Registered Valuer’s Unsupported FMV Report Cannot Override DVO’s Comparable Sales-Based Estimate

Registered Valuer’s Unsupported FMV Report Cannot Override DVO’s Comparable Sales-Based Estimate: ITAT

A taxpayer claimed her old land was worth Rs. 1,000 per sq. meter in 1981, but she could not prove it. The DVO found it was worth only Rs. 33 per sq. metre based on real data. The Tribunal agreed with the DVO and rejected her appeal.

The present appeal has been filed by a taxpayer named Sumanben Jashvantbhaii Patel (Appellant) against ACIT, Circle – 1(3), Surat (Respondent), in the Income-Tax Appellate Tribunal (ITAT), Surat Bench, Surat, before Shri Dinesh Mohan Sinha (Judicial Member) and Shri Bijayananda Pruseth (Accountant Member). The case is related to the assessment year 2017-18.

Background of Case:

The assessee is a resident of Surat who filed her income tax return (ITR) for the assessment year 2017-18, declaring her total income of Rs. 68.97 lakh. He sold two immovable properties jointly owned by 6 individuals, including her and had received her share of the full value consideration of Rs. 1,14,83,333 (Rs. 1.14 Crore). She declared long-term capital gains (LTCG) on such sale of properties at Rs. 64,58,544. As of April 01, 1981, the assessee had taken the fair market value (FMV) at Rs. 1,000 per sq. meter as per the valuation report of a Government-approved valuer.

AO’s Assessment:

This high rate of Rs. 1,000 per sq. meter caught the eye of the assessing officer (AO) on the case, saying that land prices in Surat in 1981 were only in tens of rupees. Since the valuer’s report did not give proper supporting sale data, the AO referred the matter to the Departmental Valuation Officer (DVO) under Section 55A of the Act. Because the DVO’s report was delayed, the AO estimated the value at just Rs. 5 per sq. meter using some old sale examples and added Rs. 48.50 lakh to her income. Thus, the AO assessed her total income at Rs. 1.17 crore.

Appeal before CIT(A)

Assessee dissatisfied with the action of the assessing officer (AO), thereafter approached the CIT(A). When Mrs Patel appealed, the DVO’s report became available. The DVO estimated the 1981 value at Rs. 33 per sq. meter after comparing seven sale instances of nearby lands. The CIT(A) accepted the DVO’s figure as reasonable and directed the AO to recompute capital gains using Rs. 33 per sq. meter.

Appeal before ITAT

Dissatisfied with the ruling of CIT(A), the assessee thereafter filed an appeal before the ITAT Surat, arguing that her valuer’s rate of Rs. 1,000 per sq. meter was justified and that the AO and DVO had used unrealistically low figures.

Tribunal’s Findings

When the tribunal analysed the case, it held that:

The DVO’s report was prepared by a qualified government officer following proper procedure and is presumed correct unless strong contrary evidence is shown.

The registered valuer’s report by Mrs Patel was unsupported by comparable sale data or documents. The DVO’s report, based on real comparable sales and proper adjustments, was more reliable and fair.

Therefore, in the final decision, the tribunal endorsed the ruling of CIT(A) and held that the fair market value as of 01.04.1981 should be Rs. 33 per sq. meter. Meaning, the present appeal has been dismissed.