TaxTMI 
TaxTMI 
2024 (10) TMI 1821
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.... 01.04.2001 at Rs. 6,18,38,946/- is unjust, illegal, arbitrary and against the facts and circumstances of the case. 3. Action of A.O. in working the circle rate of land as at 01.04.2001 at Rs.5,472 Per Sq. Yard as against the DRP's directions to apply land rate somewhere between Rs.4500 and 6,450 per Sq. Yard as against Rs.7,250 taken by the appellant's Government Approved Valuer as Market Price is unjust, illegal, arbitrary and against the facts and circumstances of the case 4. Action of the A.O. in completely disallowing the cost of construction in the building carried out in the year 2003-2004 claimed at Rs. 91,09,820/- is unjust, illegal, arbitrary and against the facts and circumstances of the case 5. Action of the A.O. in completely disallowing the cost of development in the building carried out in the year 2003-2004 claimed at Rs.21,31,493/- is unjust, illegal, arbitrary and against the facts and circumstances of the case." 3. Brief facts of the case: The assessee is a non-resident residing in Texas, USA. During the year, the assessee was the owner of the property being institutional (School) building and land measuring 1.55 Acres (cover....
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.... Value u/s 50C 236300000 Sales Consideration Received 236300000 Sale Consideration 236300000 Less: Transfer Expenses 0 236300000 Less: Indexed Cost Value of Land F.Y. 2001-02 54389500/100*301 163712395 Value of Land F.Y. 2001-02 7449446/100*301 22422832 Value of Land F.Y. 2003-04 9109820/109*301 25156475 Land Development Charges F.Y. 2003-04 2131493/109*301 5886049 217177751 19122249 Deduction u/s 54EC 5000000 5000000 Capital Gains 14122249 Investment in Specified Bond u/s 54EC Rs.5000000 3.1. During the draft assessment stage, the AO noted that the assessee did not submit any documentary evidence in support of her claim of cost of construction and land development charges. In the assessment proceedings, the AO has considered the cost of construction and land development charges for FY 2003-04. The AO issued notice u/s 142(1) of the Act dated 12.12.2022 requesting to submit the....
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....ls in support of her claim of cost of construction/improvement and land development charges during the assessment proceedings/DRP proceedings and therefore the entire expenses incurred in financial year 2003-04 remained unexplained and disallowed the total amount amounting to Rs.3,10,42,524/- claimed under this head. The relevant finding of the AO in this regard in para 8.2 of the final assessment order is reproduced as under :- "8.2 The Hon'ble DRP has further directed to take a more reasonable approach and pass a reasoned order on basis of findings in the valuation report, one way or the other, instead of an adhoc disallowance in form of percentage disallowance. In view of the same, it is stated that the assessee has not produced any documentary evidence/bills in support of its claim of cost of construction/ improvement and land development charges during the assessment proceedings and during the DRP proceedings. In absence of any relevant evidentiary documents, the entire expenses remain unexplained. Therefore, in view of the directions of the Hon'ble DRP, the entire expenses w.r.t. the cost of construction/ improvement and cost of land development charges amoun....
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.... plots are always lower than residential plots. Secondly, the AO stated that the above purchase price was based on market rate and not circle rates. The AO stated that as per amendment made to section 55 of the Act, applicable from AY 2021-22, fair market value of property as on 01.04.2001 cannot be more than the stamp duty value as on 01.04.2001. 6.3. Thereafter, the AO stated that the assessee had taken value of land at Rs.7250 per sq. yd. which was an approximation of the mean value of circle rates for residential Rs.6500 per sq. yd. and commercial properties (Rs. 8000 per sq. yd.) within and in around the same locality. The AO noted that the assessee had not enclosed the circle rates for the institutional plots for the FY 2001-02. The AO perused the current circle rates available on the website of sub-registrar office of Gurugram and found that circle rates of commercial plots (Rs.1,65,000/- Per Sq. Yds) in the same locality are five times higher than the circle rates of institutional plots (Rs. 28,000/- Per Sq. Yds). Likewise, the AO noted that the current circle rates of residential properties (Rs.72000 per Sq. Yds.) was found to be three time higher than the circle rate o....
