S. 55A—Bearing in mind that in the 1980s, it was common practice to pay a part of sale consideration by unaccounted cash, the rates given by independent media and press like Times of India/Accommodation Times is certainly more reliable indicator of the pr

The assessee, while computing long-term capital gain arising
on transfer of office premises purchased by him for Rs.69,000 on 1st October,
1978, considered the fair market value of this property as on 1st April, 1981 to
be its cost of acquisition. The fair market value claimed to be Rs.16,20,000 was
backed by a valuation report by an approved valuer which report relied upon
certain press reports about prevailing market prices and not on any comparable
sale instances.

The Assessing Officer (AO) found the value as per comparable
sale instances in the same society to be much lower. The assessee on being
confronted with these instances submitted that these transactions apparently had
cash element in the consideration and that the valuation of the assessee was
also in consonance with Indian Valuer Directory and Reference Book. The AO
referred the matter to the DVO who valued the premises at Rs.3,00,000 on the
basis of certain sale transactions at Cuffe Parade area. The AO adopted this
amount of Rs.3,00,000 as fair market value of the property on 1-4-1981 and
computed long-term capital gains on that basis. He rejected the assessee’s
objection to the DVO report by stating that this report is binding on the AO.

Aggrieved the assessee preferred an appeal to the CIT(A) who
rejected the appeal of the assessee.

Aggrieved the assessee preferred an appeal to the Tribunal.

(i) A Third Member decision of the Tribunal in the case of
Rubab M. Kazerani v. JCIT, 91 ITD 429 (TM) has concluded that reference to DVO
u/s.55A can be made when value of the property as disclosed by the assessee is
less than the fair market value and not vice-versa. In the present case, on
the contrary, AO was of the prima facie view that the fair market value is
less than the value disclosed by the assessee. Thus, the learned CIT(A)’s
emphasis on binding nature of DVO valuation is wholly devoid of legally
sustainable basis.

(ii) It is not even in dispute that at least in eighties,
it was a common practice to pay a part of sale consideration by unaccounted
cash and it was because of this practice several legislative measures had to
be taken to combat tax evasion in property sale transactions. Bearing this in
mind, the rates given by independent media and press like Times of India/Accomodation
Times is certainly more reliable indicator of the prevailing market value of
properties. The market prices given in ‘Indian Valuer Directory & Reference
Book’, also partly supports the valuation by valuation report as filed by the
assessee.

(iii) The Tribunal noted that as against the assessee’s
valuation @ Rs.2,700 per sq.ft., the Directory & Reference Book states the
value of office premises in Nariman Point area @ Rs.2000 per sq.ft. The
valuation as per ‘Accommodation Times’, ranges from Rs.2,400 per sq.ft. to
Rs.3,200 per sq.ft. for commercial area.

(iv) The Tribunal adopted the rate of Rs.2,000 per sq.ft.
as given in the refrencer as against the valuation @ Rs.500 per sq.ft, adopted
by D.V.O. and valuation @ Rs.2,700 per sq.ft. as adopted by the assessee’s
valuer.