PRINCIPAL COMMISSIONER OF INCOME TAX-4 vs. ILABEN K. PATEL

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TAXAP/1248/2018HC GujaratGJHC24059768201809 October 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal, holding that the issue was covered by its own prior decision in CIT v. Gauranginiben S. Shodhan ([2014] 367 ITR 238). In that precedent, the Court had observed that prior to the amendment of Section 55A effective July 1, 2012, a reference to the DVO for ascertaining the fair market value as on April 1, 1981, was not competent if the assessee had provided an estimate based on a registered valuer's report, and the Assessing Officer's opinion was that the value claimed was less than its fair market value. The Court clarified that clause (a) of Section 55A, as it stood then, did not apply to valuation as on April 1, 1981, and clause (b) was also not applicable under the given circumstances. The ratio is that the Assessing Officer's power to refer to the DVO for pre-amendment valuation under Section 55A was restricted and did not permit such a reference solely based on the belief that the claimed value was less than the fair market value as of April 1, 1981, when the assessee had submitted a registered valuer's report. The appeal was dismissed, upholding the Tribunal's deletion of the addition.

What were the facts?

The Revenue (Principal Commissioner of Income Tax-4) filed an appeal against an order of the Income Tax Appellate Tribunal dated April 2, 2018. The appeal concerns the Assessment Year 2011-12 and challenges the deletion of an addition of Rs. 6,98,630 made on account of Long Term Capital Gains. The core issue revolves around the Assessing Officer's authority to refer the determination of the fair market value of assets as of April 1, 1981, to the District Valuation Officer (DVO). The High Court noted that a similar issue was considered in Tax Appeal No. 1204 of 2018, which was dismissed on October 8, 2018.

What were the issues?

1. Whether the Appellate Tribunal has erred on the facts and in law in deleting the addition of Rs. 6,98,630 made on account of Long Term Capital Gains? (Question of law) The Revenue's contention, implied by the appeal, is that the addition made by the Assessing Officer was justified and the Tribunal's deletion was erroneous. The Revenue likely argues that the reference to the DVO was valid and the fair market value determined by the DVO should have been upheld. The judgment does not record specific arguments from the Revenue beyond the grounds of appeal. The Assessee's contention, as indicated by the Tribunal's decision and the High Court's dismissal of the appeal, is that the deletion of the addition was correct. The Tribunal relied on this Court's decision in CIT v. Gauranginiben S. Shodhan ([2014] 367 ITR 238), which held that the Assessing Officer's reference to the DVO for ascertaining the fair market value as on April 1, 1981, was not competent under Section 55A as it stood prior to July 1, 2012, particularly when the assessee had relied on a registered valuer's report.

Which sections of the Income-tax Act were involved?

Section 55A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/TAXAP/1248/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 1248 of 2018 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX-4 Versus ILABEN K. PATEL ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 09/10/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI)

1.

Revenue is in appeal against the judgment of the Income   Tax   Appellate   Tribunal   dated   02.04.2018 raising following questions for our consideration: “Whether the Appellate Tribunal has erred on the   facts   and   in   law   in   deleting   the addition of Rs.6,98,630/­ made on account of Long Term Capital Gains?”

2.

Similar issue in similar background came to be considered in Tax Appeal No.1204 of 2018. Tax Appeal was   dismissed   by   an   order   dated   08.10.2018   in following terms:

“3. The   issue   pertains   to   the   Assessment Year  2011­12   and   touches   the   authority   of the Assessing Officer to make a reference to C/TAXAP/1248/2018 ORDER the District

Valuation

Officer

for determining   the   fair   market   value   of   the assets as on 01.04.1981. 4. In this context, the Tribunal had relied on the decision of this Court in the case of Commissioner of Income Tax v. Gauranginiben S. Shodhan  reported in  [2014] 367 ITR 238. In   the   said   judgment,   the   following observations were made; “15. Coming   to   the   question   of reference to the DVO for ascertaining the fair market value as on April 1, 1981,   also,   we   find   that   such reference was not competent. We have noticed that prior to the amendment in section 55A with effect from July 1, 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 April 1, 1981. It would not be the case of the Assessing Officer that the value of the asset shown as on April 1, 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 April 1, 1981. We are conscious that with effect from July 1, 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 July 1, 2012. We are, however,   concerned   with   the   period prior thereto. Clause (b) of section 55A   is   in   two   parts   and   permits   a reference to the 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 C/TAXAP/1248/2018 ORDER 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. Sub­clause (i) of clause (b) also for the same reasons recorded above, would   have   no   bearing   on   the   fair market value as on April 1, 1981. The Assessing Officer had not resorted to subclause (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   the assessee has relied upon a registered valuer’s report, the Assessing Officer can proceed only under clause (a) and clause (b) would not be applicable.”

5.

The issue is covered by the decision of this   Court.   Hence,   the   Tax   Appeal   is dismissed.”

3.

In   the   result,   this   Tax   Appeal   is   also dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH

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