THE ITO, WARD-3(2)(7),, AHMEDABAD vs. SHRI GAUTAMBHAI BABARBHAI PATEL,, AHMEDABAD

PER P.M. JAGTAP, VICE-PRESIDENT :

This appeal is preferred by the Revenue against the order of learned Commissioner of Income-Tax (Appeals)-3, Ahmedabad (“CIT(A)” in short) dated 03.05.2016 passed for Assessment Year 2012-13. 2. In ground Nos. 1 & 2, the Revenue has challenged the action of the learned CIT(A) in holding the reference made by the Assessing Officer to the DVO for valuation as bad in law and directing the Assessing Officer to adopt the cost of acquisition of asset of the assessee as on 01.04.1981 at Rs.32,22,240/- as against Rs.89,171/- adopted by the Assessing Officer on the basis of DVO’s valuation report for the purpose of computing the Long Term Capital Gain.

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the year under consideration, ancestral agricultural land jointly owned by the assessee with his wife Smt. Meenaben Gautambhai Patel, situated at Gota, Daskroi, District Ahmedabad, was sold by the assessee for a total consideration of Rs.9,28,80,948/- and his share of long term capital gain arising from the said sale was declared by the assessee in the return of income amounting to Rs.22,05,090/-. While computing the said long term capital gain, cost of the agricultural land as on 01.04.1981 was taken by the assessee at Rs.32,22,240/- on the basis of the Registered Valuer’s Report dated 15.03.2015. According to the Assessing Officer, the valuation made by the Registered Valuer in his report did not represent fair market value of the property jointly owned by the assessee with his wife as on 01.04.1981. He, therefore, made a reference to the DVO, Ahmedabad under section 55A of the Act for estimating the fair market value of the property as on 01.04.1981. The DVO, vide his report dated 16.03.2015, determined the fair market value of the land as on 01.04.1981 at Rs.89,171/-. When the said report was confronted by the Assessing Officer to the assessee, the later raised various objections. The Assessing Officer, however, overruled the said objections raised by the assessee for the detailed reasons given in his order and proceeded to adopt the value of Rs.89,171/-, as determined by the DVO, of the land of the assessee as on 01.04.1981 for computing the Long Term Capital Gain chargeable to tax in the hands of the assessee.

Assessing Officer to adopt the value of land sold by the assessee as on 01.04.1981 at Rs.32,22,240/- on the basis of the Registered Valuer’s Report. The reasons given by the learned CIT(A) to arrive at this conclusion, as contained in his impugned order, are as under:

“I have gone through assessment order and submission by appellant. Ground No. 1 to 12 taken together as single issue is involved. The A.O. in para 7.5 of assessment order says, "...... The DVO, Ahmedabad vide order under section 55A of the I.T. Act, 1961 F.No.6(28)/DVO/2014-15/886 dated 16.03.2015 has determined the value of the said land as on 01.04.1981 at Rs.89,171/- (Rs.678 per Sq. M x 13152 sq. M.). The order of the DVO, Ahmedabad dated 16.03.2015 was received on 19.03.2015. In light of the above facts, the assessee was requested to show cause vide the show cause notice dated 19.03.2015 as to why the valuation of the said land as on 01.04.1981 at Rs.89,171/- (Rs.6.78 per Sq. M. x 13152 Sq.M.) determined by the valuation report of the DVO, Ahmedabad vide order dated 16.03.2015 should not be adopted and his income from capital gain for the A.Y.2012-13 be calculated accordingly." The contention of the AO is being examined vis-a-vis provision of section 55A, sub-clause (a) reads, ".......Provision of Section 55A: With a view to ascertaining the fair market value (FMV) of a Capital Assets for the Purpose of Computation of Capital gain, the Assessing Officer (A.O.) may refer the 'Valuation of Capital Asset to a Valuation Officer of the Income Tax Department in the following situations; 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, and the A.O. is of opinion that the value so claimed is less than its market value;,..........." As can be seen it clearly lays down that in a case where the value of the asset, as claimed by the appellant, is in accordance with the estimate made by a registered valuer and the A.O. is of the opinion that the value so claimed is less than its market value, with a view to ascertaining the FMV of a Capital Asset for the purpose of computation of Capital gain, the A.O. may refer the Valuation of Capital Asset to a Valuation officer of the Income Tax Department. Therefore, from the bare reading of the above provision, it is crystal clear that A.O. has power to refer the FMV to DVO in the situation of FMV claimed by the appellant is in accordance with the estimate made by a report of the registered valuer, if an only if, A.O. is of opinion that the ITANo.1807/Ahd/2016 AY : 2012-13 4 value so claimed by the appellant is less than its market value and not vice versa. So, in the present case, I am afraid that the A.O. has power, or juri iction to refer the case to DVO. The appellant has also filed a rebuttal to the show cause issued by AO and relied on many case laws as can be seen from No.7 of assessment order. I rely on the ratio laid down in following case laws:- i) CIT Vs Manjulaben N. Unadkat-Appeal No.167/2003(Guj.) ii) Hiraben Jayantilal Shah Vs. ITO & ANR 310 ITR 31 (Guj.). iii) M.V. Shah O/L Anant Mills Ltd. Vs. UJ Matain & ANRs 209 ITR 568(Guj.)

