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Income Tax Appellate Tribunal, “D”, BENCH KOLKATA
Before: SHRI S. S. VISWANETHRA RAVI, JM &DR. A.L.SAINI, AM
Appellant by : Shri A. K. Tiwari, CIT(DR) Respondent by :Shri R. K. Patodi, FCA सुनवाईक"तार"ख/ Date of Hearing : 25/04/2018 घोषणाक"तार"ख/Date of Pronouncement : 13/06/2018 आदेश / O R D E R Per Dr. A. L. Saini: By way of this appeal, the Revenue has challenged correctness of the order dated 07.01.2016 passed by the ld. Commissioner of Income Tax (Appeals)-1, Kolkata, in the matter of assessment u/s 143(3) of the Income Tax Act, 1961(hereinafter referred to as the ‘Act’) for the Assessment Year 2011-12.
The solitary grievance of the Revenue in this Appeal is that ld. CIT(A) has deleted the addition made by the assessing officer which was based on report of the district valuation officer (DVO) u/s 55A(a)(ii) of the Income Tax Act, and not adopted the value of the land determined by the District Valuation Officer (‘DVO’) as on, 01.04.1981. 3.The facts of the case which can be stated quite shortly are as follows: The assessee before us is a private limited company and furnished its return of income for Assessment Year 2011-12 on 17.08.2012, declaring a M/s. Pioneer Iron & Steel Corporation (P) Ltd. Assessment Year: 2011-12 total income of Rs.5,52,163/-. During the scrutiny proceedings, it was observed by the Assessing Officer that the assessee disclosed capital gain of Rs 20,65,700/- out of transfer of 227Cottahs of land at Howrah in Kolkata. The valuation report for arriving at the valuation as on 01.04.1981 and on the date of transfer was furnished by the assessee. The valuation of the property was shown by the assessee at Rs.4,31,30,000/- as on 01.04.1981, but as per assessing officer, which was a mismatch in comparison to the deemed value of transfer of Rs.30,87,20,000/- .Therefore, the Assessing Officer referred the matter to the District valuation officer (DVO) for getting the valuation of the land as on 01.04.1981.The valuation report of DVO was received by the assessing officer on 26.03.2014 and the valuation as on 01.04.2081 of the land as valued by DVO was Rs 1,98,53,912/- as against Rs.4,31,30,000/- shown by the assessee. The Assessing Officer sent the report of DVO to the assessee for offering his comments. On receipt of the valuation report the assessee filed its submission before the Assessing Officer stating that valuation report is arbitrary and valuation has been determined on the basis of two transactions for transfer of land situated in Kolkata at Jatin Bagchi Road, Tollygunj and Rash Behari Avenue. These two transactions are irrelevant in the assessee’s case as the property transferred by assessee is situated at a different place, which is near Belurmath, Howrah, Kolkata. Besides, the assessee also submitted that the DVO selected the transaction of transfer of residential plots having area measuring less than 10cottahs, whereas in assessee’s case, land is 227 cottahs, accordingly, the valuation done by the DVO does not reflect comparable transactions.
However, the Assessing Officer rejected the contention of the assessee and noted that he has already referred the matter to the DVO,as per the relevant provisions of section 55A(b)(ii) of the Act, for valuation of property as on 01.04.1981 and the District Valuation Officer (DVO) has estimated the value of property as on 01.04.1981 at Rs.1,98,53,912/- as against the M/s. Pioneer Iron & Steel Corporation (P) Ltd. Assessment Year: 2011-12 value determined by the Registered Valuer of the assessee at Rs.4,31,30,000/-. Therefore, the valuation of property done by DVO was much less than that shown by assessee. The AO noted that assessee has adopted higher fair value as on 01.04.1981 at Rs.4,31,30,000/- to pay the lesser capital gain. Therefore, the Assessing Officer assessed the long- term capital gain on property sale, by taking into consideration the valuation done by DVO at Rs.1,98,53,912/-, as follows:
Consideration for transfer 30,87,20,000 FMV as on 01.04.81 Rs.1,98,53,912/- Indexed cost of acquisition (Rs.1,98,53,912×711÷100) 14,11,61,314 Long term capital gain 16,75,58,685 Less: Cap gain shown by assessee 20,65,700 Addition 16,54,92,985
Aggrieved by the stand of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), with success. The ld. CIT(A) noted that since the assessee during the previous year handed over its land at Howrah to a developer for joint development which was treated as transfer under the provisions of section 2(47)(v) of the Income Tax Act. The ld CIT(A) noted that Assessing Officer was wrong in facts and law in making a reference u/s 55A(a) of the Act, to the DVO without proper jurisdiction, as for the formation of an opinion by the A.O. that the value of the asset as claimed by the assessee is less than the fair market value was an essential precondition. However, in the instant case admittedly, the fair market value claimed by the appellant as on 01.04.1981 at Rs.4,31,30,000/- was more than the value determined by the DVO at Rs.1,98,53,912/- therefore, the AO cannot make reference to the DVO. Hence the reference to the DVO and the determination of fair market value of the capital asset as on 01.04.1981 was found to be invalid and this way, the ld CIT(A) directed the A.O. to delete the addition of Rs. 16,54,92,985/-. M/s. Pioneer Iron & Steel Corporation (P) Ltd. Assessment Year: 2011-12 5. Aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us.
