Shri Gulab Singh Bhandari, Jodhpur V. ACIT,Circle-1, Jodhpur

CO 7/JODH/2019

AI Insights

The case involves an appeal by the Assistant Commissioner of Income Tax (ACIT), Circle-01, Jodhpur against Sh. Gulab Singh Bhandari concerning the valuation of a property sold by the assessee and the consequent long-term capital gains (LTCG) tax for the assessment year 2014-15. The property, located at Sardarpura, Jodhpur, was sold for Rs. 30,00,01,441, and the assessee declared a LTCG after claiming deductions under sections 54 and 54EC of the Income Tax Act. The ACIT contested the valuation adopted by the assessee, which was significantly higher than the valuation determined by the DVO. The CIT(A) upheld the assessee's valuation, leading to the revenue's appeal. The tribunal's decision favored the assessee, dismissing the revenue's appeal and the cross objection.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 122830 (ITAT-JODHPUR)
• Duration Of Justice: 4 year(s) 5 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 17-08-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 13-07-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 17-03-2019
• Other Referred Cases: Abhishek Jain Vs. ITO, Deen Dayal Rathi vs. ITO, Manjeet Singh vs. DCIT, Principal CIT vs. Smt. Vidhi Agarwal, Tushir Kant Agarwal vs. ITO, Sukumar Chandra Sahoo vs. ACIT, Krishnendu Chowdhury vs. ITO, Sun World Infrastructure (P) Ltd. vs. ACIT, Sh. Parvinder Vir Hans vs. ACIT, M/s Lexmark International (India) Pvt. Ltd. vs. DCIT/ACIT, ITO vs. Ashok Kumar Periwal
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Gift; Principle of natural justice; Cost of acquisition; Fair market value; Valuation report; Capital Gains
• Section: 54; 143(3); 50C; 142(1); 133(6); 143(1); 143(2); 113; 48; 119

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR VIRTUAL HEARING BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM ITA No. 53/Jodh/2019 (ASSESSMENT YEAR-2014-15) The ACIT, Circle-01, Jodhpur Vs Sh. Gulab Singh Bhandari C-99, Navgul P & T Churaha, Shastri Nagar, Jodhpur (Appellant) (Respondent) PAN NO. ABFPB 0697 J CO No.07/Jodh/2019 (ARISING OUT OF ITA No. 53/Jodh/2019) (ASSESSMENT YEAR-2014-15 ) Sh. Gulab Singh Bhandari C-99, Navgul P & T Churaha, Shastri Nagar, Jodhpur Vs The ACIT, Circle-01, Jodhpur (Appellant) (Respondent) PAN NO. ABFPB 0697 J Assessee By Shri C. M. Agarwal Revenue By Shri Lovish Kumar, CIT-DR Date of hearing 14/07/2023 Date of Pronouncement 18/08/2023 O R D E R PER: RATHOD KAMLESH JAYANTBHAI, AM 2 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari This appeal filed by the revenue and the cross objection filed by the assessee arising out of the order of the Commissioner of Income Tax (Appeals)- 1, Jodhpur [hereinafter referred to as ld. CIT(A)’] for the assessment year 2014-15 dated 06.11.2018 which in turn arises from the order passed by the DCIT, Circle-1, Jodhpur passed under Section 143(3) of the Income tax Act, 1961 (in short 'the Act') dated 29.12.2016. 2. Since the issues involved in this appeal filed by the revenue and cross objections of the assessee relates the assessee for the same assessment year and the grounds of the appeal and CO are interconnected. Therefore, the appeal of the revenue and the cross objection of the assessee were heard together with the agreement of both the parties and are being disposed off by this consolidated order. 3. Before moving towards the facts of the case we would like to mention that the revenue has assailed the appeal in ITA No. 53/Jodh/2019 on the following grounds; “On the facts and in the circumstances of the case the ld. CIT(A-1, Jodhpur has 3 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari 1. The Ld. CIT(A) deleted the addition on the ground that property sold by assessee four corner plot and having size 8.5 times of the property at Sr. No. 1, 24.8 times of the property at Sr. No. 2 and 25.16 times of the property at Sr. No. 3 and therefore have more fair market value. Thus CIT(A) ignored the fact that DVO had taken the closest and the most appropriate comparables from the same locality and property having similar condition. 2. Ld. CIT(A) ignored that valuer from whom assessee had obtained valuation report had provided comparable property from "Shastri Nagar" which is itself a separate locality and far away from Sardarpura 'C' Road where the questioned property was situated. 3. Ld. CIT(A) ignored that valuation report submitted by assessee is defective because it does not have any comparable cases in the same locality and not based on any material evidences or facts. 4. The appellant craves leave to add, amend or alter any or all the grounds of appeal on or before that date the appeal is finally heard for disposal.” Grounds of Cross Objection in CO No. 07/Jodh/2019 for A.Y 2014-15 3.1 The assessee has filed the cross objection against the appeal of the revenue and the grounds of the cross objections are reproduced here in below : “1. The ld. CIT(A)-1, Jodhpur was fully justified in allowing the appeal of the appellant on merit. However, the ld. CIT(A) has erred on facts and in law in dismissing the appeal of the assessee on the legal ground that the ld. DCIT, Circle-1, Jodhpur had erred on facts and in law in completing the assessment u/s 143(3), without issuance and service of mandatory notice u/s 143(2) by her and also that the only notice issued u/s 143(2) by ITO, Ward-3(2), Jodhpur on 30-08-2015 was bad in law being without any territorial as well as pecuniary jurisdiction.” The appellant craves leave to add, amend or alter the grounds of appeal on or before the appeal is finally heard for disposal.” 4 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari 4. The fact as culled out from the records is that return of income for the A.Y 2014-15 was electronically furnished on 28.07.2014 declaring a total income of Rs. 21,49,18,390/-. The case was accordingly processed u/s 143(1) accepting the returned income. The case was selected for Limited Scrutiny through CASS and notice u/s 143(2) of the Income Tax Act, 1961 was issued on 30.08.2015 by the ITO, Ward-3(2), Jodhpur which was duly served upon the assessee in time. On the change of incumbent of the office, a notice u/s 142(1) of the Income Tax Act, 1961 was issued on 06.06.2016 along with a questionnaire and served upon the assessee. During the year under consideration, the assessee has declared the Salary income, Interest income and Capital gain. From the AIR transaction it is gathered that the assessee has sold a plot situated at Sardarpura, Jodhpu on 29.06.2010 for a consideration of Rs. 30,00,01,441/-. As the assessee was in possession of aforesaid building before 1981. The valuation for the cost of building as on 1981 was taken by the assessee from the approved valuer and the valuation report was furnished along with the return of income. The cost of building as per valuation report was taken at Rs. 66,77,000/- as on 01.01.1981. The value of land is valued at Rs. 337.11 per sq.ft for residential part of plot and Rs. 674.22 per 5 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari sq.ft. for commercial part of the plot as fair market value as on 01.01.1981. To make the verification of the rate assessing office u/s. 133(6) were called from the office of the Sub Registrar-11 Jodhpur to provide the details of various deed regarding transfer of property registered during the financial year 1981-82 in the locality of Sardarpura, main “C” Road, Jodhpur. From the information received the ld. AO noted that the sale instances of properties reported by sub Registrar-II, Jodhpur and situated at C Road, Sardarpura, Jodhpur, the rate of land is worked out at Rs. 10 per sq.ft., Rs. 54 per sq.ft. and Rs. 55 per sq.ft. respectively which is less then rate of land as valued by the assessee through authorized valuer. Therefore, a show cause letter dated 09.09.2016 was issued in the matter. In compliance to the show cause notice the assessee filed reply on 14.09.2016 requesting to provide the copies of the material relied upon by ld. AO and obtained from the sub-registrar so as to file a suitable reply. 4.1 The ld. AO noted that the rates adopted by the assessee were 4 to 5 times higher than such rates, therefore, he contended that the valuation report furnished by the assessee is not based on valid comparable. Therefore, the ld. AO made the enquiry with the help of 6 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari the Inspector who submitted his report on 21.10.2016 on the factual aspect and size of plot and the rate adopted. Further a request was made to DVO also and DVO filed a valuation report of the property at Rs. 14,65,023/- as on 01.04.1981 and Rs. 4,80,899/- as on 1986 as against the value taken by the assessee at Rs. 66,77,000/- as on 01.04.1981 and Rs. 5,73,000/- as on 1986 respectively. The DVO valued the DLC rate of land as on 01.04.1981 @ 54.48 per sq.ft. as against rate of land taken by the assessee at Rs. 337.11 per sq.ft. for residential purpose and Rs. 674.22 per sq.ft. for commercial purpose and as such the total value as on 01.04.1981 is valued at Rs. 8,60,866/-. Considering these set of facts the assessee was again given the show cause notice and the assessee filed second reply on 29.12.2016. The ld. AO noted that the reply of the assessee was considered but cannot be accepted and therefore, the value of the said property based on the DVO report considered at Rs. 14,65,023/- and Rs. 4,80,899 as on 01.04.1981 and 01.04.1986 respectively. 