In view of facts on record and ratio laid down by juri ictional High Court, reference to the Valuation Officer itself is not as per provisions of the IT Act 1961. The fact remains that there is no alternative to the valuation report from Registered Valuer filed by the appellant and the explanation for admitting the same for valuing the property on 01.04.1981. It is decided that AO's decision to adopt FMV @ from DVO's report which is not legally tenable as per law decided by the juri ictional High Court. Therefore, the FMV @ 490 per sq. Mtr. as claimed by appellant as per Registered Valuer's Report, is to be utilized for deciding the cost of asset in question. Therefore, the same shall be at Rs.32,22,240/- as 01.04.1981 as also decided in a detailed appellate order dated 31.08.2015 for Minaben G. Patel, wife of appellant and the AO is directed to recalculate LTCG accordingly.”

consideration, i.e. AY 2012-13, and also relied on various judicial pronouncements including the judgements of Hon’ble Gujarat High Court. The learned DR in this regard has submitted that the relevant provision of Section 55A of the Act has been amended by the Finance Act, 2012 with effect from 01.07.2012 whereby the words “is less than its fair market value” are substituted by “is at variance with its fair market value”. He has contended that this amendment is an enabling provision and since the same is procedural in nature, the reference made by the Assessing Officer to the DVO after 01.07.2012 was in accordance with law. In support of this contention, he has relied on the decision of Hon’ble Supreme Court in the case of Memon Abdul Karim Haji Tayab Vs. Dy. Custodian General (1964 AIR 1256 (SC)) wherein it was held that procedural amendments to a law apply, in the absence of anything to the contrary, to all actions after the date they come into force even though the actions may have begun earlier and the claim on which the action may be based may be of an anterior date. In this regard, it is observed that a similar contention was raised on behalf of the Revenue before the Co-ordinate Bench of this Tribunal at Surat in the case of Shri Mahdevbhai Mohanbhai Naik (ITA No.820/AHD/2016 dated 11.07.2018, AY 2010-11), but the same was rejected by the Tribunal vide paragraph no.12 of its order which reads as under:

“12. Thus, the contention of the Learned Departmental Representative that reference was made after 01.07.2012 is not tenable in law as the amendment made in section is substantive in nature which is relevant to assessment year commencing after the date of amendment i.e. F.Y. 2012-13 relevant to A.Y. 2013-14, hence, it is not applicable for the assessment year 2010-11, as the assessment involved is prior to period of 01.07.2012, In view of these facts and circumstances, we are of the considered opinion that the law has been settled by the decision of Hon’ble Bombay High Court, Hon’ble Gujarat High Court, Mumbai Tribunal and Pune Tribunal. Therefore, the AO was not justified in referring to DVO or adopting valuation based on valuation report. The amendment in section 55A was qua prior period to 01.07.2012 and not qua proceeding prior to 01.07.2012.”

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land, the Assessing Officer was of the view that the assessee was not entitled to claim deduction under Section 54B of the Act in respect of new agricultural lands purchased prior to the date of transfer of old agricultural land. In this regard, it was explained by the assessee that his old agricultural land was transferred by him on 11.04.2011 itself within the meaning of Section 2(47)(v) of the Act since banakhat (agreement to sale) was executed on 11.04.2011 and the possession of the land was also given on the same date. It was also explained by the assessee that the sale proceeds of old agricultural land were received by him on 09.05.2011 which were utilized for purchase of new agricultural lands. This explanation offered by the assessee was not found acceptable by the Assessing Officer. According to him, banakhat (agreement to sale) executed by the assessee on 11.04.2011, by itself, did not create any interest in or charge on the old agricultural land and there was thus no transfer of the said land by the assessee on that date. He held that the deed of conveyance/sale deed of the old agricultural land was executed and registered by the assessee and his wife on 13.06.2011; and, the said land was thus transferred only on that date within the meaning of Section 2(47)(v) of the Act. He accordingly held that the assessee was not entitled for deduction under Section 54B of the Act in respect of new agricultural lands purchased prior to the date of transfer of old asset. Accordingly, he disallowed the claim of the assessee for deduction under Section 54B of the Act.

