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

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 prevailing market value of properties than comparable sale instances.

Facts :

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.

Held :

(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.