MUKESHBHAI RAMUBHAI AHIR,,SURAT vs. ITO,WARD-1(3) (3),, SURAT

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No.1652/AHD/2017 (AY 2012-13) (Hearing in Virtual Court) Mukeshbhai Ramubhai Ahir ITO, Ward-1(3)(3), 49,-B, Ambanagar, Room No. 603, 6th Floor, Vs B/h Kapadia Health Club, Aayakar Bhavan, Majura Bhatar, Surat-395002. Gate, Surat. PAN : AQQPA1546H Applicant Respondent

Assessee by Shri Mehul Shah – CA Revenue by Ms. Anupama Singla – Sr.DR Date of hearing 17.06.2021 Date of pronouncement 21.06.2021 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER:

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of difference in the value adopted by the assessee and the value suggested by the DVO, the AO issued show-cause notice as to why the addition be not made on the basis of valuation of DVO. In the show cause notice the AO noted that the assessee has shown sale consideration at Rs. 68,83,333/-. The assessee claimed indexation cost at Rs. 62,30,412/ by adopting fair market value at Rs. 350/ per sq Mtr as on 01.04.1981. The assessee filed its reply dated 23.03.2016 and stated that no Jantri rate concept was applicable in 1981. The sale-deeds were executed as per consideration shown on record by purchaser and seller. The only option with the assessee to drive the FMV through expert in the field who is approved by Government. The assessee appointed Government approved valuer for valuation of the land as on 01.04.1981 who suggested the market value @ 350 per sq. mtr as on .01.04.981. The objection/submission of assessee was not accepted by AO. The AO accepted the report of DVO and worked out the Long Term Capital Gain (LTCG) on the basis of rate suggested by DVO. The assessee claimed deduction under section 54B of the Act of Rs. 13,75,300/-, thus, the AO after granting set off of deduction under section 54B made addition of Rs. 92,22,624/-. 4. On appeal before the ld. CIT(A), the assessee filed additional evidence and furnished the copy of another valuer namely Ramesh Jain who estimated the

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value of land as on 01.04.1981 @ 225 per sq. mtr. vide his report dated 24.08.2015. The assessee made application for considering the additional evidence. The additional evidence of assessee was not accepted and upheld the addition made by AO. Further aggrieved, the assessee has filed the present appeal before this Tribunal. 5. We have heard the submissions of the learned AR for the assessee and the ld. Sr DR for the revenue and seen the orders of the lower authorities. The ld. AR of the assessee submits that assessee along with his co-owner sold a piece of land admeasuring 13606 Sq Mtr on 06.09.2011. The assessee adopted the FMV of property as on 01.04.1981 @ 350 per sq. mtr on the basis of Government Registered Valuer Shri P.K. Desai. The AO made reference to the DVO. The DVO suggested the rate of land as on 01.04.1981 @ 48 per sq. mtr. The AO on the basis of report of DVO made addition on LTCG by taking value @ 48 per sq. mtr in place of Rs. 350 per sq.mtr. The ld. AR submits that assessee has shown higher rate than FMV at the time of sale of land. The amended provision of section 55A(a) i.e. substitution of word “is at variance with FMV” was inserted in Income Tax Act w.e.f. 01.07.2012 and the amended provision is not applicable retrospectively. Before making the reference to the DVO, the AO must form an opinion that FMV adopted by assessee is not a fair value. The amendment made in

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section is not applicable for the AY under consideration. Therefore, the reference made by AO is not valid. The ld. AR of the assessee further submits that Hon’ble jurisdictional High Court in CIT v/s Gauranginiben S. Sodhan [367 ITR 238 (Guj.)] held that the amended provision in section 55A is not applicable to the transaction prior to 01.07.2012. The Hon’ble Bombay High Court in CIT Vs Pooja Prints [360 ITR 697 (Bom.)] has held that the Parliament has not given retrospective effect to the amended section of 55A of the Act. 6. The ld. AR for the assessee further submits that on similar facts and grounds of appeal the this Tribunal in Ranchodbhai Patel & Rasikaben Jayantibhai Patel in ITA No. 821& 822/Ahd/2016 vide order dated by following the decision of Hon’ble Gujarat High Court in CIT v/s Gauranginiben S. Sodhan allowed relief to the assessee. Further, the decision of Tribunal in Ranchodbhai C. Patel (supra) was followed in Nanubhai G. Ahir vs. ITO in ITA No. 2289/Ahd/2016 dated 19.05.2021 and deleted the similar addition. 7. In alternative and prejudice submission, the ld. AR of the assessee submits that he has raised ground no.3 that CIT(A)not admitted the additional evidence during the first appellate proceeding. The ld. AR submits that during the first appellate proceeding, the assessee filed second valuation report of Shri Ramesh Jain which is based on scientific base. The additional

