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Income Tax Appellate Tribunal, AHMEDABAD – BENCH ‘A’
Before: SHRI RAJPAL YADAV & SHRI PRADIPKUMAR KEDIA
आदेश/O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER:
Assessee is in appeal before the Tribunal against order of ld.CIT(A)-4, Ahmedabad dated 8.5.2017 passed for the Asstt.Year 2012-13.
Registry has pointed out that appeal filed by the assessee is time barred by three days. Assessee has filed an application for condonation of delay, in which it is pleaded that on account of medical reasons appeal could not be filed well in time. Certificate from Samata Hospital is being annexed with the application. After
2 considering the application, we are satisfied that the assessee has been prevented by reasonable cause for not presenting the appeal in time, and therefore, we condone the delay of three days, and proceed to decide the appeal on merit.
In the first ground of appeal, the assessee has challenged reopening of the assessment.
Brief facts of the case are that the assessee has filed return of income on 18.12.2012 declaring total income at Rs.11,93,640/- . This return was processed under section 143(1). Thereafter, the ld.AO has reopened the assessment on ground that DIT(Investigation) received an information that the assessee had sold a land bearing survey no.132 & 133 at Village Ranip. The land was sold for a consideration of Rs.9.57 crores, and assessee had received a sum of Rs.1.59 crore as a share. The AO harboured a belief that the assessee has not disclosed capital gain. Therefore, he recorded reasons and reopened the assessment. Copy of the reasons is being placed on page no.13 of the paper book which reads as under: “As per information received from Dy.DIT(Inv.), AIU, Unit-II, Ahmedabad, that a search was carried out in the office of Gajanand Corporation wherein a copy of sale deed for Survey No. 132 & 133 at Village Ranip, Final Plot No.75, T.P.Scheme No.66, was found. As per the sale deed, Kantilal Manilal Patel is one of the seller of the land admeasuring 7649 sq mtr. for a total consideration for Rs.9,57,00,000/-. As per the sale deed, the assessee had received Rs.159.50 lacs during F.Y. 2011-12. Therefore, he is liable to capital gain. On verification of records it is observed that the assessee has filed return of income for the year under consideration but has shown capital gain just for Rs.2,54,566/-. I have therefore, reason to believe that the income chargeable to tax has escaped within the meaning of section 147 of the I.T.Act, 1961.
Date : 14/10/2014 Sd/- Place: Ahmedabad (PRITA M. MENON) Income Tax Officer
The ld.AO thereafter observed that the assessee calculated the long term capital gain by adopting cost of acquisition at Rs.14,87,267/- as on 1.4.1981 on the basis of registered valuer’s report. He made reference under section 55A of the DVO who determined cost of acquisition at Rs.2,35,413/-. On the basis of DVO’s report, the ld.AO has calculated capital gain assessable in the hands of the assessee. He worked out such capital gain at Rs.99,29,384/- and made addition. The working of the AO reads as under: 110.8 Rate Adapted by the DVO 235413 Revised Cost of Acquisition as per DVO valuation 1847993 Revised Indexed cost of acquisition as per DVO valuation
4274957 LTCG as per ROI(Before Deduction) 14102007 LTCG after giving effect to DVO's report
4067847 Deduction Claimed u/s 54EC 10034160 Revised LTCG after Deduction 204776 LTCG as declared in ROI * 9829384 Addition on account of suppressed LTCG
In view of the above, the amount of Rs.98,29,384/- is added to the total income being Low Long Term Capital Gain declared by way of inflating the cost of acquisition.”
Appeal to the CIT(A) did not bring any relief to the assessee.
Before us, the ld.counsel for the assessee contended that the AO has not recorded a satisfaction that income has escaped the assessment. He has not verified the record. He has only expressed his apprehension and suspicion that how an assessee can show a capital gain of Rs.2,54,566/- . For eliminating this apprehension, he reopened the assessment which is not in accordance with law. He pointed out that the assessee has filed the return wherein he has disclosed all these details and capital gain of more than Rs.56 lakhs. Return which has been uploaded in the net has been placed on page no.53 of the paper book. He drew our attention towards the following working:
Long term capital gain.
