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TMI Blog2016 (12) TMI 1280X X X X Extracts X X X X X X X X Extracts X X X X ..... s also impugned a report dated 20.4.2010 given by the Departmental Valuation Officer ("DVO" for short) as being contrary to the principles of valuation. 2.1 The petitioner is a co-owner of a property situated at Jodhpur known as Zalam Vilas Palace, Jodhpur. Under a sale deed dated 18.3.2005 the said property was sold by the petitioner and the other co-owners for a declared sale consideration of Rs. 7.75 crores. For the Assessment Year 2005-2006, the petitioner filed a return in which he declared that he had received his share of sale proceeds of the said property to the extent of Rs. 2,13,50,000/- and offered a sum of Rs. 55,91,600/- by way of long term capital gain after availing indexed cost of the property. 2.2 While processing the petitioner's return for the Assessment Year 2006-2007, the Assessing Officer noticed that the sale deed was actually registered with the local Sub-Registrar at Jodhpur in July 2005. The Registering Authority had valued the property at Rs. 15.99 crores (rounded off). He, therefore, called upon the assessee to state why the valuation adopted by the Stamp Valuation Authority should not be taken as the market value of the property and the capital gain s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are of the assessee is added back as capital gain to the income of the assessee." 2.4 Aggrieved by the order of assessment dated 19.12.2008, the petitioner preferred a revision petition before the Commissioner of Income Tax under Section 264 of the Act. In such revision petition, the assessee mainly contended that the capital gain accruing from the sale of the said property was already assessed in the Assessment Year 2005-2006. The assessee had supported the valuation by producing valuation report which was on record. The property was encumbered and, therefore, could not fetch the market price. He also contended that the Assessing Officer committed a mistake in adopting the actual cost of acquisition as nil. In short, the assessee had raised three objections before the Commissioner; (i) regarding the correct year for computing the capital gain, (ii) the correct valuation of the property looking to the encumbrances and (iii) the cost of acquisition could not be nil. 2.5 The Commissioner passed his revisional order under Section 264 of the Act on 26.6.2009. In the order he observed that normally the property which is difficult to sell because of litigation would fetch less value th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead of A.Y. 2006-07 after referring the case to the Departmental Valuation Officer and adopt the said value as the full value of consideration for computation of capital gains." 2.7 In a separate letter dated 24.11.2010 he conveyed the reasons to the petitioner for re-opening the assessment as under. "On perusal of case records, it was noticed that the sale price of house property taken for working of Long Term Capital Gain was lesser than the fair market value. The case was subsequently referred to the valuation cell for arriving at the fair market value of the property on the date of sale (Copy was marked to the assessee as well and the DVO had given opportunity to the assessee while valuing the property). Valuation report was obtained from the District Valuation Officer, Jaipur. The fair market value of the property shall be considered as per valuation report while working of Long Term Capital Gain." 2.8 The petitioner objected to the notice of re-opening under letters dated 25.11.2010 and 27.11.2010. These objections, however, were rejected by the Assessing Officer by an order dated 2.12.2010. In such order, he also clarified his stand regarding two separate sets of reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be suggested by DVO in his report is contrary to the provisions contained in Section 50C of the Act. (2) Regarding notice of re-opening : The Counsel withdrew the challenge reserving the right of the assessee to raise all contentions in the appeal before the Commissioner. 3. Regarding DVO Report : The DVO ignored the ground realities and assessed the market value without taking into consideration the fact that the property was heavily encumbered. He ought to have noticed that there were previous litigations and the property was rented to Border Road Task Force at a nominal rent. On the date of sale, the possession of the property was still with the lessee. Such property cannot fetch what would otherwise be prevailing market rate. 4. On the other hand, Mr. K. M. Parikh, learned counsel opposed the petition contending that the revisional order of the Commissioner suffers from no error. There are no directions which can be said to be prejudicial to the petitioner in such order. The notice for re-opening of the assessment was issued after recording valid reasons. The DVO has taken into account all relevant factors including the handicaps attached to the property. In any case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suggested that the Assessing Officer mis-construed and mis-interpreted the said order. We are afraid, this could not be the ground for inaction on the part of the petitioner in challenging the order of the Commissioner. If any of the directions contained in such order were adverse to the petitioner, it was his onus to challenge the same. If, on the other hand, the case of the petitioner is that the order of the Commissioner was not defective but its implementation of the Assessing Officer was, there was no reason for him to challenge the same even at a later stage. In any case, the petitioner cannot decide to challenge the order passed by the authority depending on its consequential effect on him. In other words, the petitioner cannot contend that, if the consequences of the order of the Commissioner are favourable to him, he would not challenge the same, and if the order, however, acts harshly, he may challenge it later. 7. Quite part from this, we also do not see any illegality in the order of the Commissioner. In fact, the Commissioner substantially accepted the grievances of the petitioner. The petitioner's case that the income did not arise during the Assessment Year 2006-200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be lower than that adopted by the Stamp Valuation Authority, a presumption which eventually turned out to be true. The consideration could have perhaps been different had such valuation been higher than that valued by the Stamp Valuation Authority. Since such an eventuality did not arise, we need not deliberate on the same. 11. The contention that the Commissioner cannot issue a direction which is prejudicial to the assessee flows from the plain language used in Section 264 of the Act. Subsec.( 1) of Section 264 of the Act provides that, in a revision petition the Commissioner may call for the record of any proceeding and may pass such order as he thinks fit, subject to the provisions of the Act, not being an order prejudicial to the assessee. This term an order being prejudicial to the assessee cannot be appreciated in abstract. What is prejudicial to the assessee must be examined in the background of the facts of the case. Therefore when the Commissioner accepted the assessee's contention that the income did not pertain to the Assessment Year 2006-2007 but pertained to Assessment Year 2005-2006, he merely accepted the petitioner's ground. His direction, therefore, not to t ..... 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