5. Being aggrieved, from the order of the assessing officer, the assessee carried the matter in appeal before the ld. CIT(A). A propose 7 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari to the grounds so raised by the assessee the relevant finding of the ld. CIT(A) is reproduced here in below: “5.2 I have considered that assessment order, submissions of the appellant, facts of the case and documents on record and it is noted that one of the main objections of the appellant had been that the appellant was not provided copies of the 3 sale deeds relied upon by the AO and the DVO for arriving at the fair market value of the property in question. However, copies of the requisite sale deeds were provided to the assessee on the directions of the undersigned. Remand report was also obtained from the AO which has also been considered. Another objection has been that claim of extra appreciation of land made at the rate of 10% on account of road-width and 10% on account of plot, being corner plot was not considered whereas, at the time of purchase of plot no extra charges as claimed on account of road width and corner plot were in existence. Appellant has also contended that all the three properties compared by the A.O. none of the properties is apparently comparable to the property sold by the appellant. Appellant also contended further that, the property of the assessee was located in the main commercial area and it was four corner plot and having size 8.5 times of the property at Sr. No.1, 24.8 times of the property at Sr.No.2 and 25.16 times of the property at Sr. No.3 (supra), as considered by the AO, so it was bound to have higher price and fair market value. Appellant also has contended that the property mentioned at S. No.1 of the table of the 3 properties, measuring 1861 sq.ft. was registered at Rs. 20,000/- @ Rs. 10 per sq.ft. and this property was free from all encumbrances, whereas the other two properties mentioned at S.No. 2 & 3 having area of 637 and 628 sq. ft. (supra) respectively were sold for Rs. 35,000/- each @ Rs. 54 per sq. ft. and Rs. 55 per sq.ft. respectively and both of these properties were occupied by the tenants since long and as mentioned in the sale deeds the responsibility of getting these vacated was on the purchasers of such properties. Fact cannot be denied that such factors do effect the valuation of property, which should have been taken into account while calculating the valuation of the property in question and subsequently arriving at the long term capital gain on sale of this property. Further to above, appellant has also relied upon certain judgments in support of his stand. Considering the above noted facts of the case I am of the opinion that while arriving at the LTCG with respect to the property in 8 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari question it is important that the comparable properties be considered and not the properties which are not at par with the property under consideration. I note that the objections raised by the appellant are valid and thus, it I am inclined to accept the contention of the appellant, in this regard, especially in view of the detailed differences brought out of the documents considered by the assessing officer vis a vis the submissions of the appellant and inferences drawn therefrom. In view of the above, I find force in the arguments of the appellant as placed on file, coupled with the case laws relied upon by the appellant. Accordingly, LTCG as computed by the appellant as per his return of income deserves to be accepted. Thus, addition made by the AO on this account is directed to be deleted. Appellant succeeds on this ground. 7. Ground No. 3 as raised by the appellant is general in nature and does not require any specific adjudication thus is treated as duly disposed off hereby. 8. In the result, the appeal is partly allowed.” 6. In support of the grounds so raised by the revenue the ld. DR vehemently argued that the dispute was related to the valuation of the property as on 1981 and 1986 as claimed by the assessee. The ld. AO based on the information received from the sub registrar and filed report obtained from the inspector referred the matter before the DVO and based on the report of the DVO which has been issued based on principles of natural justice there is no reason of the same ignored by the ld. CIT(A) and the ld. CIT(A) being not technical person cannot simply ignore the report of the DVO. Even the defects pointed by were considered and the revised report of the DVO was submitted. As regards the cross objection filed by the assessee on legal ground the 9 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari ld. CIT(A) based on the judgment of Abhishek Jain Vs. ITO [ 94 taxmann.com 355 (Delhi) ] dismissed the appeal and therefore, the cross objection filed by the assessee is not maintainable. 7. On the other hand. the ld. AR of the assessee on merits supported the order of the ld. CIT(A) and submitted that the assessee was inherited the property which was of 1959. The assessee is civil engineer. The three sale instances relied upon by the learned assessing officer were never supplied till the ld. CIT(A) directed the ld. AO to supply. This itself shows that the ld. AO is acting with predetermined mind set. Without giving the instances relied upon the reference to the departmental valuation officer is against the provision of law and without confronting the documents relied upon. The ld. AR of the assessee also submitted as on the date of sale the DLC rate value of the property was Rs. 5 Cr but the assessee is executed sale deed and offered it for capital gain at consideration of Rs. 30 Cr. This shows that there cannot be intention of the assessee to offer less tax as it is legally payable. The ld. AR thus vehemently submitted that there is no basis of inspector report and the documents relied upon by the DVO and the AO were never provided till the completion of the 10 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari assessment. The contentions so raised before the ld. CIT(A) for which the revenue was given equally opportunity and the remand report was also called for from the assessing officer. The ld. AR of the assessee submitted that as the DLC rate was not available as on 01.04.981 and therefore, the assessee to support the cost of acquisition obtained the report of the valuer this shows the conduct of the assessee to remain compliant. As there was DLC rate as on 01.04.1981 alternative the ld. AR of the assessee submitted the reverse indexation be granted to the assessee and in that case of the fact which he has computed at page 21 of his written submission which works out to Rs. 2,99,52,076/- and as against that the assessee has claimed Rs. 72,50,000. The view of the reverse indexed cost is also dealt with by this bench in the case of Shri Deen Dayal Rathi in ITA no. 108/JP/2013. The ld. AR of the assessee in addition to the above arguments heavily placed reliance on the written submission containing 21 pages, case law compilation of 1 to 119 pages and relied upon the evidence in support of the contentions page to 1 to 119. The same is not reproduced on the submission made before the ld. CIT(A) is reproduced here in below “2. The assessee e-filed his return of the income for the A.Y. 2014-15 on 28-07-2014 showing income of Rs. 21,49,18,390/-. During the year the assessee had sold an immovable property for Rs. 30 crores on 11-10-2013 and after claiming indexed cost of acquisition & improvement of Rs. 11 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari 6,67,42,496/- shown Long Term Capital Gain (LTCG) of Rs. 23,32,57,504/- and after claiming deduction of Rs. 2 Crores u/s 54 and Rs.50 lakhs u/s 54EC, declared net taxable LTCG of Rs. 20,82,57,504/-. Apart from above the assessee has regular income of pension and interest etc. 3. The case was selected for Limited Scrutiny through CASS . Notice u/s 143(2) was issued on 30-08-2015 by the ITO, Ward -3 (2), Jodhpur which was duly served upon the assessee. Subsequently the case of the assessee was transferred to the DCIT, Circle-1, Jodhpur who issued notice u/s 142(1) of the I.T. Act 1961 on 06-06-2016 alongwith a questionnaire. Sh. Sachin Choudhary AR of the assessee appeared before the ld. AO from time to time and filed the requisite details. The ld. AO i.e. DCIT, Circle-1, Jodhpur completed the assessment u/s 143(3) on 29-12-2016 at income of Rs. 26,45,09,100/- as against returned income of Rs. 21,49,18,390/-. While completing the assessment the ld. AO did not accept the LTCG shown by the assessee and worked out the same at Rs. 28,28,48,215/- as against Rs. 23,32,57,504/- shown by the assessee. The ld. AO determined the indexed cost of acquisition as on 01-04-1981 at Rs. 1,71,51,785/- as against Rs. 6,67,42,496/- claimed by the assessee resulting in addition of Rs. 4,95,90,711/- against which the appeal has been preferred by the appellant before your Honour which is pending adjudication. Ground No. 1 That the ld. AO i.e. DCIT, Circle-1, Jodhpur has grossly erred on facts and in law in completing the assessment u/s 143(3) without issuance and service of statutory notice u/s 143(2) by her. Therefore, the assessment completed by her is bad in law and deserves to be quashed. It is worthwhile to mention that the notice issued u/s 143(2) on 30.08.2015 by ITO, Ward-3(2), Jodhpur was without any territorial as well as pecuniary jurisdiction and as such non est in the eye of law. Any assessment made on the basis of non est notice cannot be a valid assessment. ______ 4. The appellant is resident of Shastri Nagar, Jodhpur which falls under the territorial jurisdiction of DCIT, Circle-1, Jodhpur ( AO under Pr.CIT-1 and Range-1, Jodhpur) who has completed the assessee u/s 143 (3) on 29.12.2016 without issuing any notice u/s143(2), which is a mandatory requirement for making the assessment u/s 143 (3). The only notice issued u/s 143(2) in this case was dated 30.8.2015 by the ITO, Ward- 3(2), Jodhpur ( AO under Pr.CIT-2 and Range-3,Jodhpur). Copy of the notice u/s 143(2) dated 30.8.2015 is enclosed herewith as Annexure-A. He (ITO,Ward 3(2),Jodhpur) was very well aware of the fact that he has no territorial as 12 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari well as pecuniary jurisdiction over the case of the appellant being resident of Shastri Nagar, Jodhpur (which falls under territorial jurisdiction of Range-1, Jodhpur) and having income of Rs. 21, 49, 18,390/- whereas he has jurisdiction of cases of income upto Rs. 15 lakhs only, therefore, he himself suo motu transferred the case of the assessee for the A.Y. 2014-15 to the jurisdictional Assessing Officer i.e. DCIT, Circle-1, Jodhpur on 23-09-2015 for completing the pending scrutiny assessment. The ld. DCIT, Circle-1, Jodhpur also readily accepted the case on 24-09-2015 and without issuing any further notice u/s 143(2) and after issuing only notice u/s 142(1) on 06- 06-2016 alongwith questionnaire completed the assessment u/s 143(3) on 29-12-2016. 