Swadeshi Polytex Limited Vs DCIT (ITAT Delhi)
ITAT Delhi held that failure to call for DVO report and discrediting the valuation report of the assessee without substantial reasons is unsustainable and bad in law.
Facts- Assessee company is into the real estate development by converting the leasehold land as Stock in trade and selling the plots of smaller sizes after proper development and approval from UPSIDC. AO noticed that assessee had sold a total of 16976.5 sq. Mtr. of land. As per the MOU, the assessee is entitled to receive Rs. 8,200/- per sq. Mtr. for land sold. AO considered that the Market rate of the property is Rs. 10,000/- Sq. Mtr. as per the valuation report submitted by the assessee company.
AO was not satisfied with the fair market value of Rs. 10,000/- taken by the assessee in the year of conversion of fixed asset to stock-in-trade i.e. F.Y. 2010-11 while the fair market value as on 01.04.1981 has been presumed by the assessee at Rs.100 per sq. Mtrs. which AO considered was arbitrary.
Assessee has taken the land on lease for a total land consideration of Rs. 20,02,904/- as per the lease deed. The total area of the land on lease is 3,32,909.69 Sq. mts. Therefore, per Sq. mts. Cost of plot of land 1970-71 arrived at Rs. 6.01/- only.
Assessee claimed that AO was not entitled to discredit the fair market value taken by the assessee without referring the matter to the Departmental Valuation Officer as per section 55(2) of the Act.
Conclusion- Held that when the onus is on a party to prove a fact by a valuation report then the valuation report cannot be considered to be a self-serving document of that party without being disputed on facts. Thus, at one hand having failed to take the opportunity and mandate under law to call for a DVO report and on the other hand having discredited the valuation report of the assessee without substantial reasons makes the order of Ld. Tax Authorities Below erroneous and not sustainable under law.
FULL TEXT OF THE ORDER OF ITAT DELHI
The Assessee has come in appeal against the appellate order dated 18.05.2018 of Commissioner of Income Tax (Appeals)- 31, New Delhi, in appeal no. 252/17-18 for Assessment Year 2013-14 whereby the appeal of the assessee against assessment order u/s 143(3) of the Income Tax Act, 1961 dated 30.03.2016 passed by ITO,Ward -22(4), New Delhi (hereinafter referred as the Ld. AO).
2. The facts in brief are that assessee company is into the real estate development by converting the leasehold land as Stock in trade and to sell the plots of smaller sizes after proper development and approval from UPS IDC. The return of income declaring nil income was filed and the case of assessee was taken up for scrutiny under CASS. Ld. AO noticed that assessee had sold a total of 16976.5 Sq. Mtr. of land at Kavinagar through Pranjal Vyapar Pvt. Ltd. As per the MOU dated 12thDecember 2011, the assessee is entitled to receive Rs. 8,200/- per Sq. Mtr. for land sold. Ld. AO considered that the Market rate of the property is Rs. 10,000/- Sq. Mtr. as per the valuation report submitted by the assessee company. The assessee has calculated the long term capital gains as follows :-
