Income Tax Appellate Tribunal - Agra
Rajesh Manchanda, Agra vs Ito Ward-2(4), Agra on 13 April, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA (SMC) BENCH: AGRA
BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER
I.T.A No. 147/Agra/2016
(ASSESSMENT YEAR-2010-11)
Rajesh Manchanda Vs.. ITO, Ward-2(4),
13/112 Charbagh, Shahganj, Agra. Agra.
PAN No.AEKPM5359J
(Assessee) (Revenue)
Assessee by Shri Manoj Khurana, AR.
Revenue by Shri Waseem Arshad, Sr.DR.
Date of Hearing 15.02.2018
Date of Pronouncement 13.04.2018
ORDER
This is assessee's appeal for assessment year 2010-11, taking the following concise grounds:
"1. As the learned CIT (Appeals) has erred on facts as well as in law while making the addition for Rs.91,694/- by invoking the provision of section 145(3) of the Act and applied the rate of G.P. @ 17% as against 15.8% disclosed by the Appellant. Though no defects were found in the sales, purchases, opening and closing stock the Ld. A.O rejected the books.
(Relief claimed Rs. 91,694/-) I.T.A No. 147/Agra/2016 2
2. That the LD. CIT (Appeals) has erred in law and on facts by confirming the addition made by the A.O for Rs. 44,285/- by disallowing the proportionate amount of interest out of total interest claimed by the appellant as business expenditure. As the conditions u/s 36(1) (iii) of the Income tax act are satisfied, interest paid on Borrowings for Business purpose are an allowable expenditure.
(Relief claimed Rs. 44,285/-)
3. Further, the CIT (A) has erred in facts by confirming the addition for Rs.43,868/- by disallowing the interest paid to LIC, treating the same as not relating to the year under consideration. However, all benefits of such amount had been taken in the year under consideration for Business purpose only.
(Relief claimed Rs. 43,868/-) .
4. That the CIT (A) has erred on facts and in law while confirming, the addition for Rs. 23,94,950/- under the head long term capital gain. While adopting the sale consideration, full value of the consideration (fair market value) at Rs. 73,18,400/- as determined by DVO as against the actual sale price at Rs. 49,23,453/- as per registered sale deed. This land has a disputed title due to which it cannot be sold in the open market at a high rate.I.T.A No. 147/Agra/2016 3
Also there is a cremation ground in front of the land which is the major adverse factor.
5. That while determining the fair market value by the DVO at Rs. 73,18,400/-as against the actual sale value received at Rs. 49,23,453/- The DVO has completely ignored the various letters and confirmations by the Gaon Pradhan, Lekhpal, Property dealers and the local residents were filled before the DVO. Also a valuation report by a valuation officer approved by the Govt, of India in respect of which no objection was raised by the Ld. A.O. was filled.
(Relief claimed Rs. 23,94,950/-)"
2. Ground Nos. 1 to 3 are not pressed. Rejected as not pressed.
3. Apropos Ground No.4 and 5, the AO made the addition, holding as follows:
"Assessee has shown Long term capital Gain of Rs.44,44,160 and after taking deduction u/s 54F, the long term capital gain comes to NIL. Assessee was asked to explain as to why he had not applied sale price as per circle rate of property ids 50C of IT Act. Assessee filed objections on 01/01/2013 along with valuation report of Govt. approved valuer and requested to verify the facts through spot verification. The matter being technical was referred to valuation officer for determining the valuation of property u/s 55 A of I.T. Act. The Valuation Officer through his final report submitted vide I.T.A No. 147/Agra/2016 4 No01//CG/V0/AGRA/2012-13/114 dated 15/03/2013 determined the fair market value of property at Rs.73,18,400/- Vide show cause notice dated 15/03/2013, assessee was required to explain as to why the difference in value of property shown by assessee and fixed by Valuation Officer may not be treated as undisclosed sale consideration and accordingly long term capital gain on this sale consideration may be charged. Assessee filed his objections vide letter dated 19/03/2013 on 20/03/2013. After careful consideration of objections, the fair market value determined by valuation officer is accepted and is taken as full value of sale consideration u/s 50C of IT Act."