4.1 The assessee has obtained a copy of the transfer memo dated 14/23-09-2015 as per which the case of the assessee was transferred by ITO, Ward- 3 (2), Jodhpur to DCIT, Circle-1, Jodhpur, a copy of which is enclosed herewith for ready reference. In Colum 7 of the said transfer memo ITO, Ward-3(2), Jodhpur has mentioned the ‘reason for transfer’ as under – “the return income over 15.00 lakhs so the jurisdiction on the case vests with Dy. CIT, Cirle-1 Jodhpur.” He has also endorsed a copy of this transfer memo to Pr. CIT-1, Jodhpur & Pr. CIT-2, Jodhpur which very well shows that the ld. ITO, Ward-3 (2), Jodhpur was very well aware that he has no territorial as well as pecuniary jurisdiction over the case of appellant. 4.2. The jurisdictional AO i.e. DCIT, Cirle-1, Jodhpur never issued notice u/s 143(2) to the assessee as is evident from the assessment order and copy of order-sheet obtained from him and enclosed herewith as Annexure- B. 4.3. In view of the above facts, it is apparent that no notice u/s. 143(2) was issued by the DCIT, Circle-1, Jodhpur, who was the jurisdictional assessing officer and the only notice issued u/s. 143(2) was by the non jurisdictional Assessing Officer, therefore, the assessment order passed in the absence of statutory notice u/s. 143(2) of the I.T. Act by the A.O. holding jurisdiction in the case, the assessment order dated 29.12.2016 passed by the DCIT, Circle-1, Jodhpur is in valid in the eyes of law and may kindly be quashed. 4.4. In this regard the head note of the decision of Hon’ble ITAT, Jodhpur in the case of Jodhpur Sahakari Bhoomi Vikas Bank vs.ITO, reported in (2015 53 taxmann.com 113 (Jodphur-Trib.)) is reproduced as under:- 13 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari “ Section 143 of the Income tax Act, 1961- Assessment- Issue of notice (Limitation)- Assessment Year 2007-08- Notice under section 143(2) was issued to assessee on 18-08-2008 by Dy. CIT, Circle-3 who had no jurisdiction over assessee’s case- Realising that mistake, Dy. CIT, Circle-3 transferred file to ITO, Ward -3 who had jurisdiction over assessee’s case and thereafter, on 26-08-2009, fresh notice under section 143(2) was issued to assessee- Whether since Dy. CIT, Circle 3 had no jurisdiction over assessee’s case, notice issued by him/her was invalid and without jurisdiction and had to be treated as non est in eye of law- Held, yes- Whether valid notice issued by ITO, Ward-3 was dated 26-08-2009 which was clearly barred by limitation and assessment order framed consequent to this notice would also become invalid and barred by limitation- Held, yes {Para 4.2} {In favour of assessee}” In this regard reliance is also placed on the following judicial pronouncements:- 1. Sukumar Chandra Sahoo vs.ACIT, ITA/Kol./2016, dated 27.09.2017 (ITAT- Kolkata). 2. Krishnendu Chowdhury vs.ITO, {2017}78 taxmann.com 89 (ITAT- Kolkata). 3. Sun World Infrastructure (P) Ltd. WP (C) 1741/2015 & CM NO. 3112/2015 Delhi High Court, DOJ-05-03-2015. 4. ITO vs. M/s NVS Builders (P) Ltd., ITA No. 3729/Del./2012, ITAT Delhi reported in (2018) 169 ITD 679 (Delhi- Trib.). 5. Sh. Parvinder Vir Hans V. ACIT, CO No. 04/ASR/2011, A.Y. 2007-08 (Arising out of ITA No. 88 (ASR)/2011 ITAT, Amritsar, DOJ. 01-02-2016. 6. M/s Lexmark International (India) Pvt. Ltd. v. DCIT/ACIT, ITA No. 72/Kol./2017, ITA No.235/Kol./2017 & ITA No.2058/Kol./2017 (ITAT- Kolkata) DOJ. 28-09-2018 7. ITO vs.Ashok Kumar Periwal ITA No. 339/Viz./2016 (ITAT- Vishakhapatnam). In view of the facts of the case and the judicial pronouncements, the order passed by the DCIT, Circle-1, Jodhpur without issuing mandatory statutory notice u/s. 143(2) may kindly be quashed being invalid in the eyes of law. Ground No. 2 (i) The ld. AO has erred on facts and in law in determining the LTCG of Rs.28,28,48,215/- as against Rs.23,32,57,504/- declared by the appellant. (ii) The ld. AO has completed the assessment without following the principles of law of natural justice. _____ 14 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari 5. During the F.Y. 2013-14 relevant to A.Y. 2014-15 the assessee sold a residential cum commercial freehold property measuring 110.5 ft. X 143 ft. i.e. 15801.5 sq.ft. (1755.72 Sq. Yards or 1468 sq. Metres) at 396, 3 rd C Road, Sardarpura, Jodhpur on 11-10-2013 for Rs. 30 crores to one Sh. Dilip Kumar. 5.1. The said property was acquired by Sh. Sumer Chand Bhandari, the late father of the assessee, in the year 1959. At the time of sale of the said property on 11-10-2013 it consisted of two parts, one was partly double storeyed residential building and the other was triple storeyed commercial building with basement. The residential portion was got renovated by the father of the assessee immediately after purchase of the said property in 1959 and the commercial portion was got constructed in the year 1986. Since property sold by the assessee was acquired prior to 01-04-1981, therefore, to work out the LTCG the assessee got his property valued by a Registered Valuer to determine the Fair Market Value (FMV) of the property as on 01-04-1981 in view of provisions of sec. 55A(b)(ii) of Income Tax Act, 1961. 5.2. Sh. Arun Kumar Goyal, Chartered Engineer & Registered Valuer, after physically inspecting the property on 14-05-2014 submitted his report on 24-08-2014 estimating the FMV of the property as on 01-04-1981 at Rs. 66,77,000/- and addition done as on 01-04-1986 at Rs. 5, 73,000/-. For computation of FMV, the Regd. Valuer adopted basic land rate as on 01-04- 981 @Rs.365 per sq.ft for residential 14731.50 sq.ft. and @Rs.674/- per sq. ft. for commercial 1070 sq.ft., after considering the factors of road-width & corner plot and road on all 4 sides etc.,on the basis of guidelines of Registration & Stamp Department,Govt.Of Rajasthan, for calculation of value of properties for registration purpose. The Regd. Valuer valued the FMV of the residential portion of land @ Rs. 365/- per sq.ft. considering the sale instances of Plot No. E/104, E/105 & E/106, Shastri Nagar, Jodhpur sold by UIT, Jodhpur in open auction on 28-12-1980, 28-12-1980 and 16-05- 1982 respectively. And multiplying the same by 257.14% for arriving at the FMV of such land in Sardarpura an adjoining colony, on the basis of Govt. Rate of land as on 01-04-1973 (Residential) for Shastri Nagar being Rs. 37.66 per Sq. mt. and for Sardarpura, C- Road being Rs. 96.84 per sq.mt. (Rs. 96.84/- is 257.14% of Rs. 37.66/-), as no DLC rate was fixed by the Govt. prior to 1992 and no comparable sale instances were available for Sardarpura. On the same basis the Registered Valuer estimated the FMV of commercial portion of the land @Rs. 674/- per sq.ft. as on 01-04-1981. 15 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari 5.3 On the basis of FMV determined by the Regd. Valuer as on 01-04- 1981, as discussed above, the assessee computed the indexed cost of the property as on 01-04-1981 at Rs. 6,26,97,030/- and indexed cost of construction during F.Y.1985-86 at Rs.40,45,466/- aggregating to Rs. 6,67,42,496/- and worked out LTCG at Rs. 23,32,57,504/- as disclosed in his return of income. 6. During the course of assessment proceedings, as mentioned in the assessment order, the ld. AO called for information u/s 133(6) from the Sub- Registrar-II, Jodhpur to provide the details of various sale-deeds regarding transfer of properties registered during the F.Y. 1981-82 in the locality of Sardarpura, Main C- Road, Jodhpur. In compliance there-of the report from Sub-Registrar was received vide his letter No. 681 dated 28-07-2016 along with the copies of deeds registered between 24-01-1981 to 30-06-1982. From the aforesaid sale instances of properties reported by Sub-Registrar-II, Jodhpur , situated at C-Road, Sardarpura, Jodhpur the rate of land was found to be @ Rs.10/- per sq.ft.; Rs.54/- per sq.ft. and Rs. 55/- per sq.ft which is less than the FMV estimated by the Regd. Valuer of the assessee. The details of said three sale instances are as under:- S. No. Address of Property Size of Plot Price Date of sale Rate of land 1. Plot No. 397 the part of plot no. 398, Sardarpura, C Road, Jodhpur 1861 Sq. Ft. 20,000/- 19.06.1981 Rs. 10 per Sq. Ft. 2. Plot No. 180B, Sardarpura C Road, Jodhpur 637.20 Sq. Ft. 35,000/- 24.01.1981 Rs. 54 per Sq. Ft. 3. Plot No. 398, Sardarpura, C Road, Jodhpur 628 Sq. Ft. 35,000/- 30.06.1982 Rs. 55 per Sq. Ft. In view of above, the ld. AO issued a show cause notice to the assessee on 09-09-2016 requiring him to explain why the rate of land as on 01-04-1981 may not be restricted to maximum amount of Rs. 55/- per sq. ft. for the entire land as against Rs. 337.11 per sq. ft for residential and Rs. 674/- per sq.ft. for commercial land claimed by him. The AO also stated that why the bifurcation made for residential and commercial purpose may not be ignored because at the time of purchase of land there was no classification of residential purpose and commercial purpose. The ld. AO also asked the assessee to show cause as to why the claim of extra appreciation of land made at the rate of 10% on account of road-width and 10% on account of plot, being corner plot may not be rejected in view of the fact that at the time of purchase of plot no extra charges as claimed on account of road width and corner plot were in existence. 