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evidence furnished by assessee has direct relevance with the issue invoked in the present appeal. 8. On the other hand, the ld. DR for the Revenue submits that she strongly relied upon the order of ld. CIT(A). In alternative submission of ld. AR of assessee, the ld. DR submits that the report of DVO was based on scientific parameter. 9. We have considered the rival submission of the parties and have gone through the orders of authorities below. We find that there is no dispute about the certain fact which we have noted hereinabove. The assessee sold a piece of land on 06.09.2011 along with his co-owner. Thus, the amended provision of section 55A(a) is not applicable for the year under consideration. Further, we find that the AO while making the reference to the DVO has not form an opinion that FMV adopted by assessee is not a fair value. As noted earlier, the amended provision under section 55A(a) is not applicable for the year under consideration, therefore, the reference made by AO was invalid. We have further noted that on similar set of fact, in Nanubhai G. Ahir (supra), this combination passed the following order:

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“6. We have heard the submission of learned authorised representative of assessee and the learned Department of representative for revenue. We have also gone through the orders of lower authorities carefully. We learned of the assessee submits that he has raised purely a legal grounds to challenge the validity of reference to the valuation officer. The learned submitted that before making reference under section 55A, the assessing officer has to form an opinion that fair market value is on 1st April 1981 claimed in the computation of income is less than fair market value. In the present case the assessee has shown the value of asset at a higher rate than the fair market value and the amendment to the section 55A( a) i.e. substitution of the words “is at variance with the fair market value” were inserted with effect from 1st July 2012 and the same is not applicable retrospectively, further the assessing officer has to form an opinion that fair market value as on1st April 1981 as claimed by assessee is not fair value. The learned AR of the assessee would submit that the ratio of decision of Hon’ble was rather High Court in case of CIT Versus Gauranginiben S Shodhan Ind. reported in (367 ITR 238) is squarely applicable on the facts of the present case. The learned AR of the assessee also relied on the following case laws.  JigneshKumar S Modi (HUF) and 6 others Vs ITO (ITA No. 544 to 550/Srt/2018,  Shantaben P Patel Vs ITO & 2 other ( ITA No. 781, 784 & 785/Ahd/2011,  Gujarat High court in PCIT Vs Shantiben P Patel ( Tax Appeal No. 1204 of 2018 and

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 Mahadevi Mohanbhai Naik Vs ITO ( ITA No.82/Ahd/2016) 7. The learned AR for the assessee submits that in view of the decision of jurisdictional High Court in CIT Versus Gauranginiben S Shodhan (supra), the issue of validity of reference under section 55A(a) may kindly be addressed first as not in accordance with the law and in case it is held that reference to the DVO is not in accordance with law the additions based on such reference be deleted in such even the other contention raised before the lower authorities would become academic.

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“55A. With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer— (a) in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the assessing Officer is of opinion that the value so claimed is at variance with its fair market value; (b) in any other case, if the Assessing Officer is of opinion— (i) that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf ; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do, and where any such reference is made, the provisions of sub- sections (2),(3), (4), (5) and (6) of ection 16A, clauses (ha) and (i) of sub-section (1) and sub-sections (3A) and 4) of section 23, sub- section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall with the necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub- section (1) of section 16A of that Act. Explanation.—In this section, "Valuation Officer" has the same meaning, as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).” 14. The aforesaid provisions are as amended by the Finance Act, 2012 with effect from 1.07.2012 wherein in clause (a), for "is less than its fair market value" was substituted for “at variance with its fair value”. As per the Revenue, the amended provisions of section 55A(a) are applicable for the impugned assessment year 2012-13 and the Assessing officer was well within his jurisdiction to refer the matter to the valuation officer. The assessee’s contention is that unamended provisions of section 55A(a) are relevant for the impugned assessment year 2012-13 and the Assessing officer was not having the jurisdiction to refer the matter to the valuation officer.

