recourse was to find out mean so that a fair market value of the property is arrived at which in-fact the learned CIT(A) did to determine fair market value of the property as on 01-04- 1981 under the provisions of Section 55 and 55A of the Act. We donot find any infirmity in the order of the learned CIT(A) as the fair market value of the property is dependent on several factors which influence valuation and there is no scientific or straight jacket method to value the propert .....

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relied on by the appellant s registered valuer are of Hariyali Village , where the capital assets in question are situated. It is also seen instances cited by the appellant s registered valuer are much closer to the appellant s properties while the sale instances cited by District Valuation Officer/Valuation Officer are little far away. Similarly, the District Valuation Officer/Valuation Officer have taken the sale instances of the year 1983 and 1985 while the appellant s registered valuer has .....

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ut in case the two experts differ, perhaps the only method available at this stage would be to adopt the mean of the value adopted by the two experts i.e. District Valuation Officer/Valuation Officer on behalf of the Revenue and registered valuer, M/s Shah & Shah on behalf of the appellant. Accordingly, in the peculiar facts of the case and to meet the end of justice, the fair market value of the capital assets in question is adopted as average rate given by the District Valuation officer/Va .....

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