16 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari 6.1 In compliance to the aforesaid show cause notice the appellant filed his reply on 14-9-2016 requesting the AO to provide copies of the material relied upon by her in the aforesaid show cause notice, so as to enable him to file a suitable reply. However, copies of the said three sale deeds were not provided to the assessee. 6.2 The ld. AO through her Inspector got physical inspection of the property sold by the assessee and the properties mentioned in the said 3 sale deeds. The Inspector reported that plot no. 180B is not on main ‘C’ road Sardarpura, Jodhpur and is situated in 3 rd gali on road emerging in north of ‘C’ road. He reported that plot no. 396 (sold by the assessee) and plot no. 398 are both corner plots on the same road having distance of about 120 ft. 6.3 The ld. AO sent a reference u/s. 55 A (b)(ii) of the I.T. Act 1961 to Valuation Officer (VO) vide her letter, dated 24.10.2016 for estimation of the FMV of the property sold by the assessee, as on 01.04.1981. The relevant extract of the reference made by the AO to VO is reproduced as under:- “Please find enclosed herewith the Form No. N.S. 1.1 in Annexure- 8(A) & 8 (B) for valuation of property sold by aforesaid assessee. The assessee has sold a residential property Plot No. 396, Main Sardarpura C Road, Jodhpur in F.Y. 2013-14. The assessment is pending in aforesaid case for A.Y. 2014-15 and is getting time barred by 31.10.2016. Therefore, you are requested to please submit the valuation report at earliest. It is submitted that the case of Sh. Gulab Singh Bhandari, Jodhpur: PAN ABFPB0697; A.Y. 2014-15 is pending for assessment which is getting time barred by 31.12.2016. The assessee has computed long term capital gain by indexing the cost of acquisition in F.Y. 1981-82 and cost of improvement in F.Y. 1985-86. Therefore, the valuation report of the property by a registered valuer is enclosed by the assessee during the assessment proceedings. It is noticed from the valuation report (copy enclosed) that the assessee has considered few sale instances (F.Y. 1981-82) of immovable properties situated in location of Shastri Nagar, Jodhpur. Thereafter, the Govt. rate of land as on 01.04.1973 in Shastri Nagar & Sardarpura, C Road, Johdpur is compared and it is established that rates of land in location of Sardapura C Road Jodhpur was 257% higher than the rates of land situated in location of Shastri Nagar, Jodhpur. Accordingly, the rate of land in Shastri Nagar Area is worked out and thereafter to arrive the rate of land in Sardarpura C Road, Jodhpur, the assessee has enhanced the same by 257%. The rate of land so worked out is again enhanced by 20% on account of Road width in excess of 17 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari 60ft. and plot being corner plot. Further the rate of commercial land is taken double to the rate of residential plots in arbitrary manner. The valuation report is not acceptable to the undersigned. Therefore, the detail of few deed regarding transfer of property registered in office of sub registrar-1 was called for u/s. 133(6) of I.T. Act vide this office letter dated 19.07.2016. The Sub Registrar-1, Jodhpur has sent the detail of three properties alongwith registered deeds (copies enclosed) of same which are registered in F.Y. 1981-82 and 1982-83 and situated in vicinity to the property sold by the assessee i.e. at Sardarpura C Road, Jodhpur. The detail of deeds received from sub registrar is given as hererin under:- S. No. Address of Property Size of Plot Price of land Rate of land 1. Plot No. 397 the part of plot no. 398, Sardarpura, C Road, Jodhpur 1861 Sq. Ft. 20,000/- Rs. 10 per Sq. Ft. 2. Plot No. 180B, Sardarpura C Road, Jodhpur 637.20 Sq. Ft. 35,000/- Rs. 54 per Sq. Ft. 3. Plot No. 398, Sardarpura, C Road, Jodhpur 628 Sq. Ft. 35,000/- Rs. 55 per Sq. Ft. Since plot no. 396 and 398 are in the same line at Main Sardarpura C Road, Jodhpur and the distance between them is approximately 200-250 ft. as per inspector report (copy enclosed). Thus the land sold by assessee can be directly valued accordingly by comparing the facts of plot no. 398 as discussed above at Sr. No. 3 above i.e. at Rs. 55 per Sq. Ft. It is pertinent to state here that assessee has valued the property sold at Sardarpura C Road, Jodhpur by comparing the sale instance of property in the location of Shastri Nagar, Jodhpur when the sale instance at Sardarpura C Road at the same location and in the same year was available. Therefore, while estimating the value of land sold by assessee, the report of inspector and detail submitted by Sub registrar may be considered accordingly as discussed above.” 6. 4 The Valuation Officer (VO) issued show cause notice to the assessee and in compliance the assessee who is himself a Registered Valuer filed detailed written submissions on 04.11.2016, 17.11.2016 & 23.12.2016 justifying the FMV adopted by the Registered Valuer of the assessee. But the VO without considering the replies of the assessee made the valuation of the aforesaid property vide his report dated 26.12.2016 at Rs 14,65,023/- as on 01.04.1981 and Rs. 4,80,899/- as on 01.4.1986 as 18 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari against the value adopted by the assessee at Rs. 66,77,000/- as on 01.04.1981 and Rs. 5,73,000 as on 1986 respectively. Th. VO estimated the FMV rate of land as on 01.04.1981 @ R.s 54.48 per sq ft. as against the rate of land valued by the assessee at Rs. 337.11 per sq. ft. for residential purpose and Rs 674.22 per sq. ft. for commercial purpose and as such the total value of the land as on 01.04.1981 was valued at Rs. 8,60,866 /-. 6.5 In view of report of the VO the ld.AO again issued a show cause notice to the assessee requiring him to explain as to why the total value of the property may not be valued at Rs. 14,65,023/- as against value of Rs 66,77,000/- considered by him as on 01.04.1981 and why the cost of improvement in the F.Y. 1985-86 may not be considered at Rs. 4,80,899/- valued by the VO as against Rs. 5,73,000/- adopted by the assessee. 6.6 The appellant filed a very detailed reply on 29.12.2016 which has been reproduced in the assessment order by the AO. The appellant once again requested the ld. AO to provide copies of the 3 sale deeds relied upon by the AO and the VO and requested the AO not to complete the assessment without providing the aforesaid sale deeds and without considering the objections of the appellant after providing the sale deeds. 6.7 The ld. AO without supplying the copies of the said 3 sale deeds out rightly rejected all the submissions and objections of the appellants. She again reiterated her stand that out of the 3 sale deeds the sale instance of plot no. 398 showing sale of land @ Rs.55/-per sq.ft. is comparable with the property of the assessee but as the property of the assessee involved construction also she had to rely upon the report of the VO and on the basis of his report (i.e.VO) determined the FMV of the property as on 01.04.1981 at Rs 14,65,023/- and improvement cost as on 01.04.1986 at Rs. 4,80,899/- and after allowing indexation, calculated the total cost of acquisition at Rs. 1,71,51,785/- as against Rs. 6,67,42,496/- claimed by the assessee and resultantly made addition of Rs. 4,95,90,711/- and assessed LTCG at Rs. 28,28,48,215/- as against Rs. 23,32,57,504 declared by the assessee . 