ITANo.1807/Ahd/2016 AY : 2012-13 8 “As regards rejection of claim of deduction u/s 54B of the Act, the AO has mentioned facts at para 8.2 as under: "8.2 On perusal of the Transfer Deed, it is noticed that the new agricultural lands have been purchased before the date of transfer of agricultural Sand. On 13.06.2011, the assesses alongwith his wife Smt. Meenaben G. Patel executed a transfer deed with the purchaser and had purchased an agricultural land at Block No.53, village Chakhla, Sanand on 07.05.2011 for Rs.1,55,00,000/- having ½ undivided share and another land having Block No,97, Kalol on 16.05.2011 for Rs.30,20,000/- . After this, the assessee alongwith his wife have sold land for Rs.9,28,80,948/- on 13.06.2011. As per provisions of section 54B you were required to purchase new asset within 2 years after the date of transfer of the old asset. Since you have transferred the old asset on 13.06.2011, you were required to purchase the new asset after 13.06.2011 but before 14.06.2013. Since you have purchased new asset after 13.06.2011 and 16.05.2011 i.e. before the transfer of the original asset, the assessee failed to comply with the provisions of Section 54B(1) of the Act. Therefore, purpose to disallow your claim of deduction amounting to Rs.22,05,090/- and add it to your total income for A.Y.2012-13." It is mentioned that the appellant is co-owner Of new asset alongwith wife Smt. Minaben G. Patel and the same issue for same asset was decided in a detailed appellate order dated 31.08.2015. As the asset remain the same, the findings in the order dated 31.08.2015 are reproduced as under: - "......... the appellant entered into a notarized Agreement to sale coupled with possession on 11/04/2011. As per provision of section 2(47)(v) it is transfer as the term 'Transfer’ includes possession. The section 2(47) reads, "Transfer, in relation to capital asset, includes, ................... (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property. Act, 1882 (4 of 1882); or ......." The agreement to sale the original land (survey No.24: Gota Village, Daskoi Taluka) dated 11.04.2011 (PB-55-62) by the appellant is on record. The clause No. 10 (PB-61) of this agreement to sale indicates that the final deed to be executed within three months. Consequently, final agreement to sale of original land is registered on 13.06.2011. The act of appellant is natural and no mens-rea involved. The sale proceeds have been received and accounted in the books of account as per para 23 of statement of facts, are as under:-

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Date of the Cheque No. Credited in Amount Remark Cheque Bank Account 01/04/2011 000027 09/05/2011 35,00,000/- At the time of handing over the possession 05/04/2011 000022 09/05/2011 30,00,000/- 02/04/2011 728688 09/05/2011 33,00,000/- 02/04/2011 728692 09/05/2021 27,00,000/- 25/05/2011 Pay Order 16/06/2011 80,30,365/- at the time of execution of No. 011786 Sale Deed 25/05/2011 720788 16/06/2011 69,69,309/- Total : 2,74,99,674/- The receipt of sale proceeds against the sale of original land started on 01.04.2011 and ended on 25.05.2011. In view of credits in the books of account of appellant, much credence is required to be given to the terms of agreement to sale of original land dated 11.04.2011. The genuineness of receipt of Rs.2,74,99,674/- is not in doubt as same figures have been accepted while re-working capital gains by the A.O.at page 12 of assessment order. The payment as per available records, for purchase of New Agricultural Land is after the date on which 'Transfer' of old agricultural Land took place. The investment detail in purchasing of new agriculture land is given in para 23 of statement of facts is as under:- Amount Date Detail of Land 7,50,000 18/05/2011 Kalol Survey No. 97 7,30,000 19/05/2011 Kalol Survey No. 97 2,00,000 25/05/2011 Survey No. 816, Block No.53, Village Chekhla 2,00000 25/05/2011 Survey No. 816, Block No. 53, Village Chekhla 2,00,000 25/05/2011 Survey No. 816, Block No.53, Village Chekhla 2,00,000 25/05/2011 Survey No. 816, Block No. 53, Village Chekhla 2,00,000 26/05/2011 Survey No. 816, Block No. 53, Village Chekhla 23,83,335 25/05/2011 Survey No. 816, Block No.53, Village Chekhla 23,83,333 26/05/2011 Survey No, 816, Block No. 53, Village Chekhla 23,83,333 26/05/2011 Survey No. 816, Block No. 53, Village Chekhla 96,50,001 As it can be seen above, the appellant had invested the received funds to Purchase New Agricultural lands. I find that From No. 12 from Accounting Year 2005-2006 to accounting Year 2011-2012 (PB-51-52) which shows name of the crop, area of crop etc. for the land sold during concerned year has been placed on record by the appellant. In addition to it, Form No. 8A also shows that the said land was used for Agriculture purpose. The AO has gone to the extent of intention to convert the land to Non agriculture (NA) which is not at all the requirement of Law to claim deduction u/s 54B of the Act, 1961. As per the two additional documents filed by the appellant though

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analysis not necessary to arrive at decision in the matter (sent to AO for comments on 10.08.2015 within 15 days), indicate that the State Govt. ordered to pay additional premium amount for converting the land into NA is vide order dated 03.08.2011 and the final order for NA is dated 30.05.2012. These are incidents which ate happening subsequent to transfer of old agricultural land, hence cannot turn pendulum against appellant. The original asset in question remained agricultural land till its transfer or till the payments for transfer of such asset received through banking channel and accounted in the books of appellant.