4. As per section 50C of the IT Act, the matter was referred for valuation to the DVO. The assessee had shown sale consideration at Rs.49,23,450/-. The Circle rate was Rs.91,98,000/-. The DVO gave valuation of Rs. 73,18,400/-. The assessee objected to such valuation. He contended that:
"8.3.1 Appellant has objected the value adopted as sale consideration under section 50C by the AO based on valuation made by the District valuation Officer. It is contended that valuation made by DVO is not justified. It was contended that DVO has valued the land at higher rate disregarding the facts that:-
I. The land is having disputed title and ownership cases are pending in the civil courts;I.T.A No. 147/Agra/2016 5
II. That it is located in the remote and underdeveloped area with no facilities of electricity, waterline or sever etc. III. That there is a shamshan ghat/cremation ground near this land.
IV. Shape of the plot is irregular and there does not exist proper approach to enter the plot Appellant has further contended that while doing the valuation, the District Valuation Officer has not conducted any local inquiries and has net considered any reliable comparable sale instances. To show that the value of property is not that high, appellant has furnished various certificates from Gram Pradhan, Lekhpal, some local property agents, residents of the area, all of which in effect mention about the cremation ground/ near the land, the underdeveloped conditions of area and the low property rates in the area. It was contented that arbitrary and incorrect facts are mentioned by the Valuation Officer in his valuation report."
5. The ld. CIT(A) has observed as follows:
"1. Assessee has repeatedly contended that the area is not developed, but it is a fact that while fixing the circle rate development of the area is one of the basic criteria, and if the circle rate in the area is fixed at Rs. 4000/-, there is no relevance in again discussing that the area does not have market, electricity, waterlines or sever;I.T.A No. 147/Agra/2016 6
2. The factum of suites pending in the court has been considered by the Valuation-Officer;
3. Cognizance of cremation ground in vicinity of this land is also taken by the valuation officer;
4. Rates of area from local agents gathered by the valuation officer.
5. Valuation Officer has adopted the method based on circle rates of land issued by the Central Govt. in the absence of reliable comparable sale incidence. At the point of such valuation, assessee has also not furnished any such information before the valuation officer, which is mentioned in the reply submitted by the assessee to the valuation officer.
6. The letters obtained by assessee by local residents and local property agents have no value as the same are not based on any authentic valuation.
It is seen that in the preliminary valuation report, the valuation officer has proposed a value of Rs. 93,69,839/-, but the same was reduced to Rs. 73,18,400/- after considering the objections filed by the assessee. It is seen that the valuation officer has taken note of all the objections, which are part of the valuation report. It is observed in the valuation report that :-
Allowing the gross rebate of on account of demerits associated with said land (as old shamshan ghat, dispute I.T.A No. 147/Agra/2016 7 in ownership as claimed by assessee, irregular shape of plot and other unforeseen minor demerits if any, have been considered at the rate of 20% i.e. at Rs. 3200/- as against the Circle Rate of Rs.4000/- given all these adverse conditions, valuation officer has taken 20% lower valuation than the circle rate, which is more than justified.
8.3.4 Apparently, appellant is not appreciating the proper procedure that is followed by DVO in making this valuation. It is a statutory reference that is made by AO to the valuation officer under section 55A, to ascertain capital gains tax liability. It is a technical report, where proper procedure is followed by the valuation officer to provide technical inputs to the AO. It is seen that the valuation officer has followed the proper procedure in making this valuation. A preliminary report was prepared and all the objections of assessee on issues listed out above were considered. Based on the objections of the assessee and other facts of the case valuation of the property is finalized.
Here it is important to note that valuation officer is not a third party from whom any information is collected by the AO, and hence any opportunity for cross-examination is required. He is a government officer assigned the technical job of valuation of the properties to assist the AO under the provisions of the Act. Even CIT(A) is not a I.T.A No. 147/Agra/2016 8 technical person to value the property, and the discussion that is made by me is only with a view to address the contentions of the assessee, and see that the valuation officer has followed a proper procedure as laid down in the guidelines for valuation of immovable property. Thus the ground taken by the appellant that cross-examination of the valuation officer be allowed is preposterous, and the same is hereby dismissed.