7. In the above connection it is very respectfully submitted that in determining the FMV of the property (as on 01.4.1981) sold by the assessee, the ld.AO has acted in a most arbitrary manner without following the principles of natural justice and has made the addition of Rs.4,95,90,,711/- according to her sweet will, without considering any of the objections, submissions or reasoning given by the assessee . Therefore, 19 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari for the following reasons it is submitted that the valuation made by the Registered Valuer of the assessee may kindly be accepted and the valuation made by the VO and assessed by the AO may kindly be rejected. (1) The three sale deeds relied upon by the ld AO and VO for determination of FMV as on 01.04.1981 were received from the sub- registrar by the AO on 01.08.2016 but neither the AO not the VO provided the copy of the same to the appellant. Despite repeated requests throughout the assessments proceedings. However, copies of the 3 sale deeds have been provided to the assessee on 21.08.2018 on the basis of the directions of the ld. CIT (A) contend in his letter dated 29.05.2018, in view of request of the assessee to him vide his letter dated 20.09.2017. (2) The ld. AO in Para 4 of the assessment order has mentioned that she had called for information u/s. 133 (6) from sub registrar II, Jodhpur to provide details of various deeds regarding transfer of properties registered during F.Y. 1981 -82 in the locality of Sardarpura main C Road , Jodhpur and in compliance the sub - registrar vide his letter no. 681 dated 28.07.2016 submitted the copies of the sale deeds . The ld. AO has elaborately discussed the 3 sale deeds in her assessment order and the VO also made the valuation on the basis of the said 3 sale deeds only. But in fact the ld. AO had called for copies of the sale deeds registered during the F.Y. 1981 -82 from the sub registrar-II, Jodhpur in respect of the sale instances of Sardarpura C- road and Shastri Nagar, Jodhpur and the Sub Registrar-II, Jodhpur vide his letter no. 681 dated 28.07.2016 had sent three sale deeds of Sardarpura and three sale deeds of Shastri nagar , Jodhpur. The ld. AO after calling for the sale deeds of Shastri Nagar, Jodhpur completely ignored them and did not send them to the VO for his consideration and also did not discuss these sale deeds in the assessment order for the reasons best known to her. It appears that she has used pick and choose approach according to her sweet will. (3) The ld. AO while making reference to the VO sent him copies of that said 3 sale deeds of Sardarpura Jodhpur having rate of land at Rs. 10/-, Rs. 54/- and 55/- per sq. ft.. She categorically asked the VO in the last para of the reference reproduced earlier that since plot no. 396 and 398 are in the same line at main Sardarpura C- Road , Jodhpur and the distance between them is approximately 200-250 ft. as per Inspector’s report thus the land sold by the assessee can be directly valued accordingly by comparing the facts of plot no. 398 as discussed at serial number 3 above i.e. @ Rs 55 per sq ft. 20 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari The VO also without any independent application of mind and without collecting any other evidences relating to determination of the FMV of the land and without considering any of the reply/objections/ submissions of the appellant determined the FMV as on 01.4.1981 simply on the basis of average rate of Rs. 54.48/-per sq. ft. on the basis of 3 sale deeds supplied to him as mentioned by the AO in her reference, as per her dictat. (4) The ld. AO has tried to determine the cost of acquisition of the property as on 01.04.1981 by the assessee and has not appreciated that for determination of the LTCG what is to be determined as on 01.04.1981 is the Fair Market Value (FMV) which depends upon a number of factors such as size of property, location, neighbourhood, nearest to the market, size of the road and further upcoming development in the area etc. (5) The ld. AO has repeatedly contended in the assessment order that the property sold by the assessee is most comparable to the plot no. 398 of Sardarpura C-Road, Jodhpur sold for Rs. 35,000/-, @ Rs. 55/- per sq.ft. on 30.06.1982. However, it is submitted that there is no comparison at all of both the properties as is evident from the following details- Plot No. 398 S. No. Specification Plot No. 396 (sold by the assessee) Plot No. 398 (relied upon by AO) 1. Dimension of area & land. 110.5 ft. X143 ft. (15802 sq.ft or 1468 sq. mtr.) 628 sq.ft. (69.77 sq. yds. or 58.40 sq. mtr.) 2. Nature of Area. Mixed Area. Property suitable for commercial use e.g. Mall, show-room etc. Mixed Area but property suitable for residence of a small family only. 3. Description of the property,as on the date of sale of P.No.398. One double storeyed residential building having all amenities. Part 398/B/A of Plot No. 398 having two rooms, kitchen, two small kothris and open land, having no water and electricity. 4. Road on which the land is abutting N-80’ main C- Road S-22’ road E-20’ road W-50’road N- Sampat C. Bafna S- 6’ Gali E- Rajendra Kumar W- Anil Traders 5. Whether corner plot? Four corners No 6. Name of the tenants, if any and rent received Vacant possession A part of the property occupied by Kiran Devi w/o Late Pyare Lal. Rent Rs.7 p.m., will have to be got vacated by the purchaser. 21 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari Plot No. 180B: There is no comparison of plot no. 396 sold by the assessee with plot no. 180B as also reported by the Inspector, after physical verification of both the properties, as discussed by the A.O. in assessment order. Plot No. 180B is not situated at main road and is in third Gali on the road emerging in the North direction. This is a residential house being part of plot No. 180 having area of 59.22 sq. mtrs and the following surroundings :- N- Plot No. 181 S- Plot No. 386 E- Road W- Plot No. 179 At the time of sale this property was occupied by one Shri Rajendra Kumar Sharma, tenant, since long. This property was also to be got vacated by the purchaser. Plot No. 397 the part of Plot No. 398 : This is a residential property measuring 172.98 sq. mtr. And 1/2 of 1/4 th portion of the plot No. 398. The surroundings of this plot are as under:- N- Sh. Shanti Chandra Bafna S- 398A- Sh. Kan Mal E- Sh. Sobhag Chandra Bafna W- 22’ Road. From the above description of all the three properties compared by the A.O. it is apparent that none of the properties is comparable to the property sold by the assessee. It is an established fact that several factors affect the sale consideration like size of property, location, neighbourhood., nearness to the market, size of the road etc. and since the property of the assessee was located in the main commercial area and it was four corner plot and having size 8.5 times of the property at Sr. No.1, 24.8 times of the property at Sr.No.2 and 25.16 times of the property at Sr. No.3 , so it was bound to have higher price and fair market value. But all these factors were altogether ignored by the ld. AO and VO.. In this regard, reliance is placed on the decision of Hon’ble ITAT, Jodhpur in the case of Tushir Kant Agarwal (HUF) vs.ITO, reported in {2013} 38 taxmann. com 9 (Jodhpur-Trib.). The head-note of the decision is reproduced as under- “Section 55, read with section 48, of the Income-tax Act, 1961 - Capital gains - Cost of acquisition [Valuation of land] - Assessment year 2001- 02 - Assessee declared capital loss on sale of land and building - While computing capital gains, assessee adopted value of land at rate of Rs. 575 per sq. ft. as on 1-4-1981 on basis of valuation report of approved 22 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari valuer - However, DVO worked out value of land by applying rate of Rs. 145 per sq. ft. on basis of land rate obtained from sub-Registrar's office - Whether since sub-Registrar provided five certified documents, and DVO considered only one document, there was merit in submission of assessee that DVO knowingly ignored other documents regarding DLC rates provided by sub-registrar and considered document which more suited him – Held, yes - Whether further, property of assessee was having better commercial prospects and being approximately 8 times bigger than property considered by DVO, same commanded higher price - Held, yes - Whether since rate adopted by assessee was based on report of approved valuer who had considered rates prescribed by Collectorate and there was various flaws in rate adopted by DVO, Assessing Officer was to be directed to adopt value of land as on 1-4- 1981 at rate of Rs. 575 per sq. ft. - Held, yes [Para 8] [In favour of assessee]”. (emphasis supplied) It is also important to quote here the head note of the decision of the Hon’ble Allahabad High Court in the case of Principal CIT v. Smt. Vidhi Agarwal, reported in (2017) 88 taxmann.com 306 (Allahabad) which reads as under- “Section 55 of the Income-tax Act, 1961 - Capital gains - Cost of acquisition (Valuation report) - Assessment year 2009-10 - Assessee's mother-in-law gifted a flat to assessee which she had purchased in year 1970 - During relevant assessment year, assessee sold said flat - For purpose of computation of capital gains, assessee relied on provision of section 55(2)(b)(ii) - She disclosed value of flat in question as on 1-4- 1981 on basis of valuation report submitted by approved valuer - Assessing Officer disbelieved aforesaid valuation report submitted by assessee in support of her claim as to cost of acquisition of flat on reasoning that assessee had not led any evidence in support of valuation report, such as circle rate etc. - Tribunal set aside objection raised by Assessing Officer - Whether approved valuer's report itself is a piece of evidence and Act does not require that opinion of approved valuer should have been supported with further evidence in shape of circle rate or exemplar sale deeds etc. - Held, yes - Whether even otherwise, since there was nothing on record to doubt correctness of report or its contents, impugned order passed by Tribunal did not require any interference - Held, yes [Para 12] [In favour of assessee]” (6) The ld. A.O. had also called for DLC rates of Sardarpura, Jodhpur as on 01.04.1981 from the Sub-Registrar-I, Jodhpur. He vide letter his letter No. 10/1002 dated 05.07.2016 intimated the AO that there were no DLC 23 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari rates prior to the year 1992 and the sale-deeds were registered on the basis of their face value. From the above fact, it is apparently clear that in absence of any DLC it can not be said that the 3 sale-deeds relied upon by the ld. A.O. were registered on the Fair Market Value and were obviously registered on the basis of