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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR & SHRI AMARJIT SINGH, ACCOUNTANT MEMEBR
ORDER PER MAHAVIR PRASAD, JM:
The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (Appeals)-5, Ahmedabad (‘CIT(A)’ in short) vide Appeal No. CIT(A)- 5/ITO.Wd.5(1)(2)/10797/2017-18, dated 16.05.2018 arising out of assessment order dated 26.12.2017 passed by the Assessing Officer (AO)
Dipakkumar Someshwar Pandya vs. ITO] AY 2010-11 - 2 - under s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (the Act) concerning AY 2010-11.
The grounds of appeal raised by assessee read as under:
“1. The Learned Commissioner of Income Tax (Appeals)-5, Ahmedabad has erred in confirming the action of the Assessing Officer in adopting the value of property as on 01.04.81 at Rs.5,56,000/- as per the report of the Valuation Officer instead of value thereof as on 01.04.81 at Rs.11,74,867/- as determined by the Valuation Officer u/s.55A(a) of the I.T. Act, 1961. 1.1 As per the provisions of sec.55A(a) of the Act. the Assessing Officer had no powers to refer the matter to his valuer for Asst. Year 2010-11. The amendment in section 55A(a) of the Act enabling the Assessing Officer to refer the matter to Valuation Officer for the value as on 01.04.81 has been introduced w.e.f. 01.07.12 i.e. after Asst. Year 2010-11.
2. The Learned Commissioner of Income Tax (Appeals)-5, Ahmedabad has erred in confirming the sale consideration at Rs.44,01,000/- as per the valuation report instead of Rs.41,00,000/- shown by the Appellant.
3. The Learned Commissioner of Income Tax (Appeals)-5, Ahmedabad has further erred in confirming the taxable Long Term Capital Gain at Rs.8,87,000/- instead of Long Term Capital Loss of Rs.33,25,159/- shown by the Appellant in the return of income, relying on valuation report dated 28.05.2014 from the registered valuer.”
In this case, as pre the AIR information, it was noticed by the AO that during the year the assessee has sold l/3rd share of immovable property (Building) situated at Survey No.l650/A, F.B. NO.374 and 374/1 of TPS No.35 of Saijpur Bogha, Ahmedabad, as per Sale deed registration No.AHD-6-NRD/2059 dated 06.05.2009 registered with Sub-Registrar, Ahmedabad-6(Naroda) for a sale consideration of Rs.41,00,000/-. In the return of income filed, the assessee declared long term capital loss of Rs.33,25,159/- on sale of aforesaid property situated at Saijpur Bogha. The long term capital loss has been worked out by the assessee on the basis of valuation report of registered valuer. In support of the long term capital loss declared the assessee has furnished a valuation report dtd. 28.05.2014 from the registered valuer showing the cost of the said property as on 01.04.1981 at Rs.35,24,600/- (l/3rd Rs.l 1,74,8677-). Accordingly, the Dipakkumar Someshwar Pandya vs. ITO] AY 2010-11 - 3 - AO referred the matter to the Valuation officer for estimation of value as on 01.04.1981. Thereafter, the assessee has also filed an application before the AO to take the sale consideration at Rs.41,00,000/- as per the sale deed instead of Rs.75,00,000/- value adopted by the Stamp Valuation Authority. The DVO estimated the property as on 01.04.1981, showing cost at Rs.16,67,000/- (l/3rd Rs.5,56,000/-) as on 01.04.1981 as against cost of Rs.35,24,600/- as on 01.04.1981 claimed by the assessee and Rs.44,01,000/- as on 06.05.2009 as against Rs.75,00,000/- declared by the stamp valuation authority. Accordingly, the AO issued show cause notice to the assessee. In response to the show cause notice, the assessee filed his reply and the reply was not accepted by the AO and recomputed the long term capital gain at Rs.8,87,080/- and made the addition.
Thereafter, the assessee preferred statutory appeal before the CIT(A). During the course of appellate proceedings, the assessee has objected the addition of Rs.8,87,080/- made by the A.O. During the course of appellate proceedings, the assessee has submitted that as per the Government valuer of Income-tax Department value of the said property calculated at Rs.44,00,000/- and as per the Jantri its valuation Rs.41,00,000/- and there was a difference in valuation is less than 10% and requested to accept the jantri rate. Learned CIT(A) did not agree with the contention of the assessee and confirmed the addition made by the AO.
We have gone through the relevant record and impugned order. Now question before us is whether the AO was right in adopting the value of property as on 01.04.1981 at Rs.5,56,000/- as per the report of Valuation Officer instead of value thereof as on 01.04.1981 at Rs.11,74,867/- as determined by the Valuation Officer under s.55A(a) of the Act. Section 55A contemplates that:
Dipakkumar Someshwar Pandya vs. ITO] AY 2010-11 - 4 - “[Reference to Valuation Officer. 55A. 55A. With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the [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 [Assessing] Officer is of opinion that the value so claimed [is at variance with its fair market value]; (b ) in any other case, if the[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 of the value of the asset as 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, 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 [Assessing] Officer under sub-section (1) of section 16A of that Act. Explanation—In this section, “Valuation Officer” has the same meaning, as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).]”
5.1 We can see from the impugned order and submission of the learned AR that no claim was made by the assessee for forming any opinion as to existence of prescribed difference between value of asset as claimed by assessee and fair market value. In support of its contention, learned AR cited the judgment of Hon’ble Gujarat High Court in Hiaben Jayantilal Shah vs. ITO [2009] 181 TAXMAN 191 (Guj), wherein it is held that Section 55A of the Act did not permit the authority to find out the fair market value of the property outside of the sale with following observations:
“Pursuant to the sale of a property, the assessee filed her return on 27-8-1996 for the relevant assessment year showing capital gain worked out on the basis of valuation report of registered valuer whereunder the cost of acquisition of the property was arrived at in terms of the option exercised under section 55(2). Thereafter, in the first week of October, 1997, the assessee received an undated notice from the DVO informing that on 26-4-1996 a reference had been made by the Assessing Officer under Dipakkumar Someshwar Pandya vs. ITO] AY 2010-11 - 5 - section 55A to him. The DVO, therefore, proposed to estimate the market value of the property as on 1-4-1981 at Rs. 3,97,000 as against Rs. 6,25,000 shown by the assessee and to estimate the fair market value of the property as on the date of valuation of the sale deed. The assessee filed writ petition challenging the aforesaid reference on the ground when no assessment was pending on date of making reference, reference was bad, in law; and that section 55A did not permit the authority to find out the fair market value of the property on the date of the sale.”
5.2 The learned AR also cited an order of Surat Bench in the matter of Ranchodbhai C. Patel vs. ITO [2021] 123 taxmann.com 215 (Surat-Trib.), wherein it is held that where in case of immovable property sold by the assessee determined by Valuation Officer lesser than value declared by the assessee as on 01.04.1981, in that case reference to the Valuation Officer under s.55A of the Act was not warranted and it was also mentioned that amendment brought in Section 55A of the Act w.e.f. 01.07.2012 by Finance Act, 2012, according to which, reference could be made by the AO to D.V.O. if value of immovable property determined by assessee was lesser than fair market value of property, is applicable prospectively and not retrospectively. The learned AR also cited a judgment of Hon’ble Bombay High Court in the matter of CIT(A)-13 vs. Puja Prints [2014] 43 taxmann.com 247 (Bombay), wherein it is held that prior to 01-07-2012, no section 55A valuation if value of asset given by assessee was more than its market price. The head note of the same is as follows:
“Section 55A of the Income-tax Act, 1961 - Capital gains - Reference to Valuation Officer (Validity of reference) - Assessment year 2006-07 - Whether when a specific provision under which reference can be made to Departmental Valuation Officer(DVO) is available, there is no occasion for Assessing Officer to invoke general powers of enquiry - Held, yes -Assessee adopted value of his property at Rs.35.99 lakhs as a fair market value as on 1-4-1981 on basis of a valuation report - Assessing Officer was of view that value of property as adopted by assessee was high -Therefore, Assessing Officer referred issue of valuation to DVO who valued property at Rs.6.68 lakh as on 1-4-1981 and indexed cost at Rs.33.20 lakhs - Consequently, Assessing Officer by his assessment order enhanced capital gain of appellant - Whether law to be applied in instant case is section 55A(a) as existing during period relevant to assessment year 2006-07 wherein reference could be made to DVO only if value declared by assessee is in opinion of Assessing Officer less than its fair market value - Held, yes - Whether when value of property adopted by assessee was Dipakkumar Someshwar Pandya vs. ITO] AY 2010-11 - 6 - much more than fair market value even as determined by Departmental Valuation Officer, invocation of section 55A(a) was not justified - Held, yes - Whether in face of clear position in law, CBDT circular dated 25-11-1972 can have no application as understanding of statutory provisions by revenue as found in circular issued by CBDT is not binding upon assessee and it is open to an assessee to contend to contrary - Held, yes [Paras 7,10] [In favour of assessee]”
Respectfully following the judgment of High Court order and in parity with the order of ITAT, Surat Bench, we allow the appeal of the assessee.
We have given relief on ground No.1, so remaining grounds have become academic only. Therefore, we do not want to adjudicate the matter on merits and the relief has been granted to the assessee on technical ground.
In the result, appeal filed by the assessee is allowed.
This Order pronounced in Open Court on 25/01/2022
Sd/- Sd/- (AMARJIT SINGH) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 25/01/2022 True Copy S.K.SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।