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.... 301 58,86,049/- Total of Sl. No.3+4 (Cost of construction/improvement & Land Development) 3,10,42,525/- Allowable to the extent of 70% of total expenses claimed as discussed above 2,17,29,767/- Grand Total 14,32,26,825/- The comparative valuation in accordance with 50C is here as under :- Sl. No. Particulars Area Circle Rates (in Rs.) Amount in Rs. 1 Land measuring 1.55 Acre 7502 Sq. Yd. 28000 Per Sq. Yd. 21,00,56,000/- 2 Year 1997-98 13236.40 Sq. ft. 800 Per Sq. Ft. 1,05,89,120/- 3 Year 2003-04 13236.40 Sq. Ft. 800 Per Sq. Ft. 1,05,89,120/- Total value of land and building as per stamp valuation purpose 23,12,34,240/- Actual Sales Consideration Rs.23,63,00,000/- 5.1. Computation of total income in case of Smt. Lalita Trehan :- The assessee has declared Rs.1,41,22,249/- as income from Capital Gain. The income of the assessee is recomputed as under :- Total Sale Consideration :- Rs.23,63,00,000/- 50C Valuation of property: Rs.23,12,34,240/- Indexed cost of acquisition Rs.14,32,26,825/- (i) Long Term Capital Gain (R....
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....ue to the paucity of time and the AO may examine the same at his end also. In coming to the above conclusion, the Ld. DRP in para-7 of its order also noted that the rate of Rs.7,250/- taken by the approved valuer has been rejected by the AO as well as the assessee on the ground that the AO found the rates over quoted and the assessee found the rate under quoted. Accordingly, the ld. DRP held that since valuation report are unacceptable to both and therefore it considered the rate submitted by the assessee as reproduced in para-5 of its order. However, the ld. DRP also did not refer the matter to the Valuation Officer for ascertaining the valuation of the property being sold during the year. 7.2. Following the above directions, the AO determined the average rate i.e. Rs.5472 per sq. yd. for the calculation of cost of acquisition of institutional land rate as on 01.04.2001. The findings of the AO in this regard is discussed in para-8 of the Final Assessment Order, which is reproduced as under :- "8. The Hon'ble DRP has directed to recalculate the per sq yard cost on the basis of the logic given by the Hon'ble DRP. The Hon'ble DRP has stated that "Since the cir....
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....on report CII for the FY in which payment was made CII 2020- 21 Indexed COA FY 2020-2021 (in Rs.) 1 Land measuring 7502 Sq. Yd. X Rs.5472 per Sq. Yd. = Rs.4,10,50,944/- 1990-91 /2001-02 100 301 12,35,63,341/- 2. Cost of Construction 13236.40 Sq. Ft. X Rs.562.80 Per Sq. Ft. =Rs.74,49,446/- 1997-98 /2001-02 100 301 2,24,22,832/- 3 Cost of construction / improvement 13236.40 Sq. Ft. x Rs.688.24 Per Sq. Ft .= Rs.91,09,820/- FY 2003- 04 109 301 Disallowed by the AO NIL 4. Cost of Land Development 60899.80 Sq. Ft. X Rs.35 Per Sq, ft. = Rs.21,31,493/- FY 2003- 04 109 301 Disallowed by the AO NIL Grand Total 14,59,86,173/- The income of the assessee is recomputed as under :- Total Sale consideration Rs.23,63,00,000/- 50C value of property :- Rs.23,12,34,240/- Indexed cost of acquisition Rs. 14,59,86,173/- (i) Long Term Capital Gain (Rs.23,63,00,000 - Rs.14,59,86,173/-) Rs.9,03,13,827/- (Taxed @ 20% on Long Term Capital Gain) (ii) Less : Deduction u/s 54EC (NHAI B....
