CIT-III. LUDHIANA vs. DHARAM PAL AGGARWAL

ITA/463/2010HC Punjab & HaryanaPHHC01093399201005 March 2014Author: MR. JUSTICE SURINDER GUPTA,MR. JUSTICE RAJAN GUPTA9 pages
AI SummaryDismissed

What were the facts?

The Revenue appealed against an order of the Income Tax Appellate Tribunal (ITAT) which had dismissed its appeal against the assessee, Shri Dharam Pal Aggarwal. The assessee had declared long-term capital gains of ₹1,15,37,918 from selling immovable property in Delhi. The Assessing Officer (AO) referred the property's valuation to the Departmental Valuation Officer (DVO) under Section 55A of the Income Tax Act, 1961. The DVO determined the fair market value at ₹2,40,00,400, against the declared sale price of ₹1,60,00,000, leading the AO to add ₹79,38,318 to the assessee's income. The Commissioner of Income Tax (Appeals) allowed the assessee's appeal, and the ITAT upheld this decision, leading to the present appeal by the Revenue.

What did the High Court hold?

The High Court held that the reference under Section 55A of the Income Tax Act, 1961, to the Valuation Officer for ascertaining the fair market value of the capital asset was unjustified. The Court reasoned that Section 55A is invoked when the Assessing Officer is required to ascertain the fair market value of a capital asset. However, for computing capital gains under Section 45(1) read with Section 48, the 'full value of consideration' received or accruing from the transfer is the basis. The Supreme Court in CIT v. George Henderson & Co. Limited and CIT v. Gillanders Arbuthnot & Co. has held that 'full value of consideration' does not mean 'fair market value' but the price agreed upon by the parties. The Delhi High Court in CIT v. Smt. Nilofer I. Singh also opined that Section 55A is triggered only when the fair market value is to be determined, such as in cases under Section 45(4) or Section 45(1A), where specific provisions deem the fair market value as the full value of consideration. In the present case, no such specific provision applied. Therefore, the substantial questions of law were answered against the revenue and in favour of the assessee.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was right in ignoring the provisions contained in Section 55A of the Income Tax Act, 1961, which empower the Assessing Officer to ascertain the fair market value of a capital asset for computing capital gains? 2. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in ignoring the findings of the Assessing Officer that at the time of sale of the capital asset, there was no notification of circle rates of the Delhi Government, and hence a reference to the DVO was necessary? Assessee's arguments: The assessee contended that a reference under Section 55A could only be made in cases covered by Sections 45(1A), 45(2), and 45(4) of the Act. They argued that Sections 45 and 48 refer to the 'full value of consideration', and unless a specific provision mandates treating fair market value as full value of consideration, it cannot be substituted. Reliance was placed on CIT v. George Henderson & Co. Limited, CIT v. Gillanders Arbuthnot & Co., and CIT v. Smt. Nilofer I. Singh. Revenue's arguments: The revenue argued that since no collector rate was prevalent, it was necessary to refer the matter to the DVO under Section 55A.

Which sections of the Income-tax Act were involved?

Section 260A,Section 55A,Section 45,Section 48,Section 45(1A),Section 45(2),Section 45(4),Section 12B(2)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision: 05.03.2014 Commissioner of Income Tax III, Ludhiana ……Appellant Vs. Shri Dharam Pal Aggarwal Prop. Shakti International, K-59, Sarabha Nagar, Ludhiana …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MS. JUSTICE ANITA CHAUDHRY Present: Mr. Rajesh Katoch, Advocate for the revenue. Ms.Radhika Suri, Advocate for the assessee. Ajay Kumar Mittal,J.

1.

This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 14.10.2009, Annexure 3 passed by the Income Tax Appellate Tribunal, Chandigarh Bench ‘B’ Chandigarh (in short, “the Tribunal”) in ITA No.498/CHD/2009. The appeal was admitted on 2.12.2010 for determination of following substantial questions of law:- i) Whether on the facts and in the circumstances of the case, the Hon’ble ITAT is right in ignoring the provisions contained in Section 55A of the I.T.Act which specifically empower the Assessing Officer to ascertain the fair market value of capital asset for the purposes of comput

The order continues below.

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