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Income Tax Appellate Tribunal, AHMEDABAD - BENCH ‘B’
Before: SHRI RAJPAL YADAV & SHRI AMARJIT SINGH
आदेश/O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER:
Assessee is in appeal before the Tribunal against order of ld.CIT(A)-10, Ahmedabad dated 7.9.2017 passed for the assessment year 2011-12.
The main grievance raised by the assessee in the grounds of appeal is that the ld.CIT(A) has erred confirming addition of Rs.49,51,534/- on account of long term capital gain.
Brief facts of the case are that assessee is an individual and having income from salary, capital and other incomes. The assessee has not filed return of income during the year under consideration. The ld.AO has received information that the assessee has sold immovable being land of survey no.676 of village Chandkheda, Ahmedabad along with other co-owners for a consideration of Rs.8,01,00,000/-. Assessee has 1/6th share in that property. Accordingly, he received an amount of Rs.66,75,000/-. AO issued notice under section 148/142(1) of the Act. During the assessment proceedings, the assessee has shown cost of acquisition as on 1.4.1981 at Rs.900/- per sq.meter. In support thereof, the assessee has submitted certificate of Government approved valuer’s report. Since cost of acquisition was not to be reasonable, the AO referred the matter to the DVO, who vide report dated 17.3.2016 determined the cost of acquisition as on 1.4.1981 at Rs.153/- per sq.meter. Thus, according to the ld.AO, by adopting this rate, the total long term capital gains on sale of the land comes to Rs.57,12,188/- as against the long term capital of Rs.7,60,654/- declared by the assessee. To the show cause notice, it was explained by the assessee that the method adopted by the registered valuer was in accordance with the rate adopted by the Department in the case one Shri Madhusudan Prahaladbhai Patel. It was further contended that the DVO has not considered development and economic activities in the area, and that land of the assessee adjacent to the main road, which fetch more price. The rate determined by the DVO was not on the basis of ground reality. The method adopted by the Government approved valuer submitted by the assessee was more scientific and reasonable and based on market reality. However, explanation of the assessee was not found acceptable to the AO, who rejected the claim of the assessee. The ld.AO adopted cost of acquisition at Rs.153/- determined by the DVO and worked out long term capital gain at Rs.57,12,188/- as against Rs.7,60,654/- declared by the assessee. Differential amount of Rs.49,51,534/- was added to the total income of the assessee. Appeal to the CIT(A) did not bring any relief to the assessee. Assessee is now before the Tribunal.
Before, the ld.counsel for the assessee reiterated submissions made before the lower authorities. He further submitted that since assessee has declared cost of acquisition more than the fair market value, the ld.AO cannot invoke section 55A for determination of fair market value. Since action of both the authorities below was not in accordance with the provisions of the Act, their orders may be reversed and the claim of the assessee may be allowed. He also relied upon the decision of Hon’ble Gujarat High Court in the case of CIT Vs. Gauranginiben S. Shodhan, 45 taxmann.com 356 (Guj) On the other hand, the ld.DR supported the orders of the Revenue authorities.
With the assistance of the ld.representatives, we have gone through the record carefully. We find that the dispute is with regard to calculation of cost of acquisition as on 1.4.1981 and the applicability of amended section 55A for making reference to the DVO. Assessee has declared the value for the cost of acquisition of the property as on 1.4.1981 at a higher value than the value determined by the DVO. The case of the assessee is that reference under section 55A(a) could be made only when the value adopted by the assessee was less than the fair market value, and in the present case value adopted by the assessee at Rs.900/- per sq.meter was much more than the fair market value of Rs.153 per sq.meter determined by the DVO. The question before us is, whether reference to the DVO by the AO for the valuation of the property was valid for the year under consideration. Assessment year involved is 2011-12. This controversy has been silenced by the Hon’ble Gujarat High Court in the case of CIT Vs. Gauranginiben S. Shodhan, 45 taxmann.com 356 (Guj). The discussion made by the Hon’ble Gujarat High Court in this connection reads 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 55 A 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". The situation 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 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 en 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.
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. 1TO [20091 310 ITR31/181 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 other case, as provided under clause(b) of Sec. 55 A 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."
In the result, we see no reason to interfere. However, we have given our independent reasons and should not be seen to have confirmed the reasonings adopted by the Tribunal in the impugned judgment.”
As far as the amendment effected in section 55A w.e.f. 1.7.201 is concerned, it has been laid down by the Hon’ble Bombay High Court in the case of CIT Vs. Puja Prints, 43 taxmann.com 247 (Bombay) that this amendment is prospective in nature. The relevant discussion made by the Hon’ble Bombay High Court reads as under:
“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 than 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 than the fair market value. In the aforesaid circumstances, the invocation of Section 55A(a) of the Act is not justified.”
According this decision, this amendment is applicable i.e. from the Asstt.Year 2012-13 and not from the Asstt.Year 2011-12. Therefore, even with the help of this amended provision, the AO was not justified in validating the reference. Hence, reference made to DVO by the AO is without jurisdiction hence, no addition in this behalf is sustainable. It is deleted.
In the result, appeal of the assessee is allowed. Order pronounced in the Court on 17th October, 2018 at Ahmedabad.