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Income Tax Appellate Tribunal, “A” BENCH : KOLKATA
Before: Hon’ble Shri Aby T.Varkey, JM & Shri M.Balaganesh, AM]
ORDER Per M.Balaganesh, AM
This appeal by the Revenue arises out of the order of the Learned Commissioner of Income Tax(Appeals)-8, Kolkata [in short the ld CIT(A)] in Appeal No. 652/CIT(A)- 8/Ward-30(3)/Kol/14-15 dated 27.04.2015 against the order passed by the ITO, Ward- 30(3), Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 28.03.2014 for the Assessment Year 2011-12.
The first issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in directing the Ld. AO to re-compute the long term capital gain as returned by the assessee , in the facts and circumstances of the case.
The brief facts of this issue is that the assessee HUF filed its return of income for the assessment year 2011-12 declaring total income of Rs. 13,58,950/-. The assessee reported long term capital gain of Rs. 1,65,222/- in respect of sale of land near Shilpa
2 M/s Tolaram & Son (HUF) A.Yr.2011-12 Sala Ratangarh, Rajasthan. The sale consideration reported was Rs. 55,21,000/-. The date of transfer was 29.03.2011. The assessee claimed indexed cost of acquisition of Rs. 53,55,778/- based on fair market value of the property as on 01.04.1981 at Rs. 7,53,274/- which was duly submitted by a Government empanelled registered valuer’s report. The Ld. AO did not dispute the sale consideration reported by the assessee. However, he disputed the cost of acquisition being the fair market value as on 01.04.1981 reported by the assessee. Accordingly, he referred to District Valuation Officer (DVO) for determining the fair market value as on 01.04.1981 u/s 55A(b)(ii) of the Act. Based on DVO’s report the fair market value as on 01.04.1981 was arrived by the Ld. AO at Rs. 49,600/- and the indexed cost thereon was arrived at Rs. 3,52,656/-. Accordingly, the Ld. AO determined the long term capital gain on transfer of land at Rs. 51,68,344/- as against Rs. 1,65,222/- reported by the assessee.
Before the Ld. CIT(A), the assessee pleaded that Section 55A(a) of the Act states that the Ld. AO may refer for violation of capital asset to the valuation Officer:- “In a case where a value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the AO is of the opinion that the value so claimed is less than its fair market value.” The Ld. AO in the instant case had referred to de novo u/s 55A(b)(ii) of the Act. In the instant case, since Section 55A(a) was applicable the Ld. AO ought not to have invoked Section 55A(b)(ii) of the Act. The assessee placed reliance in this regard on the decision of Hon’ble Bombay High Court in CIT vs. Puja Prints reported in 360 ITR 697 (Bomb). The assessee also pleaded that there is absolutely no finding recorded by the Ld. AO in the year that the value so claimed by the assessee (i.e. cost of acquisition) is less than the fair market value. Without recording such finding and also recording a finding that 55A(a) of the Act is not applicable, the action of the Ld. AO in directly invoking 55A(b)(ii) cannot be appreciated. The Ld. CIT(A) granted relief to the assessee by observing as under:
3 M/s Tolaram & Son (HUF) A.Yr.2011-12 “4.2. I have carefully considered the submission of the AR of the appellant in the matter in the backdrop of the action of the AO. I have also gone through the relevant documentary evidences available on record. On an overall analysis of the matter, I find that the issue pertaining to the sale of the impugned property for this year is not a new phenomenon. A part of the same property was sold out earlier for which there was no issue and which was based on the appellant’s approved Valuer’s Report. The facts of the matter subsist during this year as well as for which the action of the AO does not seem to be in tandem with the legal as well as the factual matrix of the case. I find that the AO supplied the DVO’s report (Jaipur) to the appellant only after the assessment was completed as mentioned above on the basis of which the LTCG had been worked out by the AO. Here I find the AO was bound to communicate the said report to the appellant for necessary rebuttal in tune with the principles of natural justice. This has not happened as is apparent and which only tantamount to the violation of principles of natural justice as well as principles of consistency. No doubt the principle of res judicata does not apply to Income Tax proceeding but the principle of consistency should be maintained when there is no material variation in the facts of the case. Even on points of merit. I find that the appellant was in possession of its valuation report prepared by its Registered Valuer, on the basis of which LTCG was computed based on the FMV as on 01.04.1981 (applying cost indexation formulae). The Bombay High Court in Puja Prints (2014) 43 taxmann.com 247 (Bombay)/ 360 ITR 697 has held that wherein Valuation Report by a Registered Valuer is the base for estimation of FMV as on 01.04.1981 by the assessee then Section 55A(a) is applicable. The same is also applicable only in the case wherein the value so claimed by assessee is “less that the Fair Market Value”. It was further held that Section 55A(b) was applicable only when 55A(a) was not applicable i.e. in absence of Valuation Report Section 55A(b) of the Act very clearly stated that it would apply in any other case i.e. case not covered by Section 55A(a) and AO cannot resort to the residuary clause of Section 55A(b)(i) or 55A(b)(ii). In view of the legal position as well as the facts of the matter. I do not find any merit in the action of the AO in computing the LTCG as discussed supra. Considering the facts and legal position in the matter, the AO is directed to re-compute the LTCG as returned by the appellant which will include setting off of b/f LTCL as claimed.”
Aggrieved the Revenue is in appeal before us on the following ground: 1. That the Ld. CIT(A) has erred in directing the Ld. AO to recomputed the LTCG as returned by the assessee, just on technical ground.
The Ld. DR vehemently relied on the orders of the Ld. AO. In response to this, the Ld. AR reiterated the submissions made before Ld. CIT(A) and argued that the Ld. AO does not have any jurisdiction by referring to DVO for determination of fair market value as on 01.04.1981 u/s 55A(b)(ii) of the Act in the instant case.
