2019 (7) TMI 852 - AT - Income Tax

Appeal allowed for reassessment of FMV and cost of acquisition. Delay condoned. Issues remanded for fresh determination.

The appeal was allowed for statistical purposes, with directions to the AO/DVO to reassess the Fair Market Value (FMV) and cost of acquisition based on ... Computation of long term capital gain - adopting the full value consideration as per stamp duty valuation u/s 50C - on challenge matter referred by AO to DVO - revised stamp duty valuation based on commercial property adopted - assessee has submitted that the property in question was a residential property as stated in the sale deed whereas the DVO has considered the same as commercial while determining the fair market value of the land in question - HELD THAT:- The rates of the commercial property cannot be applied to a property which is unauthorisedly used for commercial purpose. Though the locational advantage and actual of commercial use are the relevant factor for determining the fair market value but these cannot be the basis for treating the property as commercial one. Therefore, the fair market value of the property has to be determined on the basis of the prevailing rate in the area as well as on the basis of sale instance which can be considered as comparable cases. The DVO has adopted the commercial rate for determining the fair market value of the property whereas the fact remains that the property is a residential area but is being used for commercial purpose. Thus applying the commercial rates on a residential property used for commercial purpose is not proper and justified. Determination of the fair market value by the DVO requires a fresh look based on the prevailing fair market price well as comparable sale instance. Since, the assessee has now filed the site plan as additional evidence, therefore, in the facts and circumstances of the case we set aside this issue of fair market value to the record of the DVO/AO for redetermination of the same as per above observations. It is also pertinent to note that for the purpose of computing the cost of construction the state PWD rates shall be applied as against CPWD rates as the property is situated in the jurisdiction of State PWD and not in the jurisdiction of CPWD. Hence, the DVO is directed to reconsider the determination of fair market value and after giving an opportunity of hearing to the assessee. Determination of cost of acquisition of the property on 01.04.1981 - HELD THAT:- DVO has taken the fair market value as on 01.04.1981 by considering the comparable instances however, the assessee was not confronted with such comparable cases to be adopted by the DVO. Further, the DVO enhanced the value due corner location of the property this was also not confronted with the assessee. Since, the main issue of determining the fair market value as on the date of the sale has been remanded to the DVO/AO, therefore this issue of determining the fair market value as on 01.04.1981 for the purpose of cost of acquisition of the property is also set aside to the record of the DVO/AO for determining the same afresh after consideration the objections of the assessee. - Appeal of the assessee is allowed for statistical purposes. Issues Involved:1. Condonation of delay in filing the appeal.2. Addition of Long Term Capital Gain.3. Invocation of provisions of Section 50C of the Income Tax Act, 1961.4. Determination of Fair Market Value (FMV) by the DVO.5. Determination of the cost of acquisition of the property as on 01.04.1981.Issue-wise Analysis:1. Condonation of Delay in Filing the Appeal:The assessee filed an appeal with a delay of 51 days, supported by an affidavit and medical records. The delay was attributed to the assessee's mother's illness and subsequent death. The tribunal found the reasons reasonable and condoned the delay.2. Addition of Long Term Capital Gain:The assessee contested the addition of Rs. 1,72,84,490 as Long Term Capital Gain. The AO had adopted the sale consideration based on the stamp duty value of Rs. 2,61,53,980 against the declared sale consideration of Rs. 1,55,00,000. The CIT(A) upheld the AO's action. The tribunal noted the AO's reliance on the Sub-registrar's revised valuation and the DVO's determination of FMV at Rs. 3,44,91,400. The tribunal found that the property was residential but used for commercial purposes, and thus, applying commercial rates was not justified. The tribunal remanded the issue back to the AO/DVO for redetermination of FMV based on prevailing rates and comparable sales instances.3. Invocation of Provisions of Section 50C:The AO invoked Section 50C to adopt the stamp duty value as the sale consideration. The assessee argued that the revised valuation was not in his knowledge, and the AO did not consider the FMV through the DVO due to time constraints. The CIT(A) upheld the AO's action based on the DVO's report. The tribunal remanded the issue for fresh determination of FMV, considering the property as residential.4. Determination of Fair Market Value (FMV) by the DVO:The DVO determined the FMV at Rs. 3,44,91,400, considering the property as commercial. The tribunal found that the property was residential, and applying commercial rates was not justified. The tribunal directed the DVO/AO to reconsider the FMV based on residential rates and comparable sales instances.5. Determination of the Cost of Acquisition of the Property as on 01.04.1981:The assessee declared the cost of acquisition as Rs. 23,07,171, while the DVO determined it as Rs. 14,03,400. The assessee argued that the comparable sales used by the DVO were not confronted with him and were not similar. The tribunal noted that the DVO's enhancement for the corner location was also not confronted with the assessee. The tribunal remanded the issue to the DVO/AO for fresh determination, considering the assessee's objections.Conclusion:The appeal was allowed for statistical purposes, with directions to the AO/DVO to reassess the FMV and cost of acquisition based on the tribunal's observations.