In view of the above facts and law it is decided that the AO to adopt FMV @ Rs.490/-per sq. Meter as per registered valuer's report instead of Rs.100/- per sq. Meter adopted arbitrarily by the A.O. i.e. to say to deduct purchase cost as on 01/04/1981 @ Rs.32,22,240/- in place of Rs.6,57,600/- deducted in Assessment Order i.e. to say indexed cost at Rs.2,52,94,584/- against Rs.51,62,160/- to be deducted by A.O. The appellant has fulfilled conditions laid down to claim deduction u/s.54B of IT Act, 1961, therefore, legitimate claim u/s 54B should be allowed for investment of Rs.96,50,001/- in New Agricultural lands against Long Term Capital Gains of Rs.22,05,090/- arising on sale of original agriculture land.......”

As regards the factual aspect of receipt of amount on sale of original asset and payment for new asset is reproduced herein below: During the year under question, I had sold agricultural land bearing Survey No.24, TPS 32, F.P. No.18/2 at Gota Village. The sale proceeds of the same were received in my bank account as under:- Date Amount (Rs.) 09.05.2011 65,00,000/- 09.05.2011 60,00,000/- 16.06.2011 69,69,309/- 16.06.2011 80,30,365/- Total: 2,74,99,674/- Out of the above sale proceeds, I had invested following amount for purchase of agricultural lands. Amount Date Detail of Land 7,50,000 18.05.2011 Kalol Survey No.97 7,50,000 09.05.2011 Kaloi Survey No.97 23,83,335 25.05.2011 Survey No. 816, Block No. 53, Village Chekhla 23,83,333 26.05.2011 Survey No. 816, Block No. 53, Village Chekhla 23,83,333 26.05.2011 Survey No. 816, Block No. 53, Village Chekhla 86,50,005

ITANo.1807/Ahd/2016 AY : 2012-13 11 The appellant fulfilled all the conditions laid down to claim deduction as per provisions of section 54B of IT Act, 1961. It is also decided that deduction u/s.54B is allowable to appellant for investment of Rs.86,50,005/- (shown as Rs. 92,50,000/- in statement of income but makes no difference in liability as the new investment is of Rs.86,50,005/- against the LTCG of Rs.22,05,090/-) in new agricultural land against the LTCG arising out of sale of old agricultural land in question.”

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CIT(A) in his impugned order. The provision of clause (v) of sub-section (47) of Section 2 of the Act, relied upon by the learned Counsel for the assessee in support of the assessee’s case, reads as under:- “any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882.”

Section 53A of the Transfer of Property Act, 1882 referred to in Section 2(47)(v) of the Income-tax Act, 1961 reads as under:- Section 53A in The Transfer of Property Act, 1882 1[53A. Part performance.—Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that 2[*] where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof.]

agreement to sale the original asset, i.e. old agricultural land, was executed by the assessee on 11.04.2011 which was duly notarized and even the possession of the said land was handed over by the assessee to the purchaser at the time of execution of the agreement to sale. As further found by the learned CIT(A) from the perusal of the agreement to sale, final sale/conveyance deed was to be executed within three months which was done on 13.06.2011 and the sale proceeds had also been received by the assessee substantially at the time of execution of agreement to sale which were duly invested by the assessee in the purchase of new agricultural lands. These findings of facts recorded by the learned CIT(A) in his impugned order clearly show that there was a transfer of original asset, i.e. old agricultural land, by the assessee on 11.04.2011 itself on execution of agreement to sale coupled with possession within the meaning of Section 2(47)(v) of the Income-tax Act, 1961 read with Section 53A of the Transfer of Property Act, 1882; and the assessee having purchased the new agricultural lands within the specified period after the date of the said transfer was entitled to claim deduction under Section 54B of the Act. At the time of hearing before us, learned DR has not been able to bring anything on record to rebut or controvert the finding of facts recorded by the learned CIT(A). We, therefore, find no justifiable reason to interfere with the impugned order of the learned CIT(A) giving relief to the assessee on this issue and upholding the same, we dismiss Ground No.3 of the Revenue’s appeal.

Order pronounced in the open Court on 6th April, 2022 at Ahmedabad. (MADHUMITA ROY) VICE-PRESIDENT Ahmedabad, Dated 06/04/2022 *Bt

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आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant

आदेशानुसार/ BY ORDER,सहायक पंजीकार (Asstt.