VIVINA CO OP HSG SOCIETY LTD,MUMBAI vs. ASST CIT RG 15(2), MUMBAI

M/s Vivina Co. Op HSG Society Asst. Commissioner of Income Tax, RG 15(2) Ltd. Vs. S.V. Rd, Andheri (W), Mumbai Mumbai-400 058 .. Appellant Respondent PAN No. AAAAV2507L Assessee by .. Surji D. Chheda, AR Revenue by .. B.S. Bist, DR Date of hearing .. 05-04-2017 Date of pronouncement .. 05-04-2017 O R D E R PER MAHAVIR SINGH, JM:

This appeal by the assessee is arising out of the order of CIT(A)-26, Mumbai, in appeal No. CIT(A)-26/IT-06/15(2)/13-14 dated 09-05-2014. The Assessment was framed by ACIT Circle-15(2), Mumbai for the A.Y. 2005-06 vide order dated 27-02-2013 u/s 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).

M/s Vivina Co. Op HSG Society Ltd; AY:05-06 gains under section 55A of the Act. For this assessee has raised following ground No. D: - “D) Ground 4: Addition of Rs. 1,16,13,600/- 1) The learned CIT(A) has erred in law & in facts to confirm addition of Rs. 1,16,13,600/- in income being the difference between DVO’s valuation & approved valuer’s valuation.

8) The ld. CIT(A) has erred in not following principle of consistency in spite of the same facts and circumstances valuation allowed under section 143(3) for same property to the appellant in AY-97-98.”

In addition, assessee also raised the issue of enhancing assessment by CIT(A) which is inter connected with the first ground and the ground E reads as under: - “E) Ground 5: Enhancing assessment 1) The ld. CIT(A) had erred in law & in facts to confirm action of ld.AO for enhancing the assessment by Rs. 1,16,13,600/- putting the appellant in worsen position than before appeal.”

M/s Vivina Co. Op HSG Society Ltd; AY:05-06 M/s Solanki and associates chartered architects. According to the AO, the valuer is not a Govt. approved valuer and he has not quoted any comparable sale in his valuation report to determine the value of the property and value determined is at wide variance with the value published in the Indian Value Directory and reference book 2002. Accordingly, the AO adopted the value that fixing fair market value as on 01-04-1981 at the rate of 2990 per sq. ft. based on Indian Value Directory. Accordingly, the long term capital gain was computed by the AO at Rs. 1,89,78,800/-. Aggrieved preferred the appeal before CIT(A) and finally, the matter travelled to the Tribunal in first round and Tribunal in vide order dated 29-10-2009 remanded the mater back to the file of the AO denovo by observing in Para 10 as under: - “10. After hearing both the parties and after going through the material on record, we find that the basic issue before us is with regard to fair market value of the piece of land under consideration on 1.4.1981. The assessee has claimed the same to be a commercial property as on 1.4.1981 and in support of this contention, he has also filed additional evidence in the form of letter of the municipal corporation dated 26.8.1971. However, the Assessing Officer has treated the same to be a developed piece of land. The assessee has also relied upon the assessment order for the assessment year 1997- 98 and the valuation report furnished therein in which also the fair market value of the property as on 1.4.1981 was taken at Rs.1200/- per sq.ft. However, copy of such valuation report is not furnished before us. It was contended by the learned D.R. that in the assessment year 1997-98, the assessment was reopened because the assessee omitted to disclose the long term capital gain. In the order under section 143(3), the Assessing Officer simply accepted the capital gain as disclosed by the assessee without application of mind with regard to quantum of capital gain. The learned D.R. also pointed out that after 1997-98, the Government has published Page 3 of 13

M/s Vivina Co. Op HSG Society Ltd; AY:05-06 directory with regard to rates of the property in various locations. In this publication of 2002, which came subsequent to the assessment order for the assessment year 1997-98, the value of the property as n 1.4.1981 in various locations is given and the AO has determined the value of the property as on 1.4.1981 on the basis of such publication which is more authenticated than the valuation report relied upon by the assessee in which he has simply mentioned that valuation is made on the basis of local market survey. In the valuation report, the valuer has not given any basis for such valuation. Considering the totality of the above facts, in our opinion, the entire matter needs re-examination at the end of the assessing officer. We, therefore, set aside the order of the authorities below and restore the matter back to the file of the AO. We direct him to re-adjudicate the matter in accordance with law, after allowing adequate opportunity of being heard to the assessee.”