1 Asset in case of non-resident to which first proviso to section 48 is applicable 2 Asset in the case of others where proviso under section 112(1) is not exercised a Full value of consideration 2a 196 1666 b Deductions under section 48
14364966 i Cost of acquisition after indexation bi 0 ii Cost of improvement after indexation bii 0 iii Expenditure on transfer biii 14364966 iv Total (bi + bii +biii) biv
5251701 Balance (2 a - biv) 2c d 2d Deduction under sections 54/54B/54D/54EC/54F 54G/54GA E Net Balance (2C-2D) 2,51,701
On the strength of the above details, he submitted that there is no coherence between formation of belief vis-à-vis information available with the AO. On the other hand, the ld.DR relied upon the order of the AO.
We have duly considered rival submissions and gone through the record. A perusal of the valuation report filed by the assessee would indicate that he has disclosed full value of consideration and cost of acquisition and capital gain accrued to him. Thereafter, he has disclosed net capital gain of Rs.2,51,701/-. In the revised capital gain filed in response to 148-notice he has worked this capital gain at Rs.2,54,566/-. When we confronted the ld.counsel for the assessee about this discrepancy, then he expressed that on account of indexation there might have minor change in the net capital gain. If we analysis this information vis-a-vis with the reasons recorded by the AO, then it would reveal that the AO has not referred any information which has goad him to form a belief that the income has escaped the assessment. He has just narrated details of transaction and thereafter observed that the assessee shown a capital gain of just Rs.2,54,566/- which in his assumption far less on such transaction. In order to eliminate his apprehension or suspicion, he reopened the assessment. But he is not authorized to reopen on such assumption. He has to form his concrete opinion demonstrating the escapement of income. Had he visualized the return filed by the assessee, probably he would not have formed the opinion. Therefore, reopening of the assessment is not in accordance with law, and we quash the re- assessment.
6 10. As far as merit of the addition is concerned, we find that the assessee has calculated long term capital by taking cost of acquisition as on 1.4.1981 on the basis of registered valuer’s report. Hon’ble Gujarat High Court in the case of CIT Vs. Gauranginiben S. Shodhan, Indl., 45 taxmann.com 356 (Guj) has observed that if value declared by an assessee as on 1.4.1981 is more than the fair market value assumed by the AO for making a reference to the DVO, then he cannot make a reference under section 55A. 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
7 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.”
11. In the present case, with help of DVO’s report, the ld.AO wants to reduce the cost of acquisition which he cannot do. The second aspect which probably may arise is that section 55A has been amended w.e.f. 1.7.2012 and the assessment proceedings
8 was in seisin when this amendment came. Report of the DVO was of July 17, 2016. Therefore, its cognizance can be taken, but this aspect has also been considered by the ITAT, Ahmedabad Bench on similar issue in the case of Shri Babulal S. Solanki Vs. ITO, wherein by relying upon the judgment of Hon’ble Bombay High Court, it has been held that this aspect is applicable on the transaction which has taken place after 1.7.2012. In the present case, the assessee has transferred his land on 8.7.2011. The discussion made by the ITAT in this connection reads as under:
“10. We have considered this decision in in the case of Shri Devendra Rasiklal Shah Vs. DCIT (supra) wherein para-8 of the Bombay High Court decision has been reproduced, which reads asunder:
“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 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.”
Therefore, respectfully following decision of Hon’ble jurisdictional High Court in the case of CIT Vs. Gauranginiben S. Shodhan, 45 taxmann.com 356 (Guj) as well Bombay High Court judgment (supra), we are of the view that in the present year neither with help of amended proviso of section 55A a reference can be made nor under the old proviso,
9 because value declared by the assessee as on 1.4.1981 is far more than fair market value. The ld.AO is therefore directed to re-compute capital by adopting fair market value adopted by the assessee as on 1.4.1981 on the basis of registered valuer’s report. This ground of appeal is allowed.”
12. Since the assessee has transferred his land prior to 1.7.2012, even the amended proviso is not applicable on merit also. Addition by reducing the cost of acquisition on the basis of DVO’s report cannot be made. In view of the above discussion, we allow the appeal of the assessee and quash the re-assessment order.
In the result, appeal of the assessee is allowed.
Order pronounced in the Court on 8th July, 2019.