The ld. DR for the Revenue vehemently submitted before us that the Assessing Officer referred the case to the DVO for valuation of property as on 01.04.1981. The valuation of property done by DVO was much less than that shown by assessee. The Assessing Officer referred the matter to DVO under section 55A(b)(ii) of the I.T. Act which relates to “in any other case, if the Assessing Officer is of opinion-that having regard to the nature of the asset and other relevant circumstances, it is necessary to do so.”
Therefore, ld. DR for the Revenue has submitted that the Assessing Officer has not referred the matter to DVO, u/s 55A(a) of the I.T. Act but he referred the matter under section 55A(b)(ii) of the Act, which empowers the Assessing Officer that if he thinks fit, in other circumstances, he may always have power to refer the matter to DVO. Therefore, the action of the Assessing Officer is not in violation or contradictions of the provisions of the Act. The ld. DR pointed out that ld. CIT(A) gave relief to the assessee on the ground that Assessing Officer cannot refer the case to DVO for valuation, when he is of the opinion of the value disclosed by assessee was higher than fair market value determined by DVO. Therefore, ld. DR pointed out that ld. CIT(A) was erred in not considering the fact that section u/s 55A(b)(ii) of the Act speaks that Assessing Officer may refer to DVO considering the nature of assets and other relevant circumstances, if it is necessary to do so. Thus, provisions of section u/s 55A(b)(ii) of the Act makes the issue open for Assessing Officer and he may refer the case to DVO even he is of the view that value disclosed of assessee was higher than fair market value. Apart from this, the ld. DR for the Revenue has relied on the judgment of the Hon’ble Kolkata High Court in the case of Nirmal Kr. Ravindra Kumar – HUF vs. CIT in of 2008, dated 09.06.2016, wherein it was held as under: M/s. Pioneer Iron & Steel Corporation (P) Ltd. Assessment Year: 2011-12 “The principal contention before the learned Tribunal was that the Assessing Officer could not have made a reference for evaluation of the property under section 55A(a) as the fair market value estimated by the registered valuer engaged by the assessee is higher than the actual fair market value. This contention is inherently incorrect. Policy of law is to take the fair market value as on 1st April, 1981 as the basis for the purpose of indexation. If the assessee has shown more than the fair market value he obviously, is interested in increasing the index cost for the purpose of avoiding to pay capital gains. Therefore, the practice adopted by him cannot be permitted. Even assuming that there is a case in which the assessee has offered more than the market value, it is not the policy of law to recover more than what is actually due from the assessee. In either case, the contention of the assessee is wrong and not acceptable. In the case before us, the assessee, however, was inspired by sinister motive of avoiding to pay capital gain and that was the reason why he inflated the fair market value on 1st April, 1981. The reference made by the Assessing Officer was competent. The Learned Tribunal was correct in holding that the clause (b)(ii) to section 55A carries a broader spectrum which certainly empowers the Assessing Officer to make reference to the DVO wherein in his opinion the fair market value estimated by the assessee is not proper and since in the present case the reference has been made by the Assessing Officer u/s.55A(b)(ii) of the Act, in our considered opinion such action of Assessing Officer was well within the parameters of the spirit of the section which empowers the Assessing Officer to make a reference to DVO i.e. “in any other circumstances which he thinks that it is necessary to refer the matter to the DVO" and, therefore, in the present case, the action of Assessing Officer in making reference to DVO while not accepting the valuation shown by the assessee on the basis of the registered valuer's report was well permissible under the law. For the aforesaid reasons, the appeal fails and is dismissed. Both the questions formulated at the time of admission of the appeal are answered in the negative and in favour of the revenue.”