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the valuation officer. In the instant case, the Assessing officer has invoked the amended provisions and has held that the value so claimed by the assessee is at variance with its fair market value. The contention of the assessee is that the amended provisions have only been brought on the statue books w.e.f 1.07.2012 and the same cannot be invoked in the instant case and therefore, the AO lacks the necessary jurisdiction to refer the matter to the valuation officer. 16. The question is how one should read the amendment in section 55A(a) which has been brought on the statue books w.e.f 1.07.2012. Whether we should read the amendment in the context of transactions which have happened on or after 1.07.2012 and which are liable for capital gains tax and therefore, satisfying the initial condition of reference “for the purposes of this chapter” to the valuation officer. Alternatively, irrespective of period to which the transaction pertains, where the assessment proceedings are initiated by the Assessing officer or pending before the Assessing officer on or after 1.07.2012, given that the Assessing officer has to form an opinion during the course of assessment proceedings, the amended provisions will apply. In this regard, it would be useful to refer to the Memorandum explaining the Finance Bill, 2012 which reads as under: “Under the provisions of section 55A, where in the opinion of the Assessing Officer value of asset as claimed by the assessee is less than its market value, he may refer the valuation of a capital asset to a Valuation Officer. Under section 55 in a case where the capital asset became the property of the assessee before 1st April, 1981, the assessee has the option of substituting the fair market value of the asset as on 1st April, 1981 as the cost of the asset. In such a case the adoption of a higher value for the cost of the asset as the fair market value as on 1st April, 1981, would lead to a lower amount of capital gains being offered for tax.

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Accordingly, it is proposed to amend the provisions of section 55A of the Income-tax Act to enable the Assessing Officer to make a reference to the Valuation Officer where in his opinion the value declared by the assessee is at variance from the fair market value. Therefore, in case where the Assessing Officer is of the opinion that the value taken by the assessee as on 1-4- 1981 is higher than the fair market value of the asset as on that date, the Assessing Officer would be enabled to make a reference to the Valuation Officer for determining the fair market value of the property. This amendment will take effect from 1st day of July, 2012.” Therefore, the intent and purpose behind the amendment is to enable the Assessing officer to make a reference to the Valuation officer where he is of the opinion that the value adopted by the assessee as on 1-4-1981 is higher than the fair market value of the asset as on that date and in order to check whether the adoption of a higher value for the cost of the asset as the fair market value as on 1st April, 1981, has lead to a lower amount of capital gains being offered for tax. It is therefore an empowering provision wherein the Assessing officer has been given requisite power and authority w.e.f 1.07.2012 to refer the matter relating to valuation of a capital asset to the valuation officer. The question however remains in respect of which all transactions, the Assessing officer is empowered to make a reference to the valuation officer with effect from 1.07.2012. 17. In this regard, we refer to the decision of the Hon’ble Bombay High Court in case of CIT vs. Puja Prints [2014] 224 Taxman 22 (Bom) wherein it was held that the Parliament has not given retrospective effect to the amendment and the law to be applied is as existing during the period relevant to the Assessment Year 2006- 07. The findings of the Hon’ble High Court are as under:- “6. We have considered the rival submissions. We find that the impugned order dated 18 February, 2011 allowing the respondent assessee's appeal holding that no reference to the Departmental Valuation Officer can be made under

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Section 55A of the Act, only follows the decision of this Court in the matter of Daulal Mohta HUF (supra). The revenue has not been able to point out how the aforesaid decision is inapplicable to the present facts nor has the revenue pointed out that the decision in Daulal Mohta HUF (supra) has not been accepted by the revenue. On the aforesaid ground alone, this appeal need not be entertained. However, as submissions were made on merits, we have independently examined the same. 7. We find that Section 55A(a) of the Act very clearly at the relevant time provided that a reference could be made to the Departmental Valuation Officer only when the value adopted by the assessee was less then the fair market value. In the present case, it is an undisputed position that the value adopted by the respondent assessee of the property at Rs.35.99 lakhs was much more than the fair market value of Rs.6.68 lakhs even as determined by the Departmental Valuation Officer. In fact, the Assessing Officer referred the issue of valuation to the Departmental Valuation Officer only because in his view the valuation of the property as on 1981 as made by the respondent- assessee was higher then the fair market value. In the aforesaid circumstances, the invocation of Section 55A(a) of the Act is not justified. 8. The contention of the revenue that in view of the amendment to Section 55A(a) of the Act in 2012 by which the words "is less then the fair market value" is substituted by the words " "is at variance with its fair market value" is clarifactory and should be given retrospective effect. This submission is in face of the fact that the 2012 amendment was made effective only from 1 July 2012. The Parliament has not given retrospective effect to the amendment. Therefore, the law to be applied in the present case is Section 55A(a) of the Act as existing during the period