8.4 Here another fact is of importance that emerged while going through the assessment record and the valuation reports, that the whole stretch of land is being taken by one builder namely M/s Anant Infrabuild Pvt Ltd. Thus the assessee is virtually a kind of consolidator who has taken land from the local residents and thereafter sold to the builder. It was gathered that all the adjoining land also belonged to the family members of the assessee. Under these circumstances, the lower value of land shown by assessee through various local residents and property agents seem to be managed. Once the land is being purchased by the builder to develop a colony, the adverse factors that are emphasized by the assessee would have no impact on the value of land.
8.5 In any case, it is mentioned in the valuation report that the prevailing market rates of equivalent land of same merits on the road were to the tune of Rs. 15500/m2 in Feb, 2013. Thus taking into consideration growth rate of I.T.A No. 147/Agra/2016 9 last three years, valuation officer has taken the market rates on the road at Rs. 8115/m2. Giving discount for interior location this value has been further halted (50%) at Rs.4058/m2, which happened to be nearing the circle rate of the area, which is Rs.4000/m2. For all adverse factors, another relief and discount of 20% is given, and the market value is computed @3800/m2 by the valuation officer, which is quite reasonable and justified. 8.6 Under these facts and circumstances, it is held that AO has made proper reference to the valuation officer, who in turn has followed proper procedure to arrive at the value of the land. Thus the adoption of such value by the AO is in line with the statutory law, and the capital gains tax computed by adopting such value is correct.
9. In the result, appeal of the assessee is dismissed."
6. Heard. Against the DVO's report, the assessee, inter alia, objected that it was a fact that the Valuation Officer had not made any local inquiry, though the assessee had made a request in this regard to the Valuation Officer, vide letter dated 11.03.2013 and further vide letter dated 08.04.2013, for supplying of names and addresses of the persons from whom the inquiries were made. As per the DVO's report, inquiries regarding prevailing market rate of equivalent type of land situated in that locality on the road and also inside within 30 meters of the road were gathered from many persons, records and details of whom were not I.T.A No. 147/Agra/2016 10 maintained; and that it was not practicable and also beyond the scope of the guidelines for valuation. These observations were made by the DVO vide his letter (APB 6-7) dated Nil, appended as Annexure A to the final valuation report (APB 1-9) dated 15.03.2013, of the DVO. The ld. CIT(A), in this regard, has observed (impugned order, page 18, para 8.3.4) that 'It is a technical report, where proper procedure is followed by the Valuation Officer to provide technical inputs to the AO. It is seen that the Valuation Officer has followed the proper procedure in making this valuation. A preliminary report was prepared. All the objections of the assessee on issues listed out above were considered. Based on the objection of the assessee and other facts of the case valuation of the property is finalized.
7. It is, thus, seen that as per the DVO's letter, which has been attached as Annexure A to the DVO's final report, the record and details of the inquiries made by the DVO were not maintained. It has not been shown as to how it is not practicable to do so and as to how it is beyond the scope of the guidelines for valuation. As such, if any inquiries were made, since the results thereof were to be utilized against the assessee, these alleged inquiries having been conducted at the back of the assessee, the results thereof ought to have been, in accordance with the principles of natural justice, been necessarily confronted to the assessee. This has not been done.
I.T.A No. 147/Agra/201611
8. Accordingly, the matter is remitted to the AO, to be decided afresh on directing the DVO to conduct proper inquiries into the matter and to file a fresh valuation report after confronting the results of the inquiries to the assessee and deciding any objections against such inquiries, which may be raised by the assessee. The assessee shall be afforded due and adequate opportunity of hearing. The assessee, no doubt, shall co-operate in the fresh proceedings before the AO. All pleas available under the law shall remain so available to the assessee. Ordered accordingly.
9. In the result, for statistical purposes, the appeal is treated as allowed. Order pronounced in the open court on 13/04/2018.
Sd/-
(A.D. JAIN) JUDICIAL MEMBER Dated 13/04/2018 *AKV* Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT ASSISTANT REGISTRAR