On the other hand, the ld. counsel for the assessee has submitted before us that reference made by the Assessing Officer to the DVO is without jurisdiction, as prior to the amendment made u/s 55A(a) by the Finance Act, 2012 w.e.f. 1st day of July, 2012, the said reference to the DVO could have been made by him only if in his opinion to the value of property on 1st April 1981 claimed by the assessee, is less than its fair market value. The ld. Counsel also submitted that valuation has been determined by the DVO on the basis of transfer of transactions of land situated in Kolkata at Jatin Bagchi Road, Tollygunj and Rash Behari Avenue. These two transactions are irrelevant in the assessee’s case as M/s. Pioneer Iron & Steel Corporation (P) Ltd. Assessment Year: 2011-12 the property transferred by them, is situated at a different place, which is near Belurmath, Howrah, Kolkata. The ld. counsel submitted that the transaction of transfer of land situated in Kolkata have been made the basis by the DVO for determining the valuation of property situated at Howrah which is separate District, having no common features. The ld. Counsel submitted that in assessee’s case under consideration, it was a transaction of land by way of handing over of possession to the developer on a joint development basis, there was no cash consideration for such transfer. Accordingly, the assessee considered the fair market value of the property transferred at the time of its transfer to be the consideration for such transfer, which was also determined by the same registered valuer, therefore, it is highly unjustified and unlawful on the part of the Assessing Officer to reject the valuation as on 01..04.1981 made by the same registered valuer, while accepting his other valuation determining the fair market value of the property transferred at the time of its transfer. Since both these valuations are made by the same registered valuer by considering the relevant facts and circumstances, as noticed by him while making such valuation, therefore, one of the valuation reports cannot be rejected by the Assessing Officer while accepting the other valuation report, on the same basis, to be correct.
We have given a careful consideration to the rival submissions and perused the materials available on record, we note that in the instant case, the assessee has declared the value for the cost of acquisition of the land at a higher fair value than the fair value determined by the DVO. The first technical issue arises before us is whether the reference made by the Assessing Officer to the DVO for the valuation of the property is valid for the year under consideration. In this regard, we note that an amendment u/s 55A(a) of the Act, was effective from 1st July 2012, inserting in section 55A(a) as follows: “is at variance with its fair market value”. Prior to the M/s. Pioneer Iron & Steel Corporation (P) Ltd. Assessment Year: 2011-12 amendment u/s 55A(a) of the Act, the provisions of the said section read as under:
“55A. Reference to Valuation Officer 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 less than its fair market value……… It is abundantly clear from the provisions of section 55A(a), as noted above, that prior to 1st July, 2012, the Assessing Officer can refer the valuation of capital assets to a Valuation Officer in a case where the value claimed by the assessee based on the registered valuation report is less than its fair market value, however, after amendment it reads as “…. is at variance with its fair market value”. Hence, in the case before us, there is no ambiguity that fair market value as declared by the assessee is not less than the value declared by the DVO. The valuation of property made by the Registered Valuer of assessee as on 1st April, 1981 is to the tune of Rs.4,31,30,000/- whereas the valuation of the property made by the DVO at the instance of the Assessing Officer, as on 1st April 1981, is to the tune of Rs.1,98,53,912/-. Therefore, it is evidently clear that valuation of land done by the assessee’s registered valuer is more than the value determined by the DVO therefore, valuation determined by DVO cannot be accepted since the assessee’s case under consideration is prior to 1st July 2012 i.e. belongingto Assessment Year 2011-12, whereas the mandated provisions come into effect from Assessment Year 2013-14, therefore, it is against the provisions of section 55A(a) of the Act and hence, the valuation determined by the DVO cannot be accepted. We note that assessee’s case under consideration is squarely falls u/s 55A(a) of the Act. In the scenario, if the ld. AO resort to refer to the DVO for determination of fair M/s. Pioneer Iron & Steel Corporation (P) Ltd. Assessment Year: 2011-12 market value, as on 1st April 1981 under section 55A(b)(ii) of the Act, which he could do so only after initiating or recording a finding that section 55A(a) of the Act is not applicable to the assessee. We find that there is no such finding recorded by the Assessing Officer that the value claimed by the assessee is less than its fair market value. In the absence of such finding in our considered opinion, the Assessing Officer should not have invoked the provision of section 55A(b)(ii) of the Act. For this, we rely on the judgment of the Hon’ble Bombay High court in the case of CIT vs. Pooja Prints in [2014] 265 CTR 124(Bom) where in it was held that neither section 55(A)(b)(ii) nor the amended section 55(A)(a) can be invoked for referring case of the appellant for valuation of an asset as on 01.04.1981, as the amendment was effective from 01.07.2012 and not retrospectively.