sweet will of the purchasers and sellers. It is also proved by the fact that the property mentioned at S. No.1 of the table of the 3 properties given above, measuring 1861 sq.ft. was registered at Rs. 20,000/- @ Rs. 10 per sq.ft. and this property was free from all encumbrances, whereas the other two properties mentioned at S.No. 2 & 3 having area of 637 and 628 sq. ft. respectively were sold for Rs. 35,000/- each @ Rs. 54 per sq. ft. and Rs. 55 per sq.ft. respectively and both these properties were occupied by the tenants since long and as mentioned in the sale deeds the responsibility of getting these vacated was on the purchasers. The Hon’ble ITAT, Chandigarh in the case of Manjeet Singh vs.DCIT, reported in (2013) 30 taxmann.com 216 has discussed as under:- “18................................................................................................. ...................................................................................................... ....................................................... ....... Further, it is pertinent to mention that 'Fair Market Value' in relation to a capital asset has been defined u/s 2(22B) of the Act. Fair Market Value in relation to capital asset, means the price that the capital asset would ordinarily fetch on the sale in the open market on the relevant date). Sale consideration, as found recorded in the Sale Agreement in question, which was seized in the course of search operation, is nothing but 'Fair Market Value', as negotiated and arrived at by the purchaser and the seller, in respect of said land, having regard to the market conditions, location of the land and other relevant factors. Such sale consideration, as recorded in 'Agreement to Sell' is not same as recorded in the Registered Sale Deed of the said land. Therefore, adoption of average value of land by the revenue, at Rs.27,030/- per acre, on the basis of Registered Sale Deeds, cannot be considered as 'Fair Market Value' within the definition of Fair Market Value in relation to a capital asset, as contained u/s 2(22B) of the Act. The rationale and philosophy behind insertion of section 50C of the Act is that there is a wide gap between the sale consideration shown in the Registered Sale Deed and the 'Fair Market Value' of the asset sold. Therefore, legislature deemed it fit, to introduce the deeming provisions of section 50C, which contemplate a deeming situation in respect of full value of consideration, for the purpose of levy of capital gains. Thus, conceptually and factually, there is wide difference between the sale consideration, as recorded in the registered sale deed and the 'Fair Market Value' of the asset. 24 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari 19. In view of this, consideration as shown in the Registered Sale Deed cannot be equated with 'Fair Market Value', as defined in the Act u/s 2(22B) of the Act. Therefore, adoption of average value of land at Rs. 27,030/- per acre as on 1.4.1981, as 'Fair Market Value' of the land in question, for the purpose of computation of capital gains, is not legally and factually tenable. 'Fair Market Value' represents the price that a seller is willing to accept and a buyer is willing to pay in the open market. The price or sale consideration as specified in the Registered Sale Deed of an asset in India represents the price or sale consideration negotiated or determined not in the open market but in the parallel operating market where such transactions crystallized in a clandestine manner. In view of this, sale consideration of an asset, as recorded in the Registered Sale Deed is generally understated and, hence, cannot he taken as 'Fair Market Value' as on 1.4.1981 for the purpose of computation of 'Capital Gains'. 20. The ITAT, Chandigarh 'B' Bench in the case of Smt. Baljinder Kaur (supra) held that it is well settled that the concept of 'Fair Market Value' envisages existence of a hypothetical seller and a hypothetical buyer in a hypothetical market. Therefore, intrinsically speaking, the determination of 'Fair Market Value' of a capital asset as on 1st April, 1981 would involve an element of estimation based on relevant factors. An 'Agreement to Sell' is a relevant factor in determination of 'Fair Market Value', as on 1.4.1981, in the present appeal.” (Emphasis supplied). (7) The commercial importance and prime location of the property sold by the appellant can be adjudged by the fact that when he sold the property for Rs. 30 crores on 11.10.2013 the DLC rate of the property was not even Rs. 9.5 crores (DLC rate Rs. 4690/- per sq.ft. as on 11.10.2013) which is more than 3.5 times the value of other sale-deeds in the similar area acceptable to the Sub-Registrar. This fact has also to be considered while estimating the FMV as on 01.04.1981 in the case of the appellant. (8) The Hon’ble ITAT, Jodhpur vide its decision dated 04.04.2013 in the case of Deen Dayal Rathi, Jodhpur vs. ITO-3(4), Jodhpur in ITA No. 108/Jodhpur/2013 for the A.Y. 2009-10 has accepted valuation of residential plot measuring 9600 sq. ft. (80ft. X120 ft.) in Shastri Nagar, Jodhpur as on 01.04.1981 at Rs. 44,25,600/- i.e. @ Rs. 461/- per sq.ft. The Hon’ble ITAT has observed as under:- “10. Regarding valuation of FMV as on 1.4.81 we have found that the assessee has declared it on the basis of the report of the Registered Valuer who has determined the value of the building at Rs. 20,04,207/- and that of the land at Rs. 44,25,600/- totaling to Rs. 64,29,807/-. There is no dispute regarding this fact. The registered valuer has focused his report on the undisputed sale price of Rs. 4,01,00,000/- (in the month of May, 2008) and 25 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari by taking FMV of the building consisting of basement, ground floor and first floor, has arrived at a depreciated cost of the Building as on 1.4.1981 of Rs. 20,04,207/-, which has also 7 been accepted by the AO. Thus, the then cost of construction has been accepted, as given by the Registered Valuer at Rs. 34,63,809/-. From this figure only the Registered Valuer (RV) has arrived at the cost of Rs. 20,04,207/- as on 1.4.81 and this has been accepted since the building had been demolished by the purchaser by the time the DVO reached the spot. Thus, as per RV the cost of the land comes to Rs. 3,66,36,191/-, at the time of its sale. The registered valuer has adopted the decrease in land rate @7 ½% per annum per square foot and has arrived at its FMV as on 1.4.81 at Rs. 44,25,600/-. The area of the land being 9600 sq. ft (80’ x 120’). Thus, the total cost of the property in question comes to Rs. 64,30 lakhs. The argument of ld. AR that how the AO can accept one part of RV’s report and ignore the other part seems to be not only logical but also justified. There cannot be two divergent views about the same report in respect of land and building. If report regarding one is accepted, the other shall have to be accepted unless there are deriving reasons. In the given case, the demolition of the building cannot be such a factor, which can justify one conclusion. On that basis, the report cannot be accepted in part, and rejected in part. In our considered opinion, this action of the AO is not legally justified. Even as per the backward indexation by taking advantage of CBDT Circular No. 636 dated 31.07.1992 the value of the 8 land as on 1.4.1981 would be around the same as determined by the Registered Valuer. The RV’s report is annexed at Assessee’s paper Book 26 to 32. He has adopted the land rates at Rs. 10/- per sq. ft. and has further increased the value by 15% for location wise advantage and by 10% on account of it being situated on the 200 Feet Wide Road. Thus, he has taken land value at Rs. 12.5 per sq. ft. The sale rate is Rs. 4000/- per sq. ft. The value of the building given by the Registered Valuer and accepted by the AO comes to Rs. 34,63,809/-. This amount is out of total sale consideration of Rs. 4,01,00,000/- and gives 8.64% of the total value. The value of land as on 1.4.1981 has been claimed by the assessee at Rs. 20,04,207/- but the value of the land has been taken at Rs. 1,20,000/- as against claimed at Rs. 44,25,600/- by the assessee. Admittedly, as per the DVO’s report no DLC rate was available as on 1.4.1981. The report of the RV is supported by the backward indexation computed on the basis of cost inflation index. This method of ‘Cost-Inflation Index’ was introduced for the computation of the capital gains liable to tax. For this purpose reference can be made to CBDT’s circular No. 636 dated 31.08.1992. As a measure to offset the effect of inflation, all appreciation in value of capital assets before 1.4.1974 were excluded from tax. The cut-off date was taken as 1.4.1981. Thus, the appreciation in fair market 9 value of 26 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari capital asset upto 1.4.1981 was taken as a substitute for actual cost of acquisition to offset the impact of inflation upto that date and this has to be increased by applying cost inflation index as may be notified in the official gazette from time to time. This is a further way to square-up the impact of inflation for the period post 1.4.1981. Explanation (v) of Section 48 defines ‘cost inflation index’ as under :- “Cost Inflation Index”, in relation to previous year, means such Index as the Central Government may, having regard to seventy five per cent of average rise in the Consumer Price Index for urban non-manual employees for the immediately preceding previous year to such previous year, by notification in the official gazette, specify in this benefit”. Likewise, para 