M/s Vivina Co. Op HSG Society Ltd; AY:05-06 Aggrieved, assessee preferred the appeal before CIT(A), who also confirmed the action of the AO vide Para 5 and 6 of his order as under: - “5. The 3rd ground is that A.O has erred in law to refer the matter to the DVO. It is argued that no reason has been recorded by the A.O for application of Section 55A. However, the assessee has not shown any material to demonstrate his contentions and therefore, this ground is also dismissed.

The 4th & 5th grounds are against computation of 6. Capital Gains at Rs.2,28,231500/- and an addition of Rs.1,16,13,600/- on the basis of DVO report has been made. It has not been shown by the assessee, that the AO has committed any error the AO while computing the Capital Gains as per DVO report. Assessee has furnished a copy of Agreement dated 17.08.1996 showing sale of FSI © Rs.2,725/- per sq. ft. The documents produced are found purporting to be an agreement on a Stamp Paper of Rs.10/- between, the assessee and M/s. Bindu Building Corporation, Matunga for sale of FSI of 3,000 per sq. ft. © Rs.2,725/-. per sq. ft. This cannot be said to be an agreement. If considered d as an agreement it is dated 17.08.1986 and thereafter subjected to litigation before Bombay High Court and in any case this is a value of FSI as on 21.07.1986 and therefore, it cannot be considered as FMV of the land as on 01.04.1981. Moreover, us document was not placed by the assessee before the DVO and no reasons have been given why it was not placed before the DVO. In any case, as held by various Courts, repeatedly, the valuation--by Register Valuer cannot be substituted by the report of an unregistered valuer but also requires valuation to be done by a registered valuer only. Therefore, the assessee's valuation report is not only defective but also had in law for reasons as recorded by AO and not shown to be bad or incorrect. Hence, the Page 5 of 13

M/s Vivina Co. Op HSG Society Ltd; AY:05-06 DVO report has been rightly adopted by the AO for computation of Capital Gains. Grounds No.4 & 5 are therefore hereby dismissed.”

Aggrieved, now assessee is in appeal before Tribunal.

6. We have heard the rival contentions and gone through the facts and circumstances of the case. The above facts are undisputed. Admittedly, the properties i.e. the piece of land was acquired by the assessee cooperative housing society prior to 01-04-1981. Admittedly, the assessee obtained a valuation certificate from a registered valuer M/s Solanki associates valuing the property as on 01-04-1981 at Rs. 36 lakhs. He valued the property at the rate of Rs. 1200 per sq. ft. of the balance unutilized FSI of 3,000 sq. ft. Now, the issue before us is whether the AO was justified in referring the matter to DVO under section 55A of the Act despite the fact that the value adopted by the assessee for the purpose of ascertaining cost of indexation for the purpose of computation of long term capital gain is within the provisions of law or not. The relevant provisions of section 55A of the Act reads as under: - “55A Reference to Valuation Officer 2 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; (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 M/s Vivina Co. Op HSG Society Ltd; AY:05-06 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.”

7. According to us, in view of the provisions of section 55A of the Act, the value is to be adopted assessed on the basis of report of registered valuer. In the present case, before us, the assessee has adopted fair market value as on 01-04- 1981on the basis of valuation report of registered valuer. According to this provision of section 55A of the Act the fair market value claimed by the assessee can be rejected only if fair market value is less than the fair market value as per the AO. From the facts of the present case, it is clear that the fair market value claimed by assessee as on 01-04-1981 is higher than that estimated by the AO or DVO under the provisions of section 55A of the Act. According to us, the AO should not have invoked the provision of section 55A(b)(ii) as resorted by the AO for referring the matter to DVO. Section 55A can be invoked only in case there is no estimated value as estimate by registered valuer or submitted by assessee. This issue has been dealt by Hon’ble Bombay High Court in the case of CIT vs. Daulal Mohta (HUF) (2014) 360 ITR 680 (Bom) and also in the case of CIT vs. Puja Prints (2014) 360 ITR 697 (Bom).