We note that the assessee has challenged the reference made by the A.O. u/s 55A(a) of the I.T. Act for estimating value of the capital asset as on 01.04.1981, as without jurisdiction, as such reference could have been made by him only if, in his opinion, the value claimed by the assessee was less than the fair market value, which was not so in the case of the assessee.
9.Contention referred to, before us, by the learned DR for the Revenue that the provisions of section u/s 55A(b)(ii) of the Act makes the issue open for Assessing Officer and he may refer the case to DVO; even he is of the view that value disclosed by assessee was higher than fair market value. Apart from this, the ld. DR for the Revenue has relied on the judgment of the Hon’ble Kolkata High Court in the case of Nirmal Kr. Ravindra Kumar – HUF vs. CIT in of 2008, dated 09.06.2016 which we have noted in para No. 6 of our order. We note that on the similar facts, the submissions of ld DR for the Revenue, has been addressed by the coordinate Bench of ITAT Kolkata, in other case, namely M/s. Royal Calcutta Turf Club vs. DCIT, Kolkata in ITA No.231/Kol/2013 for Assessment Year 2008-09, wherein it was held as follows: M/s. Pioneer Iron & Steel Corporation (P) Ltd. Assessment Year: 2011-12 12. U/S.55A of the Act, the AO has power to a make a reference to the valuation officer regarding valuation of a capital asset for the purpose of ascertaining fair market value of a capital asset. Section 55A of the Act reads thus: "55A : With a view of 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 assesese is in accordance with the estimate made by a registered valuer, if the Assessing Officer is of the opinion that the value so claimed is less than its fair market value, (b) In any other case, if the Assessing Officer is of the opinion- (i) That the fair market value of the asset exceeds the value of the asset as claimed by the assesese 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.
The AO made a reference to the DVO u/s.55A of the Act for determination of FMV as on 1.4.1981. The time limit for passing an order of assessment for the relevant AY was getting barred. The DVO did not furnish his report to the AO. In the circumstances, the AO computed LTCG as follows, ignoring the FMV as on 1.4.1981 given by the Assessee in the Registered Valuer's report: "6.2. At the time of scrutiny assessment, incompliance to above requisition, the A.R of the 'A ' has furnished one valuation report done by Shri Nirmal Kanti Chakraborty, Chartered Engineer, Architect, dated 12/03/2008. 6.3. On thorough scrutiny of said valuation report it is found that land rate is determined at Rs.4,41,000/- per cottah and the total valuation of 45.48 Cottahs stands as Rs.2,00,50,680/- [Rs.4,41,000 x 45.48]. With this valuation after adding Rs.1,00,000/- for Boundary Wall & Gate, total value of land assessed is Rs.2,01,56,680/-. 6.4. Not convinced by the above valuation report, the matter is referred to Valuation Cell, Income Tax Department in due course. Though the necessary action has already been taken by the valuation Cell, yet no compliance/valuation report is received till date. 6.5. Since the case is time barred on 31st December, 2010. There is no other alternative but to complete the case after estimating the value of land sale on the basis of surrounding information gathered from department and outside of the department. When the valuation report reaches this office necessary amendment will be suitably done as per law to revalue/reassess the Capital Gain. 6.6. In view of above discussion after considering all this, for the sake of interest of revenue and attempting to plug revenue loss, land value is taken as Rs.45,000/- per cottah as on 01/01/1981, for which the total land value comes to Rs.20,46,600/- as on 01/01/1981. After indexing cost of the land stands as Rs.1,12,76,766/- [20,46,600 X 551/100]. As such Index cost of land value is taken as Rs.1,12,76,766/- in lieu of Rs.11,10,63,307/-."
Before CIT(A) the report of the DVO was made available and in his report, he adopted the FMV as on 1.4.1981 at Rs.20,46,600. The grievance of the Assessee was that the DVO did not give proper opportunity to the Assessee before giving his report and the grievance in this regard is projected in the additional grounds of appeal
raised before the Tribunal.
