TaxTMI 
TaxTMI 
2004 (3) TMI 341
X X X X Extracts X X X X
X X X X Extracts X X X X
....iled her objections to the reference of the valuation report, and placed reliance on the decision of the apex Court in the case of K.P. Varghese vs. ITO & Anr. (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC), but the AO was not convinced with the explanations of the assessee and he estimated the sale consideration at Rs. 31,74,349 and worked out long-term capital gain at Rs. 5,68,019. 3. During the year, assessee also purchased a residential house No. 21-B/4,New Rohtak Road, for a declared price of Rs. 10,50,000, but the AO was not satisfied with the declared cost of this house and he referred the matter to the DVO under s. 55A of the IT Act. Relying upon various decisions on a question of valid reference, the DVO estimated the fair market value of the property purchased at Rs. 83,40,097. Copy of the valuation report was delivered to the assessee and the assessee filed her objections, but the AO was not satisfied with the objections and accepted the fair market value determined by the DVO at Rs. 83,40,097, and difference of Rs. 65,90,097 was added to the income of the assessee under s. 69 of the Act. 4. The assessee preferred an appeal before the CIT(A) with the submissions ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Shri O.P. Sapra, has categorically argued that the assessee has sold her residential house, C-2/141, Ashok Vihar, for Rs. 12,00,000 on15th Oct., 1997, to Smt. Sunita Chadha and Smt. Reena Chadha by executing two separate sale deeds for Rs. 6,00,000 each. The payment was received through cheque. The purchase price of the above house was accepted in the hands of the buyer. If the AO doubted the sale consideration and estimated it at Rs. 31,74,349 he should have reopened the assessment in the case of Smt. Sunita Chadha and Smt. Reena Chadha, and an addition under s. 69 of the Act would be warranted in their cases, but the Revenue did not do the same and straightaway accepted the purchase price declared by these buyers in their individual cases. The learned counsel for the assessee further invited our attention to the copy of Form 34-A filed before the AO on the basis of which income-tax clearance was given by the AO for sale of property for Rs. 12,00,000 to these buyers. While giving the permission, the AO did not doubt the sale consideration of the property. Copies of the sale deeds were also placed on record at page Nos. 69 to 82 of the compilation of the assessee. To counter the v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....alue as on1st Jan., 1998, was shown at Rs. 19,15,000. The learned counsel for the assessee further contended that the valuation officer has estimated the fair market value by inspecting the property on5th May, 2000, at Rs. 83,40,091. It was further contended that the valuer's report was commented by the registered valuer pointing out that the land rate notified by the Union Urban Affairs Ministry on 21st April, 1999, applicable to 31st March, 2000 for new Rohtak Road was Rs. 6,930 per sq. mt., but the AO has adopted the rate at Rs. 24,631 per sq. mt. on the basis of the auction on 19th Sept., 1994, copy of which was never supplied to the assessee. According to the registered valuer the cost of land as on 21st Jan., 1997, was Rs. 3,83,321 and the cost of construction was Rs. 12,05,817, aggregating at Rs. 15,89,191 out of which he had also allowed deductions of 1/3rd due to cancellation of the lease thereby estimating the value of the property at Rs. 10,59,461 only. In support of this contention the assessee has filed photocopy of paper cutting of "The Times of India" in which rates of lands of different zones were notified. 8. In support of land rates the assessee has filed the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e. 9. The learned Departmental Representative, on the other hand, besides placing heavy reliance upon the orders of the lower authorities has emphatically argued that before making a reference to the DVO, the AO has made local enquiries and after having been satisfied that the assessee has understated the sale price of the Ashok Vihar property and purchase price of the New Rohtak Road property, he made a reference under s. 55A of the Act to DVO to determine the fair market value of these properties. While estimating this fair market value the DVO has called the comments from the assessee and after taking into account the instances of recent sale the DVO estimated the fair market value. The learned Departmental Representative, Mr. Salil Gupta, has placed reliance on the map with the submission that the assessee's residential house at New Rohtak Road was in fact situated in Karol Bagh and its rate should at least be adopted at Rs. 24,150 per sq. yd., in view of the land rates notified in "The Times of India" newspaper on 21st April, 1999. Since the assessee has understated the sale considerations of the property, the AO was justified in making a reference and adopting the