In light of restrictions on land use and the deletion of Section 50C, ITAT permits a 25% drop in DLC Rate

Fact and issue of the case

This appeal is filed by assessee and is arising out of the order of the National Faceless Appeal Centre, Delhi dated 23/03/2023 [here in after (NFAC)] for assessment year 2013-14, which in turn arise from the order of the ITO Ward 5(2), Jaipur dated 13.01.2016 passed under 143(3) of the Income Tax Act, [ here in after referred to as Act ].

The assessee has marched this appeal on the following grounds:-

That on the law and in the facts and in the circumstances of the case, the ld CIT(A) grossly erred in confirming the addition of Rs.44, 13,704/- made by the Id. Assessing Officer u/s 50C of the Act.

That on the law and in the facts and in the circumstances of the case the Id. CIT(A) grossly erred in not providing the opportunity of hearing and to submit objection on the valuation report dated 04.05.2018 issued by Divisional Valuation Officer.

That on the law and in the facts and in the circumstances of the case the ld. CIT(A) grossly erred in relying upon the valuation report 04.05.2018 issued by the Id. Divisional Valuation Officer without considering the drawback factor i.e. IOCL Gas Line passing through middle of the Land.

That on the law and in the facts and in the circumstances of the case the ld. DVO grossly erred in taking the Value of agriculture land at Rs 1,69,13,700/- against Rs 1,25,00,000/- by holding that P & MP Act do not put any restriction on use of land whereas proviso of sub clause 1 of section 9 of P & MP Act 1962 imposed restriction, i.e., any construction over land, any construction or excavate of well, reservoir or dam or plant any tree.

The appellant craves leave to add, alter, modify or amend any ground on or before the date of hearing.”

The fact as culled out from the records is that the assessee has filed return of income on 27.09.2013 at Rs. 4,19,770/-. The case of the assessee was selected under CASS and therefore, notices were issued from time to time in compliance the notices, the assessee filed various details as called for by the ld. AO. During assessment proceedings, the Assessing Officer has observed from the return of income that the assessee the assessee sod a property for a sale consideration at Rs. 1,25,00,000/-. The DLC rate of that property was at Rs. 1,69,13,704/-. Therefore, assessee was issued a show cause notice requesting him to show cause as to why the difference of Rs. 44,13,704/- [ 1,69,13,704/-less 1,25,00,000/- ] be not added as per provision of section 50C of the Act. The assessee has filed detailed reply but ld. AO did not find the reply satisfactory and finally completed the assessment making addition of Rs. 44,13,704/- u/s 50C of the Act.

Aggrieved from the said order of the Assessing Officer, the assessee has preferred an appeal before the ld. CIT(A) raising this issue as the assessee has raised the contentions that the valuation of property need to be evaluated by the DVO considering the peculiar set of fact. The being so that in the impugned land sold by the assessee which though agricultural land but from the middly of the said land IOCL Gaspipeline passing to the property and therefore, the assessee justify the reference to the DVO. Based on the detailed facts and record placed before the ld. CIT(A), he has in the appellate proceeding directed the AO to refer the matter to the DVO. DVO made the valuation of the property as on the date of sale i.e. 20.02.2018 at Rs. 1,69,13,700/-. The DVO adopted the same rate as the assessee has submitted in his valuation report but has not granted the benefit of 25% lessor market value based on the reason. The ld. CIT(A) given the DVO’s report to the assessee for his comments. But the assessee did not controvert the finding of the DVO and has not filed any submission. The ld. CIT(A) also confirm that the consideration be adopted at Rs. 1,69,13,700/- and the appeal of the assessee was decided and the relevant observation of the ld. CIT(A) is reiterated here in below:

The addition of Rs.44,13,704/- made u/s.50C of the Act and the submissions made by the appellant have been perused. During the course of appeal proceedings, the erstwhile CIT(A)-2, Jaipur’s letter vide No.3345 dated 16.02.2018 directed the AO to refer the matter of cost of property to the DVO for correct valuation of the property. Accordingly, the AO vide his letter No. ITO/W-5(2)/JPR/2017-18/2157 dated 22.02.2018 made a reference to the DVO to make valuation of the property as on the date of transfer i.e. 20.02.2018. In view of the above reference, the Valuation Officer, Income Tax Department, Jaipur vide his letter dated 03.05.2018 forwarded the report wherein the said property was estimated by Valuation Cell at Rs.1,69,13,700/- as against declared by the appellant at Rs.1,25,00,000/-. The said valuation was made by the team of Valuation Office, Jaipur on 18.04.2018 in the presence of the appellant and the AO forwarded the Valuation Report vide his letter dated 04.05.2018 to the CIT(Appeals)-2, Jaipur.

In view of the above, the report of the Valuation Cell was forwarded to the appellant for his comments/objections. However, there was no compliance from the appellant on the Valuation Report. Thus, it is clear that the property under consideration is valued at Rs.1,69,13,700/- which is the same as per the Sub- Registrar, Amer, Jaipur. Therefore, the action of the Assessing Officer is upheld and Ground No. 1 is dismissed.”

Observation of the court

In our view, the order of the Tribunal is just and proper and is not required to be interfered with particularly when there is a finding of fact recorded by the Tribunal to come to the conclusion that it was reasonable to allow a rebate to the extent of 20% on account of the fact that admittedly, the highway went away many feet above the ground and the land of the respondent-assessee was left with congestion. The Tribunal has taken into consideration the fact that there are reports of two approved valuers namely; Mr. V. Padmanabhan and Mr. Govind Singh Bapna, who were technical experts and who in their valuation reports opined that the flyover of bridge construction got completed in the year 2002 and the so-called highway went away many feet above the ground. The underneath of flyover was left with congestion. The commercial activities were adversely affected so much so that the people had either to close the business or to sale their properties. The construction of flyover of bridge near the respondent’s property was a negative factor and had adversely affected the fair market value of the property as on the day of transfer.

It is also on record that while the valuer Mr. V. Padmanabhan computed the fair market value of the property at Rs.71 lacs as per the valuation certificate placed before the lower authorities, the second valuer Mr. Govind Singh Bapna computed the fair market value of the property at Rs.72,14,400/- as per copy of the report placed before the lower authorities and it is also a finding recorded by the Tribunal that the AO did not comment adversely on these reports.

Once the Tribunal has found as a finding that there was congestion underneath the flyover and the commercial activities were adversely affected, in our view, allowing rebate of 20% cannot be said to be unjust and once the Tribunal has taken into consideration rebate of 20%, may be on estimated basis, in our view, does not call for interference of this Court and is a finding of fact recorded on the basis of appreciation of evidence and material available on record, particularly the report of the two approved valuers who were technical experts in their field.

Taking into consideration the above factors, in our view, the finding arrived at by the Tribunal is essentially a finding of fact and in our view, no question of law much less substantial question of law can be said to arise out of the order passed by the Tribunal.”

Considering the judicial decisions cited wherein also the assessee was prevented and put with disadvantage and therefore, in that case the relief was allowed in rate to the extent of 25% stands justified, considering the restrictions placed in the middle part of the land and accordingly 25% deduction in DLC rate claimed by the assessee is found fair market and reasonable and does not require any adjustment to the return of income filed by the assessee.

For the reason, set out and discussed hereinabove, the appeal filed by the assessee is allowed. In the result, appeal of the assessee is allowed.

Order pronounced in the open Court on 09/08/2023