TaxTMI 
TaxTMI 
2011 (8) TMI 421
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....s of law contained under section 153 of the Income-tax Act, 1961; 2. That the addition on account rent of Rs. 36,000/- made by the Assessing Officer and upheld by the ld. CIT (Appeals) is against the facts and to the provisions of law." 4. First we take up the appeal filed by the Revenue. The only issue for consideration in Revenue's appeal relates to deleting the addition of Rs. 1,26,26,422/- on the basis of the DVO's report in respect of sale of property and also in respect of investments made in other properties. The facts of the case stated in brief are that the assessee sold property known as flat No. B-28, Lajpat Nagar, New Delhi in May, 2003 for sale consideration of Rs. 12 lakhs. The said property was purchased by the assessee on 25th October, 1996 for a sum of Rs.12 lakhs. Thus the capital gain on account of sale of property was admitted as NIL. The Assessing Officer in order to ascertain the market value of the property deputed an Inspector of Income-tax to make enquiries about the fair market value of the property sold. The Inspector of Income-tax vide his report dated 6/01/2006 reported that the premises bearing No. B-III/28 at Lajpat Nagar-III, New Delhi, was con....
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.... Therefore, the proportionate area of 57.56 sq. mts. was wrongly taken by the DVO for the purpose of valuation. The Assessing Officer considered the objections raised by the assessee and rejected the same. He adopted sale consideration of Rs. 57,58,400/- as sale consideration as per DVO's report and computed capital gains of Rs. 39,36,760/-. 5. The assessee had made investment in shop Nos. 11, 12 and 12-A at N-5, NDSE-II, New Delhi for an amount of Rs. 24 lakhs. In order to verify the fair market value of the investment the matter was referred to the valuation officer, who estimated the value of assets at Rs. 1,51,26,800/-. The copy of the valuation report was forwarded to the assessee for her comments. The assessee vide her letter dated 20/12/2006 objected the valuation on the following grounds :- "(a) The lease rent of all the three properties is at Rs. 65,000/- as against Rs. 97,500/- adopted by the DVO; (b) Interest free securities were at Rs. 1,35,000/- only as against Rs. 3,90,000/- taken by the DVO. Also it has been contended that the rate of interest charged at 15 per cent is on the higher side. (c) The cost of property per sq. ft. as per DVO comes to Rs. ....
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....ssessing Officer. He had estimated the value of the property at the hearsay of the alleged property dealer, namely, M/s. Kohli Property Dealer. It was also stated that the statement of property dealer was not given to the assessee to confirm what the Inspector had reported. Since no summon was issued to the property dealer for taking the statement and for cross examination by the assessee, reliance cannot be made on Inspector's report. It was also submitted that the valuation officer has not given any sale instances. No confirmation from purchasing assessee was available for any of the alleged extra payment made by him, if any, other than what has been stated in the agreement. According to the assessee whatever has been submitted in the agreement has to be accepted true and correct unless contrary proved. No proceedings were initiated against the buyer of the flat in regard to its cost. It was also submitted that the property was referred to the valuation officer under section 55A of the Act for ascertaining the market value as on May, 2003. The provisions of section 55A(a) of the Act will be applicable in the cases where the Assessing Officer or the Departmental officer had pointe....
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....t any unaccounted money was invested, no addition was warranted on the basis of the valuation report. The Assessing Officer apart from the report of the DVO has not discussed any factor in the assessment order, while adopting the value of property at Rs. 57,58,400/-. The assessee's objections have been quoted in the assessment order, but the AO had taken the sale value of the property at Rs. 57,58,400/- without adequately considering the objections raised by the assessee. The valuation officer has adopted the rate per sq. ft. at Rs. 4,800/- as against Rs. 1,000/- per sq. ft. He had not considered the fact that the flat was situated in the rehabilitation colony. The AO has brushed aside the objections raised by the assessee. The ld. CIT (Appeals) after considering the report of the DVO as well as the assessee's objections estimated the purchase price of the property at Rs. 1,200/- per sq. ft. and thus determined the value of the flat at Rs. 14,40,000/-. 10.1 As regards purchase of property consisting of three shops at N-5, NDSE-I, it was submitted by the assessee that the property was located in the residential area, which has been misused by using it for commercial purpose. The ....
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....the purpose of computation of capital gains full value of consideration is to be taken and not fair market value of the property. As regards investment in the property, the ld. AR of the assessee submitted that provisions of section 142A of the Act has been amended by Finance Act, 2010 with effect from 1/07/2010 for the purpose of determining fair market value of the immovable property. Since the assessee had purchased property in May, 2003 reference made by the Assessing Officer under section 142A of the Act is not justified. It was also submitted that the properties purchased are in residential colony and, therefore, the valuation could not be made at such an exorbitant rate. The DVO has not referred any comparable case in order to arrive at the value of the shops. It was also submitted that full facts of the assessee's case that the property was located in residential area, have not been considered by the valuation officer. He further submitted that the valuation made on the basis of rent capitalization method is not justified. 13. On the other hand, the ld. Sr. D.R. supported the order of the assessing officer. He submitted for the purpose of investment reference to valuatio....
