The Income Tax Officer Ward-3(1)(3), Bangalore V. Hotel Hemala Private Limited , Bangalore

MA 38/BANG/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3827 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 1 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 23-06-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 22-05-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Fair market value; Corroborative evidences; Valuation report; Set aside; Capital Gains
• Section: 143(3); 22

Judgement Text

MP No.38/Bang//2022 M/s. Hotel Hemala Pvt. Ltd., Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “A’’ BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER M.P. No.38/Bang/2022 (Arising out of ITA No.228/Bang/2019) Assessment Years: 2015-16 ITO Ward-3(1)(3) Bangalore Vs. M/s. Hotel Hemala Pvt. Ltd. Flat No.3, Vaishnavi Prime Apartments Andree Road Lakshmiamma Garden Shantinagar Bangalore 560 004 PAN NO : AAACH3767L APPELLANT RESPONDENT Appellant by : Shri Sudheendra, D.R. Respondent by : Shri Shivaprasad Reddy, A.R. Date of Hearing : 24.06.2022 Date of Pronouncement : 24.06.2022 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: This miscellaneous petition filed by the revenue emanated from the order of Tribunal in ITA No.228/Bang/2019 dated 27.12.2021. 2. The Ld. D.R. submitted that ITAT, vide its order in ITA No. 228/Bang/2019 dated 27.12.2021 for AY 2015-16, has disposed the appeal filed by Assessee. However, while disposing of the Appeals of the assessee-company, in the body of the order at Para. 22 wrongly mentioned "the report of the registered valuer produced MP No.38/Bang//2022 M/s. Hotel Hemala Pvt. Ltd., Bangalore Page 2 of 6 by the assessee before the assessing officer, "whereas the report of the registered valuer was not produced before the assessing officer by the assessee as per the ground 2.5 filed by the assessee before the ITAT". Hence the finding of the ITAT is an error apparent from record within the meaning of subsection 2 of Section 254 of the Income-tax Act,1961 ['the Act' for short] and may be rectified. 2.1 Further, the Ld. D.R. in his petition stated that the ITAT vide its order in ITA No. 228/Bang/2019 dated 27.12.2021 for AY 2015- 16, has disposed the appeal without adjudicating the grounds 2.5 and 2.6 filed by the assessee. It also constitutes error apparent from record within the meaning of subsection 2 of Section 254 of the Act and may be rectified. 3. The Ld. A.R. relied on the order of the Tribunal. 4. We have heard the rival submissions and perused the materials available on record. The contention of the Ld. D.R. is that the assessee has never filed the registered value of report before AO. On the other hand, it was filed before the Ld. CIT(A) who failed to admit the same at the time of hearing on earlier occasion. The Ld. A.R. drew our attention to the said valuation report and after considering that valuation report, the Tribunal remitted the issue to the AO with the direction to recompute the fair market value of the land as on 1.4.1981 by taking into account the rate as adopted by the registered valuer. Now the contention of the Ld. D.R. is that the Tribunal has wrongly recorded the findings in para 22 of its order as below which is irrelevant:- “The land rate has been adopted by the registered valuer at Rs.700/- per square ft. The Ld. AO rejected the valuation by the Registered valuer for the reason that the base taken by the registered valuer is based on the enquiries made with real estate agents, local people MP No.38/Bang//2022 M/s. Hotel Hemala Pvt. Ltd., Bangalore Page 3 of 6 and SRO. The Ld. AO observed that rate applied by the learned valuer has not been proved by any documentary evidence.” 4.1 Further, it was observed by the Tribunal in para 29 and page 39 of its order as follows:- “Therefore, respectfully following the aforesaid judicia precedents, we have no option but to accept the assessee’s contention that the Assessing Officer was not right in discarding the report of the registered valuer without having made a reference to the DVO and, therefore, the rate adopted by the Assessing Officer for the purpose of computation of fair market value cannot be upheld.” 4.2 In our opinion, the Tribunal committed error in observing as above in para 22 and para 29. Accordingly, we correct these paras as follows:- “22. We have heard both the sides and perused the material on records. We now come to the question whether fair market value of the property sold during the year as on, 1/4/1981 is required to be taken as per the report of the registered valuer produced by the assessee before the assessing officer or the value adopted by the learned assessing officer is required to be taken. The facts shows that assessee has claimed indexed cost of acquisition at Rs.4,09,28,246/- (cost of acquisition 39,96,869/-) by adopting the rate of property as on 1/4/1981 at Rs.787.50 per sq.ft. However, the same was valued by the Registered Valuer, who has valued the entire property for a sum of Rs.1,81,39,000/-. The ld. AO questioned the valuation report with respect to fair market value of the land. The ld. AO took that the notified rate of the land by SRO as on 31/3/1981 of Rs.120 per square ft. On careful consideration of the various arguments raised by both the parties, we fully agree with the contention raised by the learned authorized representative that valuation is a technical matter and learned assessing officer cannot value a property on his own or on the basis of SRO rate. MP No.38/Bang//2022 M/s. Hotel Hemala Pvt. Ltd., Bangalore Page 4 of 6 Admittedly, in this case the ld. AO has adopted SRO rates where assessee objected against those rates. We placed reliance in the case of Ved Kumari Subhash Chander