35.6 of the Circular No. 636 dated 31.08.1992 reads as under:- “35.6. for the Financial year 1981-82, Cost Inflation Index is 100 and C.I.T. for each subsequent year would be determined in such a way that 75% of the rise in Consumer Price Index for urban non-manual employees would be reflected in the rise in C.I.J.......” The cost inflation index as on 1.4.1981 was 100 and the corresponding figure relating to A.Y. 2009-10 was 582 which induced 75% of the rise in consumer price index. Therefore if the cost inflation index, which gives a statutory formula for determining the fair market value for purposes of computation 10 of capital gains, if applied backward, will result in maximum amount of capital gains liable to tax at 25% of the full scale consideration. In other words, one can calculate the taxable capital gains on the basis of above statutory formula as under :- Sale consideration Rs. 4,01,00,000/- Less: 25% which is deducted while Rs. 1,00,25,000/- Preparing notified cost inflation index Amount equivalent to 582 of cost index Rs. 3,00,75,000/- If 582 of CII is = Rs. 3,00,75,000/- Then for 100 it will be Rs. 3,00,75,000 x 100 = Rs. 51,67,525/- 582 This figure is equivalent to cost index figure of 100 as on 1.4.1981. The fair market value as on 1.4.1981 will have to be further increased by 25% as below: 51,67,525 x 125 = 64,59,407 100 Thus, Rs. 64,59,407/- is the amount of FMV as on 1.4.1981 computed as per the notified cost inflation index, which is mandatory and binding for computation of capital gains.” The Hon’ble ITAT, Jodhpur has also accepted rate of residential land @ Rs. 228/- per sq.ft. as on 01.04.1981 in Shastri Nagar, Jodhpur in the case of. 27 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari Rajendra DCIT vs Kumar Singhvi in ITA No. 313/Jodhpur/2010 , following its decision in the case of Deen Dayal Rathi. (9) On the basis of reverse/backward indexation method which is an accepted method for calculation of the FMV as on 01.04.1981 as held by the Hon’ble Andhra Pradesh High Court in the case of CIT vs.Ashven Datla reported in {2013} 37 taxmann.com 261 (Andhra Pradesh) and Hon’ble ITAT, Jodhpur in the case of Deendayal Rathi, Jodhpur vs.ITO-3(4), Jodhpur in ITA No. 108/Jodhpur/2013 and DCIT vs. Rajendra Kumar Singhvi, ITA No. 313/Jodhpur/201, the FMV of the property of the assessee comes to Rs. 2,99,52,076/-. These three decisions of the Hon’ble Andhra Pradesh High Court and ITAT, Jodhpur have been recently followed by the Hon’ble ITAT, Cochin in the case of ACIT vs. Shri Narayan Krishnanand in ITA No. 321 &322/Coch./2017 in its decision dated 14.08.2018 where the Hon’ble ITAT Cochin has held as under- “9.4 Further, in the case of CIT vs. Ashven Datla (218 Taxman 74), the Andhra Pradesh High Court had held that for computing capital gain u/s 48 of the Act, the FMV of the property cannot be determined on the basis of guideline value emanating from the Sub-Registrar’s Officer which is not scientifically prepared. The Andhra Pradesh High Court upheld the decision of the ITAT, Hyderabad Bench rendered in the case of ACIT vs. Sree Narsimha Rao as HUF in ITA No. 1240/Hyd/2007 dated 26/9/2008 wherein it was held that it is prudent on the part of the lower authorities to estimate the fair market value as on 01/04/1981 on the basis of valuation officer’s report which was arrived at by the reversed indexation method. Accordingly, we do not find any infirmity in the findings of the CIT(A) on this issue and the same is confirmed. This ground of appeals of the Revenue is rejected. Thus, the appeal of the Revenue in ITA No. 321/Coch/2017 is dismissed.” 7.1 The FMV in the case of appellant as on 01.04.1981 on the basis of reverse indexation method is worked out as under- Sale Consideration Rs. 30,00,00,000 Less: 25% which is deducted while preparing notified cost inflation index Rs.7,50,00,000/- Amount equivalent to 939 of cost index Rs. 22,50,00,000/- If 939 of CII is Rs. 22,50,00,000/- Then for 100 it will be Rs.22,50,00,000/- X100/939 = Rs. 2,39,61,661/- 28 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari This figure is equivalent to cost index figure of 100 as on 01.04.1981. The fair market value as on 01.04.1981 will have to be further increased by 25% as below: Rs. 2,39,61,661 X 125 = Rs.2,99,52,076 Thus, Rs. 2,99,52,076/- is the amount of FMV as on 01.04.1981 computed as per the notified cost inflation index, which is mandatory and binding for computation of capital gains, as discussed by the Hon’ble ITAT, Jodhpur in the case of Sh. Deen Dayal Rathi (supra). 7.2 Since the appellant has claimed the value of property as on 01.04.1981 at Rs. 72,50,000/-(Rs. 66,77,000/- plus Rs.5,73000/-) only, the same may kindly be accepted as the ld.AO has not given any really comparable case and as per reverse indexation method the appellant could have claimed the FMV of the property as on 01.04.1981 at Rs. 2,99,52,076/- in view of the decisions of the Hon’ble jurisdictional ITAT, Jodhpur, Hon’ble Andhra Pradesh High Court and ITAT,Cochin, as discussed above.” 8. We have heard the rival contentions, perused the material placed on record and judicial decisions cited by the parties to drive home to their contentions so raised. The bench noted that all the grounds raised by the revenue are interconnected and is under attack on account of accepting the report of the valuation submitted by the assessee and ignoring the observation of the ld. AO and DVO, therefore, the same is decided together. 8.1 A propose to all the grounds the facts on the issue is that the assessee has sold a property for consideration of Rs. 30,00,00,000/- and offered the capital gain of Rs. 21,49,18,390/-. The case of the 29 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari assessee selected for limited scrutiny through CASS. In the assessment proceeding the ld. AO noted that as the assessee is inherited the property which was acquired in 1959 therefore, fair market value as on 01.04.1981 is required to be determined so as to compute the capital gain. Therefore, the assessee obtained a valuation report from the value who is registered as approved valued by the department. The value has determined the value of the property at Rs. 66,77,000/- as on 1981. The valuer has adopted Rs. 337.11 per sq.ft for residential part of land and Rs. 674.22 per sq.ft for commercial part of plot and accordingly valuation report was issued. To verify the rate, assessing officer u/s. 133(6) called for sale instances from the office of the Sub Registrar-11 Jodhpur in the locality of Sardarpura, main “C” Road, Jodhpur for 1981 period. From the information received the ld. AO noted that the sale instances of properties reported by sub Registrar-II, Jodhpur and situated at C Road, Sardarpura, Jodhpur, the rate of land is worked out at Rs. 10 per sq.ft., Rs. 54 per sq.ft. and Rs. 55 per sq.ft. respectively which is less then rate of land as valued by the assessee through authorized valuer. Therefore, a show cause letter dated 09.09.2016 was issued in the matter. In compliance to the show cause notice the assessee filed 30 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari reply on 14.09.2016 requesting to provide the copies of the material relied upon by ld. AO and obtained from the sub-registrar so as to file a suitable defense reply. From the information so received by the ld. AO noted that the rates adopted by the assessee were 4 to 5 times higher than instance he obtained and therefore, viewed that the valuation report furnished by the assessee is not based on valid comparable. Further to this ld. AO deputed the Inspector to make the spot enquiry who submitted his report on the factual aspect and size of plot and the rate adopted. Based on this input ld. AO made reference to DVO for valuation of the property who submitted the report and made valuation at Rs. 14,65,023/- as on 01.04.1981 and Rs. 4,80,899/- as on 1986 as against the value taken by the assessee at Rs. 66,77,000/- as on 01.04.1981 and Rs. 5,73,000/- as on 1986 respectively. The DVO valued the rate of land as on 01.04.1981 @ 54.48 per sq.ft. as against rate of land taken by the assessee at Rs. 337.11 per sq.ft. for residential purpose and Rs. 674.22 per sq.ft. for commercial purpose and as such the total value as on 01.04.1981. Finally based on the DVO ld. AO allowed the cost of acquisition to the assessee. The assessee has challenged the action of the ld. AO on technical ground about the issue of the notice which was decided 31 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari against the assessee by the ld. CIT(A) and as regards the merits of the case the ld. CIT(A) has recorded his finding and the same is reproduced here in below for the sake of convenience : “5.2 I have considered that assessment order, submissions of the appellant, facts of the case and documents on record and it is noted that one of the main objections of the appellant had been that the appellant was not provided copies of the 3 sale deeds relied upon by the AO and the DVO for arriving at the fair market value of the property in question. However, copies of the requisite sale deeds were provided to the assessee on the directions of the undersigned. Remand report was also obtained from the AO which has also been considered. Another objection has been that claim of extra appreciation of land made at the rate of 10% on account of road-width and 10% on account of plot, being corner plot was not considered whereas, at the time of purchase of plot no extra charges as claimed on account of road width and corner plot were in existence. Appellant has also