AJIT CHAGANLAL SHAH,MUMBAI vs. THE INCOME TAX OFFICER, WARD -34(1)(1), MUMBAI CURRENT JURISDICTION WARD -42(2)(1) MUMBAI, MUMBAI

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ITA 1255/MUM/2025Status: DisposedITAT Mumbai30 April 2025AY 2012-135 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the property was acquired prior to 1981, and thus, the AO had to consider the value as of April 1, 1981. The sale occurred on April 26, 2011, with a sale consideration of Rs. 81,00,000 for the property, shared equally among three brothers. The Tribunal noted that the Gujarat High Court in CIT Vs Gaurangiben S Shodhan and the Bombay High Court in CIT Vs Pooja Prints held that for transactions during the financial year 2011-12 (relevant for AY 2012-13), the amended provisions of Section 55A(a) would not apply, and the erstwhile provisions would guide the assessment. Under the erstwhile provisions, a reference to the Valuation Officer was permissible only if the AO was of the opinion that the value claimed by the assessee was less than its Fair Market Value. If the value claimed was more than the FMV, a reference was not permissible. The Tribunal found that the AO was not empowered to refer the matter to the DVO even under the erstwhile provisions prior to the amendment by the Finance Act, 2012. Therefore, the reference to the DVO and the subsequent addition based on the DVO's report obtained in the co-owner's case were not legally sustainable. The assessee succeeded on this legal plea. The grounds of appeal were allowed.

What were the facts?

The assessee, Ajit Chaganlal Shah, along with his two brothers, sold ancestral property on April 26, 2011, for Rs. 81,00,000. The assessee's share was one-third, amounting to Rs. 27,00,000. The property was acquired on December 24, 1928. Since the acquisition predated April 1, 1981, the assessee obtained a valuation of Rs. 10,11,132 as of April 1, 1981, from a government-registered valuer, making his share Rs. 3,37,044. After indexation, the indexed cost of acquisition for the assessee's share was Rs. 26,45,795, resulting in a net capital gain of Rs. 54,205. During assessment for AY 2012-13, the Assessing Officer (AO) adopted the property's value as of December 24, 1928, at Rs. 6,999, based on the DVO's report in a co-owner's case. The assessee appealed this to the CIT(A), who upheld the AO's action. The present appeal is before the ITAT.

What were the issues?

1. Whether the learned CIT(A) grossly erred in misconstruing facts and mixing facts of another case, thereby wrongly upholding the AO's action? (Question of fact) 2. Whether there is a legal bar for AY 2012-13 to adopt the DVO's report as per Section 55(2)(b)(i) read with the decision of the Hon'ble Gujarat High Court in Gauranginiben Sodhan? (Question of law) Assessee's contentions: - The learned CIT(A) misconstrued facts. (Ground I(1) & I(2)) - There is a legal bar for AY 2012-13 to adopt the DVO report as per Section 55(2)(b)(i) and the Gujarat High Court decision in Gauranginiben Sodhan. (Ground II) - The AO was not legally authorized to refer the matter to the DVO as the transaction took place before July 1, 2012, and the amended Section 55A(a) is applicable from that date. The erstwhile provisions of Section 55A(a) required the AO to form an opinion that the value claimed by the assessee was less than its Fair Market Value (FMV). Reliance was placed on Pooja Print (Bom HC) and Gaurangiben Sodhan (Guj HC), and the co-owner's case (Ranjit Chaganlal Shah). Revenue's contentions: - The learned DR for the revenue supported the order of the lower authorities.

Which sections of the Income-tax Act were involved?

Section 55A,Section 55(2)(b)(i)

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Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of Learned Commissioner of Income Tax (Ld. CIT(A)) dated 05.12.2024 for A.Y. 2012- 13. The assessee has raised the following grounds of appeal: “ l) Misconstruing facts: (1) The learned CIT(A) appears to have totally and grossly erred in misconstruing facts of the case. (2) The learned CIT(A) appears to have mixed the facts of some other case he was dealing, lying on his desk. (ll) Appellant's valuation on 01-04-1981 There is a legal bar for A.Y. 2012-13 to adopt DVO report as per the decision of Hon'ble Gujarat High Court in case of Gauranginiben Sodhan (108-DTR-442) r.w.s 55(2)(b)(i). (lll) Miscellaneous:

Ajit Chaganlal Shah (1) The above grounds are without prejudice to each other. (2) The appellant craves leave to add, alter or delete any grounds either before or in course of hearing of the appeal.”