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....e AO was not right in discarding the report of the registered valuer without having made a reference to the DVO and therefore the rate adopted by the AO for the purpose of computation of fair market value cannot be upheld. 10. The Ld. DR strongly relied upon the orders of the AO and submitted that the valuation of 2001 was not notified by the Government. It is further submitted that it was not mandatory for the AO to refer the matter to the DVO. The ld. DR also relied upon the findings of the DRP in para no.8 to 10 of its order. The Ld. DR also submitted that the matter may be set-aside to the file of the AO with a direction to re-examine the facts and if required to refer the matter to the DVO for its valuation of the property to determine the cost of the property, on which the capital gains has accrued to the assessee. 11. Further, the matter was put up for clarification on 26.07.2024, to enquire how in ground no.2 of the appeal, the figures of Rs.6,18,38,946/- was arrived at evidencing the fair market value as on 01.04.2001. Further, the assessee was also requested to clarify the date on which the valuation report dated 05.12.2019 was placed before the AO during the assess....
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....016 A. Y. 2012-13 dated 26.08.2022 150 to 154 ITAT Delhi B Bench in the case of Ved Kumari Subhash Chander vs. ITO Ward 11(1), Gurgaon in ITA No. 2041/Del/2016 A. Y. 2011-12 dated 26.08.2019 155 to 160 ITAT Surat Bench in the case of Harivadanbhai Manganlal Patel vs. ITO Ward 1(3)(7), Surat in ITA No. 30/SRT/2023 A. Y. 2013-14 dated 08.05.2023 161 to 167 ITAT Delhi Bench "A" in the case of DCIT Circle 1(1), New Delhi vs. Ajanta Tubes Ltd. in ITA No. 4432/Del/2014 dated 05.09.2019 for A. Y. 2008-09 168 to 174 6. It was also argued that the Tribunal in the case of Ved Kumari Subhash Chander vs. ITO Ward 11(1), Gurgaon in ITA No. 2041/Del/2016 A. Y. 2011-12 dated 26.08.2019 in Para 5.2 has relied upon two high courts judgements in arriving at the decision that the A.O. was not right in discarding the report of a registered valuer without having made a reference to the DVO (Refer Page No. 159/ 160). 5.2 In the case of CWT Vs Raghunath Singh Thakur (304 ITR 268 HP) the Hon'ble High Court of Himachal Pradesh held that if the Assessing Officer does not agree with the report regarding the valuer relied upon by the assessee, rejection of such value....
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....rt was only Rs.1,160/- per sq. mtr. and the assessee had increased the rate of land by five times. The AO issued a show cause notice and after examining the submissions of the assessee, determined the fair market value of the land as on 01.04.1981 at Rs.1,160 per sq. mtr. as against Rs.5800 per sq. mtr. adopted by the assessee. The AO also noted that the assessee had adopted the cost of construction at Rs.1800 per sq. mtr. whereas, the rate fixed by Ahmedabad Urban Development Authority was Rs.1000 per sq. mtr. By adopting the said rates, the AO recomputed the Capital Gains of the assessee at Rs.1,61,81,888/-. Aggrieved with this order, the assessee filed an appeal before the Ld. CIT(A). The CIT(A) directed the AO to refer the valuation of the property to the DVO for ascertaining correct fair market value as on 01.04.1981, which was done by the AO. However, the valuation officer at Ahmedabad reported that the property in question was inspected along with the assessee but he noted that the property was non-existent on the date of inspection as the purchaser had dismantled the old construction and new apartments were being constructed. He, therefore, expressed his inability to carry ....
