DEPUTY COMMISSIONER OF INCOME TAX, NASHIK vs. SAGAR SURESH SOMWANSHI, NASHIK

आदेश आदेश / ORDER आदेश आदेश

PER VIKAS AWASTHY, JM :

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-2, Nashik dated 17-03-2017 for the assessment year 2012-13.

2 ITA No. 1375/PUN/2017, A.Y. 2012-13

seeking adjournment from assessee/respondent has been received. It

appears that the assessee is not keen to defend his case. Under such

circumstances, we proceed to decide the appeal of Revenue with the

assistance of by ld. Departmental Representative and the material available

on record.

Commissioner of Income Tax (Appeals) in deleting the addition of

Rs.1,65,50,809/- on account of long term capital gains on sale of plots.

assessee is running a Fast Food Restaurant. The assessee filed return of

income for the impugned assessment year on 29-03-2013 declaring total

income of Rs.87,04,594/-. The case of the assessee was selected for

scrutiny under CASS. Statutory notice u/s.143(2) of the Act was issued to

the assessee on 13-08-2013. During the course of scrutiny assessment

proceedings, the Assessing Officer observed that the assessee has sold two

plots of land (herein after referred to as ‘P-1 and P-2’). The P-1 was sold for

Rs.3,10,00,000/-, the market value for stamp duty purposes of the said

plot was Rs.3,08,71,000/-. The P-2 was sold for Rs.50,00,000/- and the

market value for stamp duty purposes of the said plot was Rs.55,50,000/-.

In P-1, the assessee had 100% share and in P-2 the assessee had only

14.28% share. Both these plots were acquired by the assessee prior to

01-04-1981. Thus, for the purpose of calculating long term capital gains,

the assessee valued the property as on 01-04-1981. The assessee declared

the value of P-1 as on 01-04-1981 at Rs.20,05,500/- and P-2 at

Rs.4,35,000/-. The Assessing Officer made reference to the Department

Valuation Officer (DVO) u/s.55A for determining fair market value of both

the properties. The Valuation Officer ascertained the fair market value of

3 ITA No. 1375/PUN/2017, A.Y. 2012-13

P-1 as on 01-04-1981 at Rs.1,75,000/- and P-2 as Rs.31,500/-. On the

basis of the Valuation Report by DVO, the AO re-computed the long term

capital gains declared by the assessee and made addition.

Aggrieved by the assessment order dated 27-03-2015, the assessee

filed appeal before the Commissioner of Income Tax (Appeals).

following the decision of Hon’ble Bombay High Court in the case of CIT Vs.

M/s. Puja Prints 360 ITR 697. The Commissioner of Income Tax (Appeals)

held that the Assessing Officer had no power to refer valuation of

properties to DVO where the value declared by the assessee is more than

the fair market value.

Against the findings of Commissioner of Income Tax (Appeals) the

Revenue is in appeal before the Tribunal.

the findings of Assessing Officer and submitted that reference to the DVO

was made by the Assessing Officer on 23-03-2014. He submitted that the

amendment to section 55A of the Act was made by the Finance Act, 2012

w.e.f. 01-07-2012. Thus, reference to the DVO was made much after the

amendment to section 55A of the Act. The Commissioner of Income Tax

(Appeals) has erred in applying the ratio laid down by the Hon’ble High

Court in the case of CIT Vs. M/s. Puja Prints.

Representative and have perused the orders of the authorities below. The

only dispute in appeal is whether the amended provisions of section 55A

would apply to the facts of the present case. Undisputedly, the assessee

ITA No. 1375/PUN/2017, A.Y. 2012-13

has sold the property in the period relevant to the assessment year 2012-

the provisions of section 55A. The provisions of section 55A were amended

by the Finance Act, 2012 w.e.f. 01-07-2012. Prior to the amendment,

Assessing Officer could have made reference to DVO only if the value of

asset claimed by assessee is less than the fair market value. In the present

case undisputedly the value of plots sold by assessee is much higher than

the fair market value determined by the DVO. Even if reference is made to

DVO after the date of amendment, the unamended provisions of section

55A would apply to the transactions entered into prior to the date of

amendment.

The Hon’ble Bombay High Court in the case of CIT Vs. M/s. Puja

Prints (supra) has held that amended provisions of section 55A would not

apply retrospectively. The relevant extract of the observation of Hon’ble

High Court on the applicability of the amended provisions of section 55A

reads as under :

“9 The contention of the revenue that the reference to the Departmental Valuation Officer by the Assessing Officer is sustainable in view of Section 55A(a) (ii) of the Act is not acceptable. This is for the reason that Section 55A(b)of the Act very clearly states that it would apply in any other case i.e. a case not covered by Section 55A(a) of the Act. In this case, it is an undisputable position that the issue is covered by Section 55A(a) of the Act. Therefore, resort cannot be had to the residuary clause provided in Section 55A(b)(ii) of the Act. In view of the above, the CBDT Circular dated 25 November 1972 can have no application in the face of the clear position in law. This is so as the understanding of the statutory provisions by the revenue as found in Circular issued by the CBDT is not binding upon the assessee and it is open to an assessee to contend to the contrary.

5 ITA No. 1375/PUN/2017, A.Y. 2012-13

to the Departmental Valuation Officer is available, there is no occasion for the Assessing Officer to invoke the general powers of enquiry.”

Thus, in view of the judgment of Hon’ble jurisdictional High Court, the amended provisions of section 55A would not apply to the transactions

entered into by the assessee prior to amendment.

Tax (Appeals) in deleting the addition. The appeal of Revenue is dismissed being bereft of any merit.

Order pronounced on Tuesday, the 14th day of August, 2018.

Sd/- Sd/- (डी. क�णाकरा राव/D. Karunakara Rao) (िवकास अव�थी / Vikas Awasthy) लेखा सद�य / ACCOUNTANT MEMBER �याियक सद�य / JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 14th August, 2018 Satish

आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. आयकर आयु� (अपील) / The CIT(A)-2, Nashik 3. 4. The Pr. CIT2, Nashik िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “SMC” ब�च, 5. पुणे / DR, ITAT, “SMC” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary, आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune