COMMISSIONER OF INCOME TAX Vs. SHMATILAL POPATLAL HUF

JUDGEMENT

(1.) THE following question has been referred for our opinion by the Tribunal, Ahmedabad Bench "A", under S. 27 of the WT Act, 1957 :

(2.) THE relevant assessment years are 1974 75 to 1977 78. The assessee owned bungalow with an open area of land in the Shahibaug locality of the city of Ahmedabad. The said asset was valued at Rs. 1,43,375 for the asst. year 1974 75, as per the report of a registered valuer, who had estimated the value at Rs. 35 per square yard and since the land was encumbered with a building, the effective value thereof was taken at 60 per cent of the said value of the land. The WTO accepted the valuation return and completed the assessment for the asst. year 1974 75. On the same basis, he completed the assessment for the asst. yrs. 1975 76, 1976 77 and 1977 78. The CWT, Gujarat II, Ahmedabad invoking his revisional powers under S. 25(2) of the said Act, held that the assessment orders passed by the WTO under S. 16(1) of the Act were erroneous and prejudicial to the interest of the Revenue. He held that the land on which the bungalow was constructed had an area of 4471 sq. yards and the constructed area was only 371 sq. yards. It was therefore, noticed that there was surplus land available for development. The CWT, therefore, held that the registered valuer was not justified in treating the entire plot of land at reduced value on the plea that the land was encumbered with a building thereon. He was of the view that prima faciethe estimate of market price of the property made by the registered valuer was less than its fair market value and that the WTO should, therefore, have referred the valuation of the said assets to the Valuation Officer under S. 16A(1)(a) of the said Act. The CWT further held that the value of the bungalow constructed on the building was estimated at Rs. 49,484 only and there being a surplus open plot of land which could be developed, such surplus land cannot be considered for the purpose of exemption under S. 5(1)(iv) of the said Act. The CWT referred to the Board's circular in the context of the land appurtenant to the house, which laid down the guidelines for valuation of the land which was not appurtenant to the house. As per this circular, where the vacant land surrounding a house does not exceed the minimum land required to be left open according to Municipal bye laws in force in the area, no portion of the vacant land can be regarded as not being a part of the house itself or appurtenant to the house and where the open land exceeds the limit specified in the Municipal bye laws, but if a separate tenantable unit cannot be constructed thereon even such land was to be considered as a part of the house appurtenant thereto. However, in cases where a separate tenantable unit could be constructed on such excess land, such land can be considered as not appurtenant to the house and the matter regarding it's valuation may be referred to the valuation cell. The CWT observed that in view of the clear instruction of the Board such surplus land was to be considered as not appurtenant to the house and the matter regarding its valuation was required to be referred to the valuation cell. Having not done so, the order of the WTO was considered to be erroneous and prejudicial to the interest of the Revenue. The assessment orders were, therefore, set aside with a direction that the WTO should refer the question of valuation of the said asset to the valuation cell. The Tribunal, entertaining the appeal against the orders of the CWT, observed that the fact that the record has indicated certain guidelines for the valuation of the land appurtenant to the house does not by itself indicate that valuation adopted by the assessee supported by registered valuer's report was erroneous.