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....n of the capital asset to the valuation officer in a case where value adopted or assessed or assessable by stamp valuation authority exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed or assessable by the stamp valuation authority has not been disputed in any appeal or revision or no reference has been made before any authority, court or High Court. On combined reading of sub-sections (1) and (2) of section 50C it is clear that in the absence of any material to the effect that the assessee had received amount over and above the value on which stamp duty is payable, the full value of consideration will be the value adopted for the purpose of stamp valuation in respect of transfer of the asset. 15. Under section 142A of the Act the AO is empowered to refer to the valuation cell for the purpose of making an assessment or reassessment where an estimate of the value of any investment referred to in section 69 or 69B or the value of any bullion, jewellery or other valuable article, referred to in section 69A or section 69B. Thus provisions of section 142A are applicable where the value of investment is to be determined. Provi....
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....ssessment year 2004-05 under consideration reads as under: "142A. (1) For the purposes of making an assessment or reassessment under this Act, where an estimate of the value of any investment referred to in section 69 or section 69B or the value of any bullion, jewellery or other valuable article referred to in section 69A or section 69B is required to be made, the Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to him." 15.3 Section 69 of Income-tax Act, 1961 deals with unexplained investments not recorded in books of account, if any, maintained by the assessee for any source of income; section 69A is applicable in the cases where in any financial year the assessee is found to be owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income; and section 69B is applicable in cases where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the Assessing Officer finds that the amount exp....
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....erty as on the date of transfer; (b) the value so adopted or assessed or assessable by the stamp valuation authority has not been disputed in any appeal or revision or no reference has been made before any authority, court or High Court. Thus in order to enable the Assessing Officer in the circumstances mention u/s 50C(2), to refer the valuation of the property received from a person other than specified for section 56(2)(vii)(b), section 142A was amended by insertion words 'or fair market value of any property referred to in sub section (2) of section 56' with effect from 1/07/2010. 15.5 Our view gets support from Memorandum explaining the provisions in Finance Bill, 2010 which explains the Legislative intention for insertion of words 'or fair market value of any property referred to in sub-section (2) of section 56' in section 142A. Clause (xxi) and (xxxiii) of Finance Bill, 2010 has been explained under the head 'Taxation of certain transactions without consideration or for inadequate consideration'. The relevant portion of Memorandum explaining provisions is reproduced as below:- "Under the existing provisions of section 56(2)(vii), any sum of money or any property in kin....
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....is proposed to amend section 142A(1) to allow the Assessing Officer to make a reference to the valuation officer for an estimate of the value of property for the purposes of section 56(2). This amendment is proposed to take effect from 1st July, 2010." 15.6 From plain reading of the Memorandum explaining the provisions in Finance Bill, 2010 the Legislative intention is clear. The amendment to section 142A(1) has been made with a view to value the immovable property which is received by the assessee being an individual or a HUF from person other than relatives without any consideration. The Assessing Officer can make reference to the valuation officer under section 142A for determination of fair market value of the property for the purpose of assessment in respect of properties received without consideration referred to in section 56(2) of the Act and that too when assessee when assessee claims that the value adopted or assessed or assessable by stamp valuation authority exceeds the fair market value of the property as on the date of transfer. Therefore, it is incorrect on the part of the ld. counsel for the assessee to say that with effect from 1st July, 2010 reference to valuat....
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....ry high as compared the value recorded in sale deeds. It is also a settled law that the Revenue cannot be asked to prove the impossible particularly in the circumstance where actual information is in possession of the assessee. The difference in valuation as per registered valuer's report or sale deed vis-a-vis DVO's report is not small. It almost is almost six times. Therefore, the decision of ITAT Delhi Bench in the case of Five Star Healthcare (P.) Ltd. (supra) will be applicable. 15.8 ITAT, Delhi in the case of Five Star Healthcare (P.) Ltd. (supra) for AY 2006-07 has held that the AO was right in invoking provisions of section 69 read with section 142A of the Act. In this case the assessee company had purchased land for consideration of Rs. 7 lakhs. The AO observing that the land was under-valued, referred the valuation of the land to the DVO, who valued the property at Rs. 22 lakhs. The AO made addition of Rs. 15 lakhs towards undisclosed investment under section 69B of the Act. There was huge difference in the amount shown to have expended by the assessee on purchase of land and the amount representing the average rate of similar property in the area and the difference wa....
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....ntainable rent for the purposes of Rule 3 in relation to an immovable property shall be the amount of gross maintainable rent, as reduced by amount of taxes levied by any local authority in respect of the property and a sum equal to 15 per cent of gross maintainable rent. As per Rule 5, gross maintainable rent is to be computed in respect of property which is let and will be the amount received or receivable by the owner as annual rent or the annual value assessed by the local authority in whose area the property is situated for the purposes of levy of Property Tax or any other tax on the basis of such assessment, whichever is higher. Therefore, for the purpose of determination of gross maintainable rent the interest on advance received cannot be included. Moreover, the Assessing Officer has allowed the deduction in respect of Municipal Taxes paid by the assessee at Rs. 18,355/-, but no deduction of a sum equal to 15 per cent of gross maintainable rent has not been allowed. Further it is not known whether the soaps purchased by the assessee are free-hold or lease-hold. If it is a case of lease hold property, proviso to Rule 3 will come into operation, according to which where the u....