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.... is fairly settled in this regard and coordinate benches of the Tribunal have time and again held that where the assessee had submitted valuation report of a registered valuer and the matter was not referred by the Assessing Officer to the DVO, the Assessing Officer is bound to accept the report of the registered valuer regarding the market value of the land as claimed by the assessee. We take support from the order of ITAT Chandigarh Bench in the case of Barjidner Singh Bhatti v. ITO in[IT Appeal No. 1101 (Chd.) of 2014, dated 15-7-2015]wherein vide order dated 15.7.2015, the Bench had ruled in favour of the assessee by holding that if the Assessing Officer was not satisfied with the report of the registered valuer, he should have made a reference to the DVO and in absence of such a reference, the Assessing Officer should not have made his own calculation for the purpose of computation of capital gains. Reliance is also placed on the order of the ITAT, Lucknow Bench in the case of Adarsh Kumar Agrawal v. ACIT in [IT Appeal No.66 (LKW) of 2014, dated 23-9-2013]wherein vide order dated 23.03.2014, it was held that where the assessee had submitted the valuation report of the register....
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....ter to the DVO for determining the fair market value of the land as on which he failed to do so. The tribunal held that the revenue has not discharged the onus but merely rejected the fair market value taken by the assessee. It set aside the order of the CIT (A) and directed the AO to recompute the capital gain after taking the fair market value of the land as on 1/4/ 1981, as claimed by the assessee. Fair market value of the land as on 1 / 4/ 1981 estimated by the registered valuer being based on sound factual basis and the phenomenal development in that area could not be rejected by the AO without assigning any specific reasons. 5.2 In the case of CWT v. Raghunath Singh Thakur (304 ITR 268 HP) the Hon'ble High Court of Himachal Pradesh held that if the Assessing Officer does not agree with the report regarding the valuer relied upon by the assessee, rejection of such valuer's report without making reference to the valuation, order is invalid and the report of the registered valuer shall be accepted. 5.4 The Hon'ble Bombay High Court in the case of C.I.T. v. Raman Kumar Suri reported in [2013] 31 taxmann.com 122/255 CTR 107/213 Taxman 214 had held tha....
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....r for valuation of the property sold during the year in which the quantum of capital gains on account of valuation of the land has been disputed. Therefore, respectfully following the aforesaid order of the Coordinate Bench of the Tribunal, we hold that the Assessing Officer was not right in discarding the report of the registered valuer regarding the determination of the fair market value of the land as on 01.04.2001 without making a reference to the DVO and, therefore, the rate adopted by the Assessing Officer for the purpose of computation of capital gains in the final assessment order cannot be upheld. Accordingly, we set aside the order of the AO and direct the Assessing Officer to re-compute the fair market value of the land as on 01.04.2001 at Rs.7,250/- per sq. yard as adopted by the registered valuer and allow indexation accordingly. Similarly, the cost of construction (Rs.91,09,820/-) and land development charges (Rs.21,31,493/-) incurred during FY 2003-04 was also valued by the registered valuer and being an integral part of the capital asset and which was again disputed by the AO but not referred to the Valuation Officer by the AO and therefore considering the same reas....
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....delwal Chartered Accountant & Document 2 SEHGAL & ASSOCIATES ARCHITECTS. ENGINEERS. SHOP NO. 15, SEC .- 14, OPP. HUDA OFFICE, GURGAON-122001 Gurgaon 23/11/19 VALUATION REPORT On pursuance of Smt. Lalita Trehan the undersigned inspected the school building so called American Montessori Public School to assess its value as on 31.01.2001 plus for the construction done post 2001 i.e., in the year of 2003-04. Keeping in view of specification and this building , year of construction and corresponding CPWD (PAR) during this period I assess its value as on 31.03.2001 . This building is very neatly finished and nicely maintained . Good land development, with 5'-6"boundary wall , pavements in cement rough finished , a basket ball court and good grassy lawn at entrance .Rest all the area has been left kucha but raised from the adjoining roads. Construction of first phase of school comprised of Ground Floor and First Floor , both having covered area 615.072 Sq.mts i.c., 6618.2Sq.Ft each floor , comprising of 8 class rooms , staircase , toilet block for girls and boys with separate drinking water system . The school looks very open and airy . The size of the class ....