contended that all the three properties compared by the A.O. none of the properties is apparently comparable to the property sold by the appellant. Appellant also contended further that, the property of the assessee was located in the main commercial area and it was four corner plot and having size 8.5 times of the property at Sr. No.1, 24.8 times of the property at Sr.No.2 and 25.16 times of the property at Sr. No.3 (supra), as considered by the AO, so it was bound to have higher price and fair market value. Appellant also has contended that the property mentioned at S. No.1 of the table of the 3 properties, measuring 1861 sq.ft. was registered at Rs. 20,000/- @ Rs. 10 per sq.ft. and this property was free from all encumbrances, whereas the other two properties mentioned at S.No. 2 & 3 having area of 637 and 628 sq. ft. (supra) respectively were sold for Rs. 35,000/- each @ Rs. 54 per sq. ft. and Rs. 55 per sq.ft. respectively and both of these properties were occupied by the tenants since long and as mentioned in the sale deeds the responsibility of getting these vacated was on the purchasers of such properties. Fact cannot be denied that such factors do effect the valuation of property, which should have been taken into account while calculating the valuation of the property in question and subsequently arriving at the long term capital gain on sale of this property. Further to above, appellant has also relied upon certain judgments in support 32 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari of his stand. Considering the above noted facts of the case I am of the opinion that while arriving at the LTCG with respect to the property in question it is important that the comparable properties be considered and not the properties which are not at par with the property under consideration. I note that the objections raised by the appellant are valid and thus, it I am inclined to accept the contention of the appellant, in this regard, especially in view of the detailed differences brought out of the documents considered by the assessing officer vis a vis the submissions of the appellant and inferences drawn therefrom. In view of the above, I find force in the arguments of the appellant as placed on file, coupled with the case laws relied upon by the appellant. Accordingly, LTCG as computed by the appellant as per his return of income deserves to be accepted. Thus, addition made by the AO on this account is directed to be deleted. Appellant succeeds on this ground. 8.2 From the above finding so recorded and arguments of both the parties before us we have observed that as the assessee was not given the sale instances relied upon by the assessing officer and DVO the same was provided to the assessee in the first appellate stage. The ld. AR of the assessee filed a detailed objections to that and the same was confronted to the assessing officer and the relevant comments were called for. Even the assessee has submitted detailed objections to the rates on various aspects such as dimensions of area of land, Nature and size of the property, whether the property sold is free hold or occupied by the tenant, whether the property is having the location advantage that is four side open or not. Thus, the instances cited and relied upon by the revenue were differentiated on various 33 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari aspects. The ld. AR of the assessee thus, citing all the facets of the issue contended that in the absence of any DLC it cannot be said that 3 sale deeds relied upon by the revenue were registered on the fair market value and were obviously having the various other factors as size, occupancies, locations advantage etc.(APB-7to13), Even these aspects were confronted to the revenue in the remand proceedings. Thus, we see that in the assessment proceeding the reference was made without first consulting the assessee on the sale instances relied upon by the revenue. In the proceeding before the ld. CIT(A) the same was done and based on that remand report there is nothing placed on record by the ld. AO through the ld. DR before us that whether there is a grave error on the part of the departmental approved valuer while issuing the valuation report which was appointed by the assessee. Even the ld AO before making the reference to the DVO has not feel it necessary to call for the comments of the department registered valuer and sought any comments from him first before making a case of reference to DVO. We have also take note of the fact that the assessee is Civil Engineer and sold the property at 30 Cr when the property is having the DLC rate 5 Cr. This itself shows the conduct of the assessee while offering the capital gain. We note from the order of 34 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari the ld. CIT(A) that in the proceeding before him he has directed the assessing officer to provide the three sale instances which were earlier not provided. The assessee made a detailed comments on it and same was forwarded to the ld. AO for remand report. The ld. CIT(A) has based on the reply of the assessee agreed that thee instances cited none of the instances apparently comparable to the property that the assessee sold. He further appreciated that the fact that the property of the assessee was located in the main commercial area [ this contention support the consideration that the assessee received 30 cr as against the DLC rate of 5 Cr ] and having four corner plot and having the size of 8.5 times or property relied upon at sr no. 1 and 24.8 times of the property at Sr no. 2 and 25.16 times of the property listed at sr no. 3 in table mentioned at page 8 of his order. He further observed that in some of the property were occupied by the tenant even this fact were not disputed by the revenue before us. The assessee relying on the judgment of Allahabad high court in the case of PCIT Vs. Smt. Vidhi Agarwal 88 taxmann.com 306 where in the court observed as under 12. In the instant case, the assessee clearly did not chose the value of the cost of acquisition of the asset by the previous owner, which was only Rs. 45,000/- in the year 1970 as her cost of acquisition. In fact the assessee specifically relied on the report of the approved valuer disclosing the fair market value of the assets at Rs. 1,05,02,677/-. The Assessing Officer on his 35 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari part only objected to the valuation report for the reason of it not being supported with any evidence. However, he perhaps lost sight of the fact that the expert opinion i.e. approved valuer's report was itself a piece of evidence. It was for the Assessing Officer to have led or required such evidence to come on record as he may have wished to rely upon if he doubted the correctness of the value disclosed in the report of the approved valuer. 8.3 We have also noted the fact that the ld. AO has called for DLC rates as on 01.04.1981 from the sub registrar and in reply dated 05.07.2016 informed that no DLC rates were applicable prior to the year 1992 and sale deeds were registered on the basis of the face value. Thus, in the absence of the DLC rates and merely based on the three sole instances and that too was differentiated on major part submitting that the same cannot be relied upon. We also take note of the alternative arguments raised by the ld. AR of the assessee in the absence of the DLC rate relying upon this bench decision in the case of Shri Deen Dayal Rathi in ITA no. 108/Jodh/2013 where in the coordinate bench view that when the benefit of reverse cost of inflation index can be considered while computing the capital gain and the same is coming at Rs. 2,99,52,076/-. On this aspect we are of the considered view that the assessee is not in appeal on this ground and therefore, in absence of the ground that benefit cannot be granted to the assessee. In the light of the facts and circumstance discussed here in above we see no infirmity in the order of the ld. CIT(A) and 36 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari therefore the ground no. 1 to 3 raised by the revenue stands dismissed. In terms of this observation the appeal of the revenue in ITA no. 53/Jodh/2019 stands dismissed. 9. Now we take up the cross objection filed by the assessee particularly challenging the order of the assessing of on jurisdiction issue. We have heard the rival contentions, perused the material placed on record and judicial decisions cited by the parties to drive home to their contentions so raised. From the court file we noted that this issue is dealt by the ld. CIT(A) in his order and he has dismissed the technical ground raised by the assessee considering the decision of Delhi High Court in the case of Abhishek Jain Vs. ITO [ 94 taxmann.com 355 (Delhi) ]. Therefore, on this issue also we see no infirmity in the finding so recorded by the ld. CIT(A) while dismissing the technical ground raised by the assessee. Based on this observation the cross objection filed by the assessee has no merits and the same stands dismissed. 37 ITA Nos. 53/Jodh/2019 & CO No. 7/Jodh/2019 Shri Gulab Singh Bhandari In the result, appeal of the revenue is dismissed and cross objection of the assessee also stands dismissed. Order pronounced under rule 34(4) of the Appellate Tribunal Rules, 1963, by placing the details on the notice board. Sd/- Sd/- (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) Judcial Member Accountant Member D at e d : 1 8 / 08 /2 02 3 *G an es h K u m a r , P S Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR 6. Guard File Assistant Registrar Jodhpur Bench