2.

Rival submission of both the parties have been heard and record perused. The ld. AR of the assessee submits that a very short submissions on legal issue, involved in the present appeal. The assessee along with his two brothers namely Manharlal Chaganlal Shah and Ranjit Chaganlal Shah sold their ancestor property on 26.04.2011 for a sold consideration of Rs. 81.00 lacs. The share of assessee being 1/3rd is of Rs. 27.00 Lacs. Such property was acquired on 24.12.1928 Since, the property was acquired prior to 01.04.1981, the assessee obtained valuation of property on 01.04.1981 from Government registered valuer. Government registered valuer estimated the value of property as of Rs. 10,11,132/-, thereby value of share of assessee is at Rs. 3,37,044/-. On the basis of indexation the indexed cost of acquisition the value of assessees share is arrived at Rs. 26,45,795/-, thus, the net capital gain arrived is Rs. 54,205/-. During assessment, the AO adopted the value of property as on 24.12.1928 at Rs. 6999/- on the basis of report of DVO in case of co-owner namely Ranjitlal Shah. Since, transaction of sale took place prior to 01.07.2012. Therefore, AO was not legally authorised to make a reference to DVO as there is statutory bar to the valuation as on 01.04.1981 prior to A.Y 2013-14. The amendment in section 55A(a) is applicable with effect from 01.07.2012 wherein the word “ is less than” its fair market value was substituted “is at variance”. To support his submission the ld. AR of the assessee relied upon the decision of Jurisdictional High court in Pooja Print 360 ITR 697 (Bom) and Gujarat High Court in Gaurangiben 2 Ajit Chaganlal Shah Sodhan 108 DTR 442(Gujarat) and Ranjit Chaganlal Shah (Co-owner) in dated 15.07.2020.

3.

On the other hand, ld. DR for the revenue supported the order of lower authorities.

4.

I have considered the rival submission on both the parties and perused the orders of lower authorities carefully. I have also deliberated on various case law relied by Ld. AR of the assessee. There is no dispute that property which is the subject matter of sale was acquired prior to 1981. Thus, the AO has to consider the value of asset as on 01.04.1981. The assessee along with this co-owner sold the property 26.04.2011. The assessee and his two brothers have shown the sale consideration of Rs. 81.00 lacs. The assessee was having 1/3rd share in the property. During the assessment the matter was referred to DVO to assess to determine the cost of asset as on 01.04.1981. I find that Hon’ble Gujarat High Court in CIT Vs Gaurangiben S Shodhan (supra) and Hon’ble Bombay High Court in CIT Vs Pooja Prints (supra) held that when the transaction of the land taken place during the financial year 2011-12 relevant the assessment year 2012-13, the amended provisions of section 55A(a) would not be applicable and one shall be guided by the erstwhile provisions of section 55A(a) of the Act. It was also held that in order to refer the matter to the valuation officer as per under erstwhile provisions of section 55A(a) of the Act would be applicable. Further, the AO should form an opinion that value so claimed by assessee is less than its Fair Market Value (FMV). Only in such a scenario, the value so claimed by assessee is less than its Fair Market Value in the opinion of AO, matter can Ajit Chaganlal Shah be referred to valuation officer. In a scenario, where the value so claimed by the assessee is more than its fair market value, the matter could not be referred to the valuation officer. It was ultimately held that the AO was not empowered to refer the matter to the valuation officer, even as per the erstwhile provisions of section 55A(a) prior to amendment by the Finance Act, 2012. Considering the decision of Hon'ble Gujarat High Court in CIT Vs. Gauranginiben S. Shodhan Ind.(supra) and Hon'ble Bombay High Court in CIT Vs. Puja Prints (supra) and respectfully following the same, I hold that reference made to the DVO by AO Officer for determination of Fair Market Value was not valid, so no reliance can be made on his report. Therefore, the addition based on such report of DVO, which is obtained in co-owners case, is not legally sustainable. Thus, the assessee succeeded on legal plea. No contrary facts or law is brought to my notice to take other view. In the result, the grounds of appeal

raised by the assessee are allowed.

5. In the result, the appeal of the assessee is allowed. Order pronounced in open court on 30.04.2025.

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