15. First and foremost objection of the assessees before learned CIT(A) was that reference to the DVO under s. 55A was invalid. Under cl. (a) of s. 55A of the Act, the AO M/s. Pioneer Iron & Steel Corporation (P) Ltd. Assessment Year: 2011-12 is entitled to make the reference to the Valuation Officer in a case where the value of the asset as claimed by the assessee in accordance with the estimate made by the registered valuer, if the AO is of the opinion that the value so claimed is less than the fair market value. In any other case, as provided under cl. (b) of s. 55A of the Act, the AO 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. The assessee had claimed the valuation as on 1st April, 1981 at a sum of Rs. 2,01,56,680 before indexation based on the report of a registered valuer. Therefore, the AO was required to form an opinion that the value so claimed is less than the fair market value. The reference by the AO was on the ground the FMV as on 1.4.1981 is more than the FMV as on 1.4.1981. Therefore cl. (a) of s. 55A of the Act cannot be made applicable. Clause(b) of s. 55A of the Act can be invoked only in any other case, namely, when the value of the asset claimed by the assessee is not supported by an estimate made by a registered valuer. The assessees thus submitted that on the facts of the present case, cl. (b) of s. 55A of the Act also cannot be invoked. Therefore, there should be no question of having recourse to sub-cl. (ii) of cl. (b) of s. 55A of the Act. The appellant has relied on HiabenJayantilal Shah vs. ITO 310 ITR 31 (Guj), CIT vs. DaulalMohta (HUF), IT Appeal No. 1031 of 2008 (Bombay High Court) dt. 22nd Sept., 2008. It was further contended that a reference can be made under s. 55A(b)(ii) by the AO if he is of the opinion having regard to the nature of asset and other relevant circumstances that it is necessary to do so. It is obligatory on the part of the AO to record such other relevant circumstances on the basis of which he forms such opinion in order to refer the matter to the Valuation Cell under said clause. It was contended that only in cases other than the case where there is no valuer's report given by the assessee, the AO is empowered to make reference under s. 55A(b) and not otherwise.
16. The CIT(A) however did not agree with the view of the Assessee and he adopted the value as given by the DVO and computed LTCG. The following were the relevant observations of the CIT(A): "The submission of the A/R and assessment order were duly considered. The value of property was determined by the appellant through Regd. Valuer as on 01.04.1981 at Rs.2.01 crores and by the A.O. through DVO at Rs.20,60,244/-In the assessment order value of this property as' 1.4.81 was determined at Rs.20,46,600/- based on sale instances. As A.O. while finalizing assessment could not get the report from DVO, he based on sales instances completed assessment by taking value on 1.4.81 at Rs.20,46,600/-. Report of DVO was received on 13-04-2011. Copy of the DVO report was given to the AR during appellate proceeding. It is pertinent to mention here that a sharp difference was found in the valuation done by Registered Valuer at Rs.2.01 crores and valuation done by DVO at Rs.20,60,244/-. For this appellant has no reply. Practically this difference can't be so wide. It is not important whether the AO. can refer to DVO or not, but it is important to determine correct value on 01.04.81. Appellant has declared high value of property at 1.4.81 to claim high cost after indexation and pay lesser tax. This device is adopted basically to evade long term capital gain tax. Hence, for the purpose of capital gain value of property is taken at Rs.20,60,244/- as determined by DVO as on 1.4.81 instead of Rs.2,05,56,680/- as taken by appellant based on sales instances. This ground of appeal is therefore dismissed."
17. Aggrieved by the order of the CIT(A), the Assessee has raised Gr.No.4 to 8 and additional ground before the Tribunal. M/s. Pioneer Iron & Steel Corporation (P) Ltd. Assessment Year: 2011-12
18. The learned counsel for the Assessee submitted before us that what is applicable in the present case is clause (a) of Sec.55A(2) of the Act. Hence to make a reference under section 55A of the Act, Assessing Officer has to form an opinion that the FMV as on 1.4.1981 claimed in the registered valuer's report 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, a reference under section 55A could not have been made. He placed reliance on the decision of the Hon'ble Calcutta High Court in the case of CIT -vs.