Vs. ITO in ITA No.2041/Del/2016 dated 26.8.2019, wherein an identical issue is decided as under:- “5.0 We have heard the rival submissions and have also perused the material available on record. It is the contention of the assessee that the lower authorities have erred in overriding the report of the registered valuer without supporting evidence and, therefore, the same is bad in law. It is also the contention of the assessee that the Assessing Officer should have referred the matter to :the DVO if he was not in agreement with the valuation as 'computed by the registered valuer and that in absence of any evidence on record, the report of the registered valuer .should have been accepted with regard to fair market ,value as on 1.4.1981 for the purpose of computing the capital gains. It is seen that the Assessing Officer while rejecting the registered valuer's estimate at Rs. 5800/- per sq.mtr. has noted that the average rate at which the sales deeds were being executed was Rs. 1160/- per sq mtr. However, it is our considered opinion that valuation done by the empaneled registered valuer of the Income Tax Department would certainly take precedence over a value, which the Assessing Officer might adopt on his own without referring to the DVO. The fact of the matter remains that the Assessing Officer, during the course of assessment proceedings, did not refer to the DVO even though he chose not to accept the rate adopted by the registered valuer. Therefore, in our considered opinion, the Assessing Officer exceeded the powers entrusted to him in this regard by undertaking to compute the fair market value on his own without being supported by the expert knowledge of the DVO. The law is fairly settled in this regard and coordinate benches of the Tribunal have time and again held that where the assessee had submitted valuation report of a registered valuer and the matter was not referred by the Assessing Officer to the DVO, the Assessing Officer is bound to accept the report of the registered valuer regarding the market value of the land as claimed by the assessee. We take support from the order of ITAT Chandigarh Bench in the case of Barjinder Singh Bhatti vs. ITO in ITA No. 1101/ CHD/ 2014 wherein vide order dated 15.7.2015, the Bench had ruled in favour of the assessee by holding that if the Assessing Officer was not satisfied with the report of the registered valuer, he should have made a reference to the DVO and in absence of such a reference, the Assessing Officer should not have made his own calculation for the purpose of computation of capital gains. MP No.38/Bang//2022 M/s. Hotel Hemala Pvt. Ltd., Bangalore Page 5 of 6 Reliance is also placed on • the order of the order of the ITAT, Lucknow Bench in the case of Adarsh Kumar Agrawal vs. ACIT in ITA No. 66/ LKW/ 2014 wherein vide order dated 23.03.2014; it was held that where the assessee had submitted the valuation report of the registered valuer and the matter was not referred by the Assessing Officer to the DVO,- the • Assessing Officer has to accept the report of the registered valuer regarding the fair market value of the land as - claimed by the assessee. ITAT Cochin Bench in the case of Mrs. Susamma Paulose Vs JCIT reported in 79 TTJ 573 (Coch.) on identical facts held as under: A registered valuer is competent to value properties as per the 'provisions of the IT Act and Rules made there under. The AO is not justified in brushing aside the report of the registered valuer without pointing out any specific reason for that. The AD did not have any materials with him ,to rebut the valuation worked out by the registered valuer. The AD was rejecting the report of the registered valuer with a stroke of pen as if the law does not recognize the valuation made by a registered valuer. The method followed by the AO is quite unlawful and arbitrary. The report of a registered valuer is a valid piece of evidence in deciding matters of valuation. Such report can be modified or questioned or rebutted by the AO only in the light of reliable materials available with him. In the present case, the AO himself has not referred the matter to valuation. In the facts and circumstances of the case, the AO as well as the C/ T(A) have erred in coming to their conclusions regarding the valuation of the property as on 1st April, 1981. Fair market value of the land as on 1st April, 1981, estimated by a registered valuer being based on sound factual basis and the phenomenal development in that area could not be rejected by the AO without assigning any specific reasons." Paras 23 to 28 – As it is – No change 29. In view of the above order of the Tribunal, we are of the opinion that the AO cannot be given second innings so as to correct his lapse while framing the assessment u/s 143(3) of the Act. When the assessee all along disputing the valuation of the property as on 1/4/1981, the AO failed to find out the correct value of the property at the stage of assessment or at the stage of appellate proceedings. The decision referred herein above squarely applicable to the facts of the assessee’s case. Accordingly, we set aside the order of the Ld. CIT(A) and direct MP No.38/Bang//2022 M/s. Hotel Hemala Pvt. Ltd., Bangalore Page 6 of 6 the Assessing Officer to recompute the fair market value of the land as on 1.4.1981 by taking into account the rate as adopted by the registered valuer.” 5. Thus, there is no change in final result of the appeal. 6. In the result, the miscellaneous petition filed by the revenue is allowed. Order pronounced in the open court on 24 th Jun, 2022. Sd/- (N.V. Vasudevan ) Vice President Sd/- (Chandra Poojari) Accountant Member Bangalore, Dated 24 th Jun, 2022. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.