8. We have gone through the judgment of Hon’ble Bombay High Court in the case of Daulal Mohta (HUF) (Supra), wherein it is held as under:-

“A) Whether on the facts and in the circumstances of the case, the Hon’ble ITAT was right in law in reversing the Page 7 of 13

M/s Vivina Co. Op HSG Society Ltd; AY:05-06 decision of the CIT(A) on valuation of Laxmi Niwas property at Rs.1,35,40,000/made by the DVO as against the valuation done by the Government approved valuer which was at Rs.2,13,31 000/-?

B) Whether on the facts and in the circumstances of the case the Hon’ble Tribunal was right in law to observe that the A.O. was not justified in making a reference under sec. 55A of the Act to the DVO for determination of the fair market value of the property?

We have perused the judgment of the Tribunal. It is explicitly clear that the questions sought to be raised are with regard to the quantum of valuation which s only a finding of fact and there is absolutely no question of law involved in the above appeal.

The Tribunal in its order dated 23rd July, 2004 has categorically observed thus:

"5. The first issue that arises for our consideration is whether the reference made by the Assessing Officer to the DVO u/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 against the Revenue by the judgment in the case of Rubab M.Kazerani reported in 91 ITD 429 (Mum(TM). Further the assessee also covered by the Third Member decision of the Pune Bench of the Tribunal, the case of Krishnabhai Tingore Vs. ITO reported in 101 ITD 317 (Pune) (TM) 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 Page 8 of 13

M/s Vivina Co. Op HSG Society Ltd; AY:05-06 more than its fair market value, reference under S.35A was not valid. Respectfully following the propositions laid down these two cases by the coordinate benches we uphold the contention of the assessee and hold that the reference made by the Assessing Officer to the DVO u/s 55A in the peculiar facts and circumstances of the case is bad in law. Thus, on the sole grounds of appeal of the assessee has to be allowed.

6. 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 this case on merits."

5. In view thereof there is no merit in the appeal. Appeal stands dismissed.”

9. Similarly Hon’ble Bombay High Court in the case of Puja Prints (supra) held as under:-

“Regarding Questions (a) and (b):

M/s Vivina Co. Op HSG Society Ltd; AY:05-06 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 November 25 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.

10. The contention of the revenue that the Assessing Officer is entitled to refer the issue of valuation of the property to the Departmental Valuation Officer in exercise of its power under Sections 131, 133(6) and 142(2) of the Act is entirely based upon the decision of the Guwahati High Court in Smt. Amiya Bala Paul (supra). However, the Apex Court in Smt. Amiya Bala Paul (supra) has reversed the decision of the Guwahati High Court and held that if the power to refer any dispute with regard to the valuation of the property was already available under Sections 131 (1), 136(6) and 142(2) of the Act, there was no need to specifically empower the Assessing Officer to do so in circumstances specified under Section 55A of the Act. It further held that when a specific provision under which the reference can be made to the Departmental Valuation Officer is available, there is no occasion for the Assessing Officer to invoke the general powers of enquiry.

In view of the above and particularly in view of clear provisions of law as existing during the period Page 11 of 13

M/s Vivina Co. Op HSG Society Ltd; AY:05-06 relevant to Assessment Year 200607, we are of the view that questions (a) and (b) do not raise any substantial question of law.

Regarding Question (c):

11. The Tribunal by its impugned order has merely remanded the issue to the Assessing Officer to determine the date on which the respondent assessee acquired the property for the purpose of working out the cost of acquisition. No specific submission in regard to this issue was made by the revenue during the oral submissions. In any event, an order of remand in these facts does not give rise to any substantial question of law.

M/s Vivina Co. Op HSG Society Ltd; AY:05-06 computation of long term capital gains. We direct the AO accordingly. This issue of assessee’s appeal is allowed.

Order pronounced in the open court on 05-04-2017.