fair mar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....evenue despite a fact that the assessee has filed the copy of sale deeds executed in favour of Smt. Sunita Chadha and Smt. Reena Chadha and while estimating the sale price of this property at Rs. 31,74,349 following the DVO's report, no effort was made to examine the cost of investment shown by Smt. Sunita Chadha and Smt. Reena Chadha in their return of income. During the course of hearing, the learned counsel for the assessee has emphatically argued that the purchase price of the above house at Rs. 12,00,000 stands accepted by the Revenue in the hands of Smt. Sunita Chadha and Smt. Reena Chadha. This contention of the assessee was not rebutted by the learned Departmental Representative. It means once the purchase price of this property was accepted in the hands of the purchasers at Rs. 12,00,000 how the same property can be valued at Rs. 31,74,349 in the hands of the seller without bringing any cogent material on record to establish that some amount over and above to Rs. 12,00,000 was given to the seller by the buyers, Smt. Sunita Chadha and Smt. Reena Chadha. The Revenue cannot blow hot and cold in the same breath. It has to take one stand that too in the hands of the seller as w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in order to compute capital gain. 12. Now, the next question comes whether the AO has properly exercised his discretion under the given facts and circumstances of the case. In the instant case, the assessee has declared the sale value of her residential house at Ashok Vihar at Rs. 12,00,000 and furnished the copy of the two sale deeds showing the said sale considerations. The AO has simply doubted the sale considerations, but he has not mentioned anything in his order as to on what basis he has formed an opinion that the assessee has understated the sale considerations. From a careful perusal of the assessment order, we do not find any inkling that the AO at any point of time has collected some information that this sale consideration was understated by the assessee. Without bringing anything on record, he has simply referred the property to the DVO for determination of its fair market value on the date of sale. While estimating the fair market value of this property, the valuation officer has not brought out any cogent material on record on the basis of which he has estimated the fair market value at Rs. 31,74,349. He has simply taken the rates of land following the rates of la....
X X X X Extracts X X X X
X X X X Extracts X X X X
....between the declared consideration and market value as unexplained investment/receipt. The Revenue is saddled with the onus to establish that higher consideration has been paid over and above the consideration indicated in the sale documents. In support of this contention, we may refer to the judgment of the jurisdictional High Court in the case of CIT vs. Ms. Sushila Mittal & Ors. (2001) 250 ITR 531 (Del) and CIT vs. Shri Gulshan Kumar. In the instant case, the Revenue has not brought anything on record to form an opinion that some higher amount than the consideration declared by the assessee in the sale documents was passed over to the assessee. The AO has simply made reference to the valuation officer, who valued the fair market value of the property on the basis of certain instances of sales of plots in a different locality, which is a commercial area without taking into factual aspect that the residential house in Ashok Vihar situates in a purely residential area and the market value of a residential house is always lesser than the house situated in a commercial area. The assessee, on the other hand, has furnished the valuation report of the registered valuer, who has valued t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....9 of the Code of Civil Procedure, 1908, since the consequence of a reference to a valuation officer under s. 55A of the IT Act and of a commission issued under s. 75 r/w order 26 r. 9 of the Code are different. Through this judgment the apex Court made it abundantly clear that a reference to a valuation officer can only be made under s. 55A in order to determine the fair market value of the property in order to work out a capital gain under Chapter IV of the IT Act. The AO has no jurisdiction to make a reference under s. 55A or by invoking the provisions of ss. 131(1), 133(6) and 142(2) of the IT Act for any purpose other than the computation of income from a capital gain. In the instant case, a reference for determining the fair market value of the residential house atNew Rohtak Roadwas not made to compute the capital gain accrued to the assessee. The object of reference was to determine the unexplained investment made in purchase of residential house at New Rohtak so that necessary addition if need be can be made under s. 69 of the IT Act. In view of the aforesaid judgment of the apex Court in the case of Smt. Amiya Bala Paul vs. CIT, the reference made in the instant case is inv....