- Umedbhai International (P) Ltd. (2011) 338 ITR 506, in a similar situation, where there was a substitution of the cost as on 1.4.1981, 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. The Hon'ble Calcutta High Court followed the said decision in the case of CIT Vs. Mina Deogun 375 ITR 586 (Cal). However in a later decision rendered by the Hon'ble Calcutta High Court in the case of Nirmal Kumar Ravindra Kumar-HUF Vs. CIT 386 ITR 10 (Cal.) the Hon'ble Calcutta High Court took a view, in a case where FMV as on 1.4.1981 was supported by a registered valuer's report held that the reference was valid and fell within the ambit of Sec.55A(2)((b)(ii) of the Act. The following were the relevant observations of the Court: "7. The principal contention before the learned Tribunal was that the Assessing Officer could not have made a reference for evaluation of the property under section 55A(a) as the fair market value estimated by the registered valuer engaged by the assessee is higher than the actual fair market value. This contention is inherently incorrect. Policy of law is to take the fair market value as on 1st April, 1981 as the basis for the purpose of indexation. If the assessee has shown more than the fair market value he obviously, is interested in increasing the index cost for the purpose of avoiding to pay capital gains. Therefore, the practice adopted by him cannot be permitted. Even assuming that there is a case in which the assessee has offered more than the market value, it is not the policy of law to recover more than what is actually due from the assessee. In either case, the contention of the assessee is wrong and not acceptable. In the case before us, the assessee, however, was inspired by sinister motive of avoiding to pay capital gain and that was the reason why he inflated the fair market value on 1st April, 1981. The reference made by the Assessing Officer was competent. The learned Tribunal was correct in holding that the clause (b)(ii) to section 55A carries a broader spectrum which certainly empowers the Assessing Officer to make reference to the DVO wherein in his opinion the fair market value estimated by the assessee is not proper and since in the present case the reference has been made by the Assessing Officer u/s.55A(b)(ii) of the Act, in our considered opinion such action of Assessing Officer was well within the parameters of the spirit of the section which empowers the Assessing Officer to make a reference to DVO i.e. "in any other circumstances which he thinks that it is necessary to refer the matter to the DVO" and, therefore, in the present case, the action of Assessing Officer in making reference to DVO while not accepting the valuation shown by the assessee on the basis of the registered valuer's report was well permissible under the law." In a decision rendered by the ITAT Kolkata Bench in the case of ITO, Ward 23(3), Kolkata Vs. Sudip Roy ITA No.2864/Kol/2013 order dated 19.10.2016,(which is authored by the Hon'ble Accountant Member of the present Bench) this Tribunal followed the view of the Calcutta High Court in the case of Nirmal Kumar Ravindrakumar HUF (supra) for the reason that the latter decision has to be followed than the earlier decision of the Hon'ble Calcutta High Court. M/s. Pioneer Iron & Steel Corporation (P) Ltd. Assessment Year: 2011-12
19. The learned counsel for the Assessee submitted that out of the three decisions of the Calcutta High Court on the same issue, two earlier Division Bench Judgments are in favour of the Assessee, accepting the view canvassed by the Assessee before CIT(A) but the later judgment by a Division Bench has taken a contrary view. He brought to our notice that in the later judgment, the Court did not consider it's earlier two judgement on the same issue. It was submitted by him that in a situation where there are conflicting decision of High Court on an issue which are irreconcileable and pronounced by judges of co-equal strength, then the earlier view has to be followed as the later decision has to be regarded as per incurium. In this regard he drew our attention to a decision of the Hon'ble Supreme Court in the case of Sundeep Kumar Bafna Vs. State of Maharashtra & another (2014) 16 SCC 623 wherein the Hon'ble Supreme Court took the view (at page- 642 (Para-19) that a decision or judgment can also be per incuriam if it is not possible to reconcile its ratio with that of a previously pronounced judgment of a Co-equal or Larger Bench and when High Courts encounter two or more mutually irreconcilable decisions of the Supreme Court cited at the Bar, the inviolable recourse is to apply the earliest view as the succeeding ones would fall in the category of per incuriam. The following were the relevant observations of the Hon'ble Supreme Court: "19. It cannot be over-emphasised that the discipline demanded by a precedent or the disqualification or diminution of a decision on the application of the per incuriam rule is of great importance, since without it, certainty of law, consistency of rulings and comity of Courts would become a costly casualty. A decision or judgment can be per incuriam any provision in a statute, rule or regulation, which was not brought to the notice of the Court. A decision or judgment can also be per incuriam if it is not possible to reconcile its ratio with that of a previously pronounced judgment of a Co-equal or Larger Bench; or if the decision of a High Court is not in consonance with the views of this Court. It must immediately be clarified that the per incuriam rule is strictly and correctly applicable to the ratio decidendi and not to obiter dicta. It is often encountered in High Courts that two or more mutually irreconcilable decisions of the Supreme Court are cited at the Bar. We think that the inviolable recourse is to apply the earliest view as the succeeding ones would fall in the category of per incuriam."