4 M/s Tolaram & Son (HUF) A.Yr.2011-12 7. We have heard the rival submissions. The fact stated herein above remain undisputed and hence the same are not reiterated for the sake of brevity. It is not in dispute that the assessee had claimed indexed cost of acquisition at Rs. 53,55,778/- based on registered valuer’s report determining the fair market value as on 01.04.1981. Hence the assessee’s case squarely falls under 55A(a) of the Act. In this scenario, if the Ld. AO resorted to refer to the ld DVO for determination of fair market value as on 01.04.1981 u/s 55A(b)(ii) of the Act, which he could do so only after ensuring or recording a finding that section 55A(a) of the Act is inapplicable. We find there is no finding recorded by the Ld. AO 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 Ld. AO ought not to have invoked the provisions of 55A(b)(ii) of the Act. Reliance in this regard has been rightly placed by the Ld. AR on the decision of Hon’ble Bombay High Court in the case of CIT vs. Puja Prints (supra), wherein the one of the questions raised before the Hon’ble Bombay High Court is as under: “(a) Whether on the facts and circumstances of the case and in law, the ITAT was right in holding that the reference made by the AO to the valuation officer per se is bad in law? Further, whether the ITAT was justified in observing that the reference to the DVO u/s 55A of the IT Act, 1961 is to be made when the value of the property disclosed by the assessee is less than the fair value and not vice versa thereby ignoring the provisions of section 55A(b)(ii) of the Act, 1961 and paragraph 26 to 28 of circular No. 96 dated 25.11.1972 of the CBDT?”
The decision referred thereon by the Hon’ble Bombay High Court is an under: “6. We have considered the rival submissions. We find that the impugned order dated 18th February, 2011 allowing the respondent-assessee’s appeal holding that no reference to the Departmental Valuation Officer can be made u/s 55A of the Act, only follows the decision of this Court in the matter of Daulal Mohta HUF (supra). The Revenue has not been able to point out how the aforesaid decision is inapplicable to the present facts nor has the revenue pointed out that the decision is Daulal Mohta HUF (supra) has not been accepted by the revenue. On the aforesaid ground alone, this appeal need not be entertained. However, as submissions were made on merits, we have independently examined the same.
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 Valuation Officer only when the value adopted by the assessee was less than the fair market value. In the present case, it is an 4 5 M/s Tolaram & Son (HUF) A.Yr.2011-12 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 Assessing Officer referred the issue of valuation to the Departmental Valuation Officer 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 55A9a) 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 the fair market value” is substituted by the words” “is at variance with its fair market value” is clarificatory and should be given retrospective effect. This submission is in face of the fact that the 2012 amendment was made effective only from 1st July, 2012. The 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 Departmental Valuation Officer only if the value declared by the assessee is in the opinion of Assessing officer less than its fair market value.
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 if 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 25th 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.”
7.2. In view of the findings and respectfully following the judicial precedents relied upon (supra) we do not find any justifiable reason to interfere with the order of the Ld. CIT(A) with regard to this ground. Accordingly, the ground no. 1 raised by the Revenue is dismissed.
8. The next ground to be decided is as to whether the assessee was eligible for set off of brought forward long term capital loss with long term capital gain in the facts and circumstances of the case.
6 M/s Tolaram & Son (HUF) A.Yr.2011-12 9. The brief facts of this issue is that the assessee had claimed long term capital loss of Rs. 9,32,051/- for the loss incurred in the assessment year 2010-11 for transfer of mutual fund of J.M.Basic Dividend Fund, which is an equity oriented fund. The Ld. AO observed that the long term capital gain of an equity oriented fund where Securities Transaction Tax (STT in short) had been suffered, the said long term capital gain is exempt u/s 10(38) of the Act. Similarly, the long term capital loss arising out of such equity oriented funds where STT is suffered shall not be eligible for carry forward to subsequent years according to the Ld. AO. Accordingly, the Ld. AO denied the benefit of set off of long term capital loss of Rs. 9,32,051/- with the long term capital gain as reported by the assessee. In appeal, the Ld. CIT(A) did not give any specific finding in his appellate order. Instead he simply directed the Ld. AO to re-compute the long term capital gain as returned by the assessee which includes setting off of brought forward long term capital loss as claimed. Aggrieved, the Revenue is in appeal before us on the following ground: 2. That the Ld. CIT(A) has erred in directing the AO to set off of brought forward Long Term Capital loss, without discussing the issue in allowing relief to the assessee.
We have heard the rival submissions. The Ld. AR argued that there is no prohibition to carry forward the long term capital loss in respect of equity oriented fund where STT has been suffered, to subsequent years for consequential set off with long term capital gain. We find the assessee here is trying to take double advantage that is:- (i) on transfer of equity oriented mutual fund where STT is suffered, the resultant long term capital gain, if any, would be exempt u/s 10(38) of the Act, (ii) in the event of incurrence of long term capital loss on sale of such equity oriented mutual fund, the assessee is trying to carry forward for consequential set off in subsequent years. In our considered opinion, the assessee cannot take dual advantage and fairly the assessee should ignore the long term capital loss arising out of equity oriented mutual fund and not claim the same for set off with long term capital gain in subsequent years. We find that the Ld. 6
7 M/s Tolaram & Son (HUF) A.Yr.2011-12 AO had rightly denied the benefit of set off of long term capital loss of assessment year 2010-11 to the assessee. Accordingly, the ground no. 2 raised by the Revenue is allowed.
In the result, the appeal of the Revenue is party allowed.
Order pronounced in the Court on 11.04.2018