SHRI DILIPBHAI U.UDANI, RAJKOT,,JAMNAGAR vs. THE COMMISSIONER OF INCOME TAX-III,, RAJKOT-GUJARAT

The only issue raised by the assessee is that the learned CIT erred in holding the assessment order framed by the AO under section 143(3) of the Act, as erroneous insofar prejudicial to the interest of revenue.

The facts in brief are that the assessee in the present case is an individual and earning income from other sources and capital gain. The assessee for the year under consideration has filed his return of income declaring income of Rs. 3,14,450/- only. Subsequently the case of the assessee was selected under scrutiny and the assessment was made by the AO under section 143(3) of the Act, by accepting return income vide order dated 14-11-2011.

However, the learned CIT under section 263 of the Act, found certain defects in the assessment framed by the AO under section 143(3) of the Act. As such the assessee has purchased a piece of land at Rs, 24,701/- dated 11 March 1981 which was valued as on 1 April 1981 at Rs. 5,50,000/- for the purpose of working out the capital gain under section 45 of the Act. As per the learned CIT the value of the property cannot be increased to such high-value within a short span of 22 days. Accordingly, the learned CIT called the assessee as well as the valuer who valued the property at Rs. 5,50,000/- as on 1 April 1981. But both of them failed to make any satisfactory reply. Accordingly the learned CIT held the order of the AO as erroneous insofar prejudicial to the interest of revenue and directed to take the value of the land as on 1 April 1981 at Rs. 24,701/- while working out the capital gain.

Being aggrieved by the order of the learned CIT, the assessee is in appeal before us.

The learned AR before us submitted that the AO has no power to substitute the value shown by the assessee as on 1 April 1981 under the provisions of section 55A of the Act.

Other hand the learned DR vehemently supported the order of the authorities below.

We have heard the rival contentions of both the parties and perused the materials available on record before us. The provisions of section 55A of the Act, has direct bearing on the issue on hand which reads as under as applicable for the year under reference: 55A. With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter 86, the 87[Assessing] Officer may refer the valuation of capital asset to a Valuation Officer— (a ) in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the 87[Assessing] Officer is of opinion that the value so claimed is less than its fair market value ; (b ) in any other case, if the 87[Assessing] Officer is of opinion— (i) that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage 88 of the value of the asset as so claimed or by more than such amount 88 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, 89 and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clauses (ha) and (i) of sub-section (1) and sub-sections (3A) and (4) of section 23, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall with the necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the 90[Assessing] Officer under sub-section (1) of section 16A of that Act.

A plain reading of the above provision reveals that the AO can substitute the value shown by the assessee as on 1 April 1981 if he has shown less value whereas the assessee in the present case has shown the higher value. Thus the question of making reference or substituting the value shown by the assessee as on 1 April 1981 in the given facts and circumstances does not arise.

In holding so we draw support and guidance from the judgement of Hon’ble Jurisdictional High Court in case of CIT vs. Gauranging S. Sodhan Indl. Reported in 367 ITR 238 wherein it was held 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 55A 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 on 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. 16. 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. ITO [2009] 310 ITR 31/181 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. 55A 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." 17. 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. Tax Appeal is dismissed.

We also note that there was an amendment under the provisions of section 55A where the word ‘variance’ was inserted but such amendment is applicable with effect from 01-07-2012 which is prospective in nature. Thus amended provisions cannot be applied in the year under consideration. Accordingly, we do not find any infirmity in the assessment order framed under section 143(3) of the Act. Accordingly we hold that the order framed under section 263 of the Act is not sustainable and hence we quashed the same. Thus the ground of appeal of the assessee is allowed.

Before we part with the issue/appeal as discussed above, it is pertinent to note that the clause (c) of rule 34 of the Appellate Tribunal Rules 1963 requires the bench to make endeavour to pronounce the order within 60 days from the conclusion of the hearing. However the period of 60 days can be extended under exceptional circumstances but the same should not ordinarily be further extended beyond another 30 days. In simple words the total time available to the Bench is of 90 days upon the conclusion of the hearing.

In the result, the appeal filed by the assessee is allowed.