ACIT, CIRCLE-33, KOLKATA, KOLKATA vs. SHRI, SANAT KUMAR LAHA, KOLKATA

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ITA 1912/KOL/2016Status: DisposedITAT Kolkata16 January 2019AY 2012-134 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s order, agreeing that the AO could not invoke Section 55A of the Act as it stood prior to its amendment, which required the AO to believe the declared value was less than the fair market value.

What were the facts?

The assessee sold ancestral property and claimed long-term capital gains after deducting indexed cost of acquisition and exemptions. The AO referred the property valuation to the DVO, who determined a lower indexed cost. The CIT(A) deleted the AO's addition, holding that the AO wrongly invoked Section 55A as it was amended and came into effect later.

What were the issues?

Whether the AO was justified in referring the property valuation to the DVO under Section 55A when the amendment to the section, which allowed reference when the value was at variance, was not retrospective and the AO believed the declared value was higher than fair market value.

Which sections of the Income-tax Act were involved?

Section 55A,Section 143(3),Section 54,Section 54EC

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA BENCH “D”, KOLKATA

Hearing: 15.11.2018Pronounced: 16.01.2019

ORDER

PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER

1.

This appeal filed by the Revenue against the order dated 13.06.2016 passed by CIT(A)-9, Kolkata u/s 143(3) of the Income Tax Act, 1961 (in short “Act”) for AY 2012-13.

2.

Heard both parties and perused the material available on record. According to AO, the assessee sold his ancestral property for a consideration of Rs.9,25,00,000/- on 17.09.2011. The assessee computed the purchase cost at Rs.49,71,617/- and indexed cost of acquisition was calculated at Rs.3,90,27,193/-. Accordingly, long term capital gain was calculated at Rs.2,69,22,357/- after claiming exemption to the tune of Rs.2,15,50,450/- u/s 54 and Rs.50,00,000/- u/s 54EC of the Act. The AO not been satisfied by the valuation of the property as on 01.04.1981 by a registered valuer and referred to the Valuation Officer for the valuation of property as on 01.04.1981. The DVO valued the (ASSESSMENT YEAR-2012-13) indexed cost of acquisition at Rs.13,22,238/- which was served on the assessee. According to the AO, the assessee did not provide any details supporting value adopted by the assessee basing on report of the registered valuer. Accordingly, the AO determined the long term capital gain at Rs.5,55,44,790/- as against Rs.2,69,22,357/-.

3.

The CIT(A) deleted the said amount by holding the AO ought not to have invoked the provision u/s 55A(a) of the Act as it came into effect from 01.07.2012 taking into effect the assessment year under consideration is being 2012-13 FY being 2011-12. The relevant portion of which is reproduced hereunder:- 4. “Conclusion: It is seen that the reference to DVO was made by AO u/s 55A as he was of the opinion that the value determined as on 01/04/1981 was more than the fair market value. The AO can make reference to DVO only when has opinion that value declared is less than the fair market value. The appellant had got valuation done by a registered valuer who is registered under Income-tax-Act. Therefore, the case is covered u/ s 55A(a) and not 55A(b). The Hon’ble ITAT in case of Vivek Bose v. ITO in of 2013 (Kol) has observed that- "What is applicable here is clause (a) of the above section. Hence to make a reference under section 55A of the Act, Assessing Officer has to form an opinion that value claimed is less than the fair market value. On the other hand, the opinion of the Assessing Officer here is that the value shown was very high or in other words, more than the fair market value. This being the case we are of the opinion that the reference under section 55A could not have been made. Hon’ble Calcutta High Court in the case of Umdebhai International (P.) Ltd. (supra), in a similar situation, where there was a substitution of the cost as on 01.04.1981, by value based by DVO on a reference under section 55A of the Act, held that such a reference could not be made unless and until the Assessing Officer formed an opinion that value shown by the assessee was less than fair market value.” Section 55A has been amended w.e.f. 01.07.2012 by Finance Act 2012 so as to replace the words “is less than its market value” by “is at variance with its fair market value.” However, this amendment is not retrospective as has been held by Hon’ble ITAT, Mumbai in Pradeep G Vora v ITO in ITA No.2186 of 2006. The Hon’ble ITAT has held that :-

(ASSESSMENT YEAR-2012-13) "We find that section 55A(a) of the Act very clearly at the relevant time provided that a reference could be made to the Departmental VO only when the value adopted by the assessee was less than the fair market value. In the present case, it is an undisputed position that the value adopted by the respondent assessee of the property at Rs 35.99 lakhs was much more than the fair market value of Rs 6.68 lakhs even as determined by the Departmental Valuation Officer. In fact, the AO referred the issue of valuation of the Departmental VO only because in his view the valuation of the property as on 1981 as made by the respondent- assessee was higher than the fair market value. In the aforesaid circumstances, the invocation of section 55A(a) of the Act is not justified. The contention of the Revenue that in view of the amendment to section 55A(a)of the Act in 2012 by which the words “is less than its fair market value" is substituted by the words “is at variance with its fair market value” is clarifactory and should be given retrospective effect. This submission is in face of the fact that the 2012 amendment was made effective only from July 1, 2012. Parliament has not given retrospective effect to the amendment. Therefore, the law to be applied in the present case is section 55A(a) of the Act as existing during the period relevant to the assessment year 2006-07. At the relevant time, very clearly reference could be made to Department VO only if the value declared by the assessee is in the opinion of AO less than its fair market value.”

4.

Before us, Ld.DR placed reliance on the head notes of decision of Hon’ble High Court of Gujarat, Hon’ble High Court of Calcutta, Mumbai Bench of Tribunal, Hon’ble High Court of Punjab & Haryana and argued the principle laid down by the Hon’ble High Court & Mumbai Bench of Tribunal is applicable to the facts of the present case. Ld.AR supported the order of CIT(A). On perusal of the head notes produced by the Ld.Dr, it is found that the facts and circumstances of the case as emanating from the head notes are not applicable to the facts of the case for the reason the finding given by the CIT(A) was that the AO has no jurisdiction to invoke section 55A of the Act as it is came into effect from 01.07.2012 is applicable from AY 2012-13. Ld.DR did not controvert the same. The law to be applied in the present case is section 55A(a) of the Act as existing during the period relevant to the assessment year 2012- 13 being FY 2011-12. At the relevant time, very clearly reference could (ASSESSMENT YEAR-2012-13) be made to Department VO only if the value declared by the assessee is in the opinion of AO less than its fair market value. Therefore, taking into consideration the discussion as made by the 5. CIT(A) in his order at para No.4, we find no infirmity in the order of CIT(A), accordingly, it is justified. 6. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 16.01.2019.

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