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relevant to the Assessment Year 2006-07. At the relevant time, very clearly reference could be made to Departmental Valuation Officer only if the value declared by the assessee is in the opinion of Assessing Officer less than its fair market value. 9. The contention of the revenue that the reference to the Departmental Valuation Officer by the Assessing Officer is sustainable in view of Section 55A(a) (ii) of the Act is not acceptable. This is for the reason that Section 55A(b)of the Act very clearly states that it would apply in any other case i.e. a case not covered by Section 55A(a) of the Act. In this case, it is an undisputable position that the issue is covered by Section 55A(a) of the Act. Therefore, resort cannot be had to the residuary clause provided in Section 55A(b)(ii) of the Act. In view of the above, the CBDT Circular dated 25 November 1972 can have no application in the face of the clear position in law. This is so as the understanding of the statutory provisions by the revenue as found in Circular issued by the CBDT is not binding upon the assessee and it is open to an assessee to contend to the contrary. 10. The contention of the revenue that the Assessing Officer is entitled to refer the issue of valuation of the property to the Departmental Valuation Officer in exercise of its power under Sections 131, 133(6) and 142(2) of the Act is entirely based upon the decision of the Guwahati High Court in Smt. Amiya Bala Paul (supra). However, the Apex Court in Smt. Amiya Bala Paul (supra) has reversed the decision of the Guwahati High Court and held that if the power to refer any dispute with regard to the valuation of the property was already available under Sections 131(1), 136(6) and 142(2) of the Act, there was no need to specifically empower the Assessing Officer to do so in circumstances specified under Section 55A of the Act. It

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further held that when a specific provision under which the reference can be made to the Departmental Valuation Officer is available, there is no occasion for the Assessing Officer to invoke the general powers of enquiry. In view of the above and particularly in view of clear provisions of law as existing during the period relevant to Assessment Year 2006-07, we are of the view that questions (a) and (b) do not raise any substantial question of law.” 18. We now refer to the Hon’ble Gujarat High Court decision in case of CIT vs. Gauranginiben S. Shodhan Indl. [2014] 224 Taxman 253 (Gujarat) wherein it was held section 55A as it stood at the relevant time, has to be seen and emphasis was laid on the period of the transaction and where the transaction was for the period prior to 1.7.2012, amended provisions were held not applicable. The findings of the Hon’ble High Court are as under: “15. Coming to the question of reference to DVO for ascertaining the fair market value as on 1.4.1981 also, we find that such reference was not competent. We have noticed that prior to the amendment in section 55A with effect from 1.7.2012 in a case, the value of the asset claimed by the assessee is in accordance with the estimate made by the Registered Valuer, if the Assessing Officer was of the opinion that the value so claimed was less than its fair market value as on 1.4.1981. It would not be the case of the Assessing Officer that the value of the asset shown as on 1.4.1981 was less than the fair market value. Such clause, therefore, as it stood at the relevant time, had no application to the valuation as on 1.4.1981. We are conscious that with effect from 1.7.2012, the expression now used in clause (a) of section 55A is "is at variance with its fair market value". Thesituation may, therefore, be different after 1.7.2012. We are, however, concerned with the period prior thereto. Clause (b) of section 55A is in two parts and permits a reference to DVO if the Assessing

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Officer is of the opinion that (i) the fair market value of the asset exceeds the value of the asset so claimed by the assessee by more than such percentage of the value of the asset so claimed or by more than such amount as may be prescribed in this behalf; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do. Sub-clause(i) of clause (b) also for the same reasons recorded above, would have no bearing on the fair market value as on 1.4.1981. The Assessing Officer had not resorted to sub-clause(ii) of clause (b). In any case, clause (b) would apply where clause(a) does not apply since it starts with the expression "in any other case". In other words if assessee has relied upon a Registered Valuer's Report, Assessing Officer can proceed only under clause (a) and clause (b) would not be applicable.” 16. In the present case, admittedly the assessee had relied on the estimate made by the Registered Valuer for the purpose of supporting its value of the asset. Any such situation would be governed by clause (a) of section 55A of the Act and the Assessing Officer could not have resorted to clause (b) thereof as held by the Division Bench of this Court in the case of Hiaben Jayantilal Shah v. ITO [2009] 310 ITR 31/181 Taxman 191 (Guj.). In the said decision, it was held and observed as under:— "10. Under clause(a) of sec. 55A of the Act under the Assessing officer is entitled to make the reference to the Valuation Officer in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by the Registered Valuer, if the Assessing Officer is of the opinion that the value so claimed is less than the fair market value. In any

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other case, as provided under clause(b) of Sec. 55A of the Act, the Assessing Officer has to record an opinion that (i) the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage or by more than such an amount as may be prescribed; or (ii) having regard to the nature of the asset and other relevant circumstances, it is necessary to make such a reference." 19.xxxxxxxxxx 20 xxxxxxxxxx 21 xxxxxxxxxx 22 xxxxxxxxxx 23. As we have noted above, the Hon’ble Bombay High Court in case of CIT vs. Puja Prints (supra) has held that the Parliament has not given retrospective effect to the amendment and the law to be applied is as existing during the period relevant to the Assessment Year 2006-07. Similarly, the Hon’ble Gujarat High Court in case of CIT vs. Gauranginiben S. Shodhan Indl. (supra) has held that section 55A as it stood at the relevant time, has to be seen and emphasis was laid on the period of the transaction and where the transaction was for the period prior to 1.7.2012, amended provisions were held not applicable. Similarly, in case of Late Shantaben P Patel, Ahmedabad (supra), the Hon’ble Gujarat High Court has reiterated the legal position that for the transaction falling in financial year 2010-11 relevant to AY 2011-12, the matter is covered by the earlier decision in case of Gauranginiben S. Shodhan Indl. (supra). We therefore find that there is convergence of view as evident from these decisions of Hon’ble Bombay and Hon’ble Gujarat High Court that the amendment brought in by the Finance Act, 2012 in section 55A(a) has to be read prospectively and not retrospectively. Secondly, such amendment shall apply to transactions (subject matter of determination of capital gains) which are effected during the period starting on or after 1.07.2012. No contrary High Court decision has been cited before us and in any case, the decision of the Hon’ble Gujarat High Court, being the jurisdictional High Court is binding on us.

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matter to the valuation officer even as per erstwhile provisions of section 55A(a) prior to amendment by the Finance Act, 2012. 27. Therefore, without going into the merits of the basis of valuation so adopted by the registered valuer and subsequently by the department’s valuation officer, in absence of a valid reference to the valuation officer, the addition so made under the head “long term capital gains” so far as it relates to cost of acquisition as substituted by fair market value as on 1.4.1981 is directed to be deleted. In the result, the appeal of the assessee is allowed.” 10. Considering the decision of co-ordinate bench of Tribunal on almost similar set of fact while considering the similar contention of assessee in the said held that when the transaction of sale of land was taken during the financial year 2011-12 relevant to the assessment year 2012 -13, the amended provision of section 55A(a) would not be applicable and one shall be guided by the wrest while provision of un-amended section 55 A(a) of the Act. Therefore, respectfully following the same, we allow the ground No. 1 raised by the assessee. No contrary facts or law is brought to our notice to take other view.” 10. We further find that following the aforesaid order, similar order was passed in Ranchodbhai C. Patel & Rakshaben (supra) reported in 186 ITD 523. Thus, considering the aforesaid factual and legal discussion and keeping in view the binding decision of jurisdictional High Court in Gauranginiben S. Sodhan (supra) and Hon’ble Bombay High Court in CIT v/s Pooja Prints (supra) and decision of this combination as referred above and respectively following the same, the ground no.2 raised by assessee is allowed. 11. Considering the fact that we have allowed the ground no.2, on primary submissions of the learned AR for the assessee, therefore, the consideration and adjudication in ground no.3 have become academic.

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