20. It was submitted by the learned counsel for the Assessee that the earlier view of the two Division Benches should be followed in preference to the later view of the Division Bench as in the later decision, the two earlier decisions were neither noticed nor referred to. Our attention was also drawn to the view of the other High Courts on the issue of validity of reference u/s.55A(2)(a) of the Act when the FMV as on 1.4.1981 adopted by an Assessee in support of his computation of LTCG is supported by a registered valuer's report. The Hon'ble Bombay High Court in the case of DaulalMohata HUF (supra) dealt with following substantial question of law : "(B) Whether on the facts and in the circumstances of the case the Hon'ble Tribunal was right in law to observe that the AO was not justified in making a reference under s. 55A of the Act to the DVO for determination of the fair market value of the property ?" In para Nos. 4 and 5 of its judgment Hon'ble High Court held as follows : "4. The Tribunal in its order dt. 23rd July, 2004 has categorically observed thus : 'The first issue that arises for our consideration is whether the reference made by the AO to the DVO under s. 55A is bad in law under the facts and circumstances of the case. This issue, in our considered opinion is covered in favour of the assessee and M/s. Pioneer Iron & Steel Corporation (P) Ltd. Assessment Year: 2011-12 against the Revenue by the judgment in the case of Ms. Rubab M. Kazerani vs. Jt. CIT (2005) 97 TTJ (Mumbai)(TM) 698 : (2004) 91 ITD 429 (Mumbai)(TM). Further the assessee also covered by the Third Member (sic) decision of the Pune Bench of the Tribunal, the case of the Smt. KrishnabaiTingre vs. ITO (2006) 103 TTJ (Pune) 216 : (2006) 101 ITD 317 (Pune) wherein it has been held that reference to DVO can only be made in cases where the value of capital asset shown by the assessee is less than its fair market value of land as on 1st April, 1981 shown by the assessee on the basis of approved valuer's report being more than its fair market value, reference under s. 55A was not valid. Respectfully following the propositions laid down in these two cases by the Co- ordinate Benches we uphold the contention of the assessee and hold that the reference made by the AO to the DVO under s. 55A in the peculiar facts and circumstances of the case is bad in law. Thus, on the sole ground appeal of the assessee has to be allowed. Before passing, we have to mention that the assessee has submitted the arguments. As on the basis of the legal aspects itself we have decided the issue in favour of the assessee, we refrain from undertaking this academic exercise of disposing of this case on merits.'
5. In view thereof there is no merit in the appeal. Appeal stands dismissed."
21. The Hon'ble Gujarat High Court in the case of HiabenJayantilal Shah (supra) has held on this issue as follows : "Under cl. (a) of s. 55A, the AO 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 AO is of the opinion that the value so claimed is less than the fair market value. In any other case, as provided under cl. (b) of s. 55A, the AO 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. As can be seen from the communication dt. nil from DVO to the petitioner insofar as the fair market value of the property as on 1st April, 1981 is concerned, the petitioner had claimed the same at a sum of Rs. 6,25,000 as per registered valuer's report. Therefore, the AO was required to form an opinion that the value so claimed is less than the fair market value. The estimated value proposed by the DVO is shown at Rs. 3,97,000, which is less than the fair market value shown by the assessee as on 1st April, 1981. Therefore, cl. (a) of s. 55A cannot be made applicable. Clause (b) of s. 55A can be invoked only in any other case, namely when the value of the asset claimed by the assessee is not supported by an estimate made by a registered valuer. In the facts of the present case, cl. (b) of s. 55A also cannot be invoked. Therefore there is no question of having recourse to sub-cl. (ii) of cl. (b) of s. 55A of the Act."
22. The learned DR placed reliance on the later decision of the Hon'ble Calcutta High Court referred to above in the case of Nirmal Kumar Ravichandra Kumar-HUF (supra) and submitted that if the interpretation adopted in the earlier decision is followed then that would result in policy of the law not being given effect.
23. We have given a very careful consideration to the rival submissions. The Hon'ble Calcutta High Court in the earlier decision rendered in the case of Umedbhai International Pvt.Ltd. (supra) and Smt Mina Deogun (supra) has taken the view that where FMV as on 1.4.1981 in support of computation of LTCG as made by the Assessee is supported by a report of a registered valuer, than to make a reference under section 55A of the Act, Assessing Officer has to form an opinion that the FMV as on 1.4.1981 M/s. Pioneer Iron & Steel Corporation (P) Ltd. Assessment Year: 2011-12 claimed in the registered valuer's report is less than the fair market value. On the other hand, if the opinion of the Assessing Officer is that the value shown was very high or in other words, more than the fair market value, then no valid reference can be made u/s.55A(2)(a)of the Act. However in the later decision rendered in the case of Nirmal Kumar Ravichandra Kumar-HUF (supra), the Hon'ble Calcutta High Court has taken the view that Tribunal was correct in holding that the clause (b)(ii) to section 55A carries a broader spectrum which certainly empowers the Assessing Officer to make reference to the DVO wherein in his opinion the fair market value estimated by the assessee is not proper and since in the present case the reference has been made by the Assessing Officer u/s.55A(b)(ii) of the Act, in our considered opinion such action of Assessing Officer was well within the parameters of the spirit of the section which empowers the Assessing Officer to make a reference to DVO i.e. "in any other circumstances which he thinks that it is necessary to refer the matter to the DVO" and, therefore, in the present case, the action of Assessing Officer in making reference to DVO while not accepting the valuation shown by the assessee on the basis of the registered valuer's report was well permissible under the law. It thus clear that on same facts, the Hon'ble Calcutta High Court has taken irreconcilable view. The earlier view has not been referred to or considered in the later view and all the Judgements have been rendered by Judges of equal strength. In the given circumstances, we are of the view that the ratio laid down by the Hon'ble Supreme Court in the case of Sundeep Kumar Bafna (supr) would be applicable. As rightly contended by the learned counsel for the Assessee, the ratio laid down in the said judgment will support the view that the earlier decisions have to be followed. In that view of the matter, we are of the view that the reference made in the present case to the DVO by the AO has to be regarded as invalid. We therefore hold that reference by the AO to the DVO under s. 55A for valuation of fair market value of the property as on 1st April, 1981 is not valid for the reason that the AO was of the view that fair market value declared by the assessee as per Government registered valuer's report was more than the fair market value whereas in law the AO could make a reference only when he is of the opinion that the value so claimed is less than the fair market value as on 1.4.1981. Since determination of the fair market value as on 1st April, 1981 was based on the report of the DVO, the same is held invalid. Consequently, estimation of the fair market value of the property as on 1st April, 1981 as made by the assessee is directed to be accepted. Ground No.4, 5 and 8 are allowed. Gr.No.6 & 7 and the additional ground of appeal raised by the Assessee does not call for any adjudication in view of the decision that the reference to the DVO is invalid and hence the LTCG computed by the Assessee has to be accepted. We hold and direct accordingly.”
10. We note that the judgment of the Hon’ble Calcutta High Court, in the case of Nirmal Kumar Ravindra Kumar-HUF, (supra) relied by the ld DR for the Revenue has been considered by the coordinate Bench in the case of M/s Royal Calcutta Turf Club (supra), stating that out of the three decisions of the Calcutta High Court on the same issue, two earlier Division Bench Judgments were in favour of the Assessee, but the later judgment by a Division Bench has taken a contrary view. In the later judgment, the Hon’ble High Court of Calcutta did not consider its earlier two judgments on the same issue. In such a situation where there are M/s. Pioneer Iron & Steel Corporation (P) Ltd. Assessment Year: 2011-12 conflicting decisions of Hon’ble High Court on an issue which are irreconcilable and pronounced by judges of co-equal strength, then the earlier view has to be followed as the later decision has to be regarded as per incurium. This is also supported by the judgment of the Hon'ble Supreme Court in the case of Sundeep Kumar Bafna Vs. State of Maharashtra & another (2014) 16 SCC 623 wherein the Hon'ble Supreme Court took the view (at page-642 (Para-19) that a decision or judgment can also be per incuriam if it is not possible to reconcile its ratio with that of a previously pronounced judgment of a Co-equal or Larger Bench and when High Courts encounter two or more mutually irreconcilable decisions of the Supreme Court cited at the Bar, the inviolable recourse is to apply the earliest view as the succeeding ones would fall in the category of per incuriam.
As the issue is squarely covered in favour of the assessee by the decision of the Co-ordinate Bench in the case of M/s Royal Calcutta Turf Club, Kolkata,(supra) on the identical facts, and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings. We find no reason to interfere in the order of the ld. CIT(A) and the same is hereby upheld and, therefore, this ground of the appeal of the Revenue is dismissed.
In the result, the appeal filed by the Revenue is dismissed.
Order is pronounced in the open court on 13.06.2018. (S.S. VISWANETHRA RAVI) (A. L. SAINI) "या"यक सद"य / JUDICIAL MEMBER लेखा सद"य / ACCOUNTANT MEMBER कोलकाता /Kolkata; "दनांक/ Date: 13/06/2018 (RS, Sr.PS) M/s. Pioneer Iron & Steel Corporation (P) Ltd. Assessment Year: 2011-12