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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
आदेश / ORDER
PER ANIL CHATURVEDI, AM :
This appeal filed by the assessee u/s 253 of the Income Tax Act, 1961 is emanating out of the order of Commissioner of Income Tax (A) – 6, Pune, dt.29.01.2017 for the assessment year 2010-11.
The relevant facts as culled out from the material on record are as under :-
Assessee is an individual having income from business, capital gains and other sources. Assessee filed his return of income for AY. 2010-11 on 30.03.2012 declaring total taxable income of
Rs.59,019/-. Thereafter, notice u/s 148 of the Act was issued on
25.03.2013 and served on the assessee. In response to the notice,
assessee filed revised return of income on 12.03.2014 declaring total
income of Rs. 1,87,987/-. Thereafter, the assessment was framed
u/s 143(3) of the Act vide order dt.28.03.2014 and the total income
was determined at Rs.71,93,380/-. Aggrieved by the order of AO,
assessee carried the matter before Ld. CIT(A), who vide order
dt.29.01.2017 (in appeal No.PN/CIT(A)-V/ITO Wd.8(4)/343/2014-
15) dismissed the appeal of the assessee. Aggrieved by the order of
Ld.CIT(A), assessee is now in appeal before us and has raised the
following grounds :
“1. On the facts and in the circumstances of the case and in law the appellant- assessee had 1/4th share in the property/asset along with three brothers having capital gain (long term) in equal proportion. In the case of other three brothers the Ld. CIT(A)-9, Akurdi, Pune asserted the plea of those three brothers in their respective appeals the reference to DVO by the A.O. was not valid. The reference u/s 55A can be made to DVO only when value adopted is less than FMV. The Ld. CIT(A) accepted the argument of the assessee and allowed the appeal of those assessee. The Ld. CIT(A) ought to have allowed the appeal of the assessee. On similar facts and circumstances the appeal of the assessee be allowed holding reference to DVO was not valid. 2. On the facts and in the circumstances of the case and in law the assessee in those appeals relied upon the judgment of the Hon'ble Bombay High Court in the case of CIT vs. Puja Prints reported as (2014) 360 ITR 697 (Mum). The Ld. CIT(A) in those appeals accepted the plea of the assessee made after reliance upon the Hon'ble Bombay High Court judgment (supra). In view of the identical facts and circumstances in those appeals the Ld. CIT(A) was not justified in not following the Hon'ble Bombay High Court judgment (supra) which is in favour of the assessee. The computation of capital gain and other benefits be allowed to the assessee as per law.”
Before us, the Ld.A.R. submitted that the sole controversy is
with respect to the reference made to the District Valuation Officer
(DVO) u/s 55A of the Act.
During the course of assessment proceedings AO noticed that
assessee had sold ancestral immovable properties along with his
three brothers for a total consideration of Rs.12,56,00,000/- and
assessee’s share being 1/4th in the property. On the basis of
Valuation Report dt.29.03.2012 of Shri S.P. Tayawade Patil, the
Government Approved Valuer, Sangli, the assessee while calculating
the long term capital gain had adopted the cost of acquisition of the
immovable property at Rs.1,15,99,280/- as on 01.04.1981. The AO
was of the view that the cost of acquisition adopted by the assessee
was excessive and hence not acceptable. He referred the matter to
the District Valuation Officer (DVO) for the valuation of the property.
The DVO vide order dt.07.02.2014 passed u/s 55A r.w.s. 16A(5) of
the Wealth Tax Act, 1957 determined the fair market value of the
property at Rs.51,000/- and accordingly, the assessee’s share was
worked out at Rs.12,750/- (1/4th of Rs.51,000/-). AO on the basis
of report of DVO considered the cost of acquisition of the property at
Rs.12,750/-. AO also noticed that assessee had claimed deduction
u/s 54F for construction of three house properties. (Rs.94,50,000/-
for property at Rahatani, Tal. Haveli, Rs.22,71,500/- for property at
Patas, Tal. Daund and Rs.43,52,750/- for property at Nane, Tal.
Maval) AO was of the view that u/s 54F deduction is allowable only
in case of one house property. He accordingly granted deduction
for house property constructed at Rahatani of Rs.23,62,500/- (being
assessee’s 1/4th share out of Rs.94,50,000/-) which was the higher
amount of the three house properties. He accordingly worked out
the long term capital gain at Rs.69,47,370/-. Aggrieved by the order
of AO, assessee carried the matter before Ld.CIT(A), who upheld the
order of AO by holding as under :
Ground No.1: In this ground the appellant challenged the “4.1 reference to the District Valuation Officer by the AO on the ground that the value of the assets taken by the assessee was more than the
FMV determined by the Valuation Officer. The appellant relied on the decision of the Hon'ble Jurisdictional High Court in the case of CIT Vs. Puja Prints [2014] 360 ITR 697 (Mum). “4.1.1. As per sec.55A, with a view to ascertaining the FMV of a capital asset [for the purpose of this chapter i.e. computation of total income], the AO may refer the valuation of a capital asset to the Valuation Officer in a case where the value of asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the AO is of opinion that the value so claimed is at variance with its FMV. The underlined bold portion of the section was substituted by Finance Act 2012 w.e.f.1/7/2012, for 'is less than its FMV'. The appellant claims that the assessment year in question being AY. 10-11, the amended portion is not applicable to the facts of the case. As the FMV of the property as on 1/4/81 is less than the value of the asset claimed and adopted by the appellant for the computation of capital gains, the AO has no power to refer it to the Valuation Officer. The appellant relied on the decision of the Bombay High Court in the case of Puja Prints cited supra for this proposition. 4.1.2. The perusal f the decision of the Bombay High Court in the case of Puja Prints shows that it relates to the AY.06-07. The ITAT had passed the order in that case on 18/2/2011 against which the appeal was filed before the High Court. This shows that the reference to the valuation officer was well before the amendment has been introduced in sec.55A. The argument that the amendment has a retrospective effect did not find favour with the High Court and it held that it is made effective only from 1/6/2012. In the present case, the AO had referred the matter to the DVO on 25/11/2013 and on which date the amended law is applicable. Further, sec.55A is a procedural section and any amendment to the procedural section is applicable from the date of amendment. It has no relevance to the assessment year. The amendment would be applicable to all the pending assessments as on that date of amendment. Therefore the decision of the Bombay High court is not applicable to the facts of this case. The AO has correctly referred the matter to the DVO for ascertaining the market value as the value adopted by the assessee is at variance with the FMV. Therefore this ground of the appellant is dismissed. The action of the AO in referring the matter to DVO is upheld.”
Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before
us.
Before us, Ld.A.R. reiterated the submissions made before the
AO and Ld.CIT(A) and further submitted that the fair market value
declared by the assessee on 01.04.1981 was higher than the fair
market value admitted by the DVO and therefore there was no legal
necessity to refer the matter of valuation of fair market value as on
01.04.1981 to the DVO. He further submitted that the amendment
to Sec.55A was made effective from 01.07.2012 and therefore not
applicable to the facts of the case under appeal. He also placed
reliance on the decision of the Bombay High Court in the case of CIT
Vs. Puja Prints reported in [2014] 360 ITR 697 (Bom). He further
submitted that in the case of three co-owners, on identical issue of
capital gains arising out of the same land, the Ld.CIT(A) in the case
of co-owners, after relying the decision of Puja Prints (supra), has
decided the issue in favour of the assessee. He placed on record the
copy of the decision of Ld.CIT(A) in the cases of co-owners in the
Paper Book from Pages 77 to 98. He submitted that against the
decision of Ld.CIT(A) in case of co-owners, the Revenue has not
preferred any appeal. He therefore submitted that when the facts in
the present case are identical to that of co-owners’ case, a different
view in the case of assessee is not called for. Ld.A.R. also relied on
the decision of Co-ordinate Bench of the Tribunal in the case of
Arjun Dada Kharate and Parvatabai Dada Kharate in ITA
No.185/PN/2016 and ITA No.186/PN/2016 dt. 19.08.2016.
Ld.D.R. on the other hand, supported the order of AO and Ld.CIT(A)
and further submitted that the amendment made to Sec.55A is a
date specific amendment and the reference in the present case was
made after the amendment and in such a situation, the AO was fully
justified in making a reference u/s 55A of the Act. He further
submitted that AO is entitled to call for a report from DVO to
determine the fair market value of a property in exercise of its power
u/s 131, 133(6) and 142(2) even without invoking the provisions
u/s 55A of the Act. He thus supported the order of lower
authorities.
We have heard the rival submissions and perused the material
on record. The issue in the present case is with respect to reference
made to the DVO is u/s 55A of the Act. It is an undisputed fact
that for the purpose of valuation of the property assessee had got
the valuation from Government Registered Valuer, who determined
the value of the property as on 01.04.1981 at Rs.1,51,99,280/-.
The AO did not accept the valuation made by the Registered Valuer
and referred the matter to the DVO, who determined the value of the
immovable property as on 01.04.1981 at Rs.51,000/-. It is thus
seen that the value of property determined by the valuer appointed
by the assessee was higher than the value determined by the DVO.
We find that the issue of reference u/s 55A was before the Hon’ble
Bombay High Court in the case of CIT Vs. Puja Prints (supra).
Before the Hon’ble High Court Revenue had argued that the
amendment made to Sec.55A(a) was retrospective and that the AO
had powers u/s 131, 133(c) and 142(2) to refer the matter for
valuation. These arguments did not find favour with the Hon’ble
High Court. The Hon’ble Bombay High Court has held that
reference to DVO can only be made when the value adopted by the
assessee was less than the fair market value. The relevant
question of law formulated in the aforesaid case and the decision of
the Hon’ble High Court is reproduced hereunder.
“1. …….. “The following questions of law have been formulated by the revenue for consideration by this Court:—
(a) Whether on the facts and in the 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? (b) Whether on the facts and in the circumstances of the case and in law, the ITAT was right in directing the AO to accept the valuation
given by the respondent as the Fair Market Value on the basis of the registered valuer's report and workout capital gain?
………. Regarding Questions (a) and (b)
We have considered the rival submissions. We find that the impugned order dated 18 February, 2011 allowing the respondent- assessee's appeal holding that no reference to the Departmental Valuation Officer can be made under Section 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 in 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. 7. 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 then 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 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 then the fair market value. In the aforesaid circumstances, the invocation of Section 55A(a) of the Act is not justified. 8. 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 then the 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 1 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. 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. 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 relevant to Assessment Year 2006- 07, we are of the view that questions (a) and (b) do not raise any substantial question of law."
We thus find that Hon’ble jurisdictional High Court has held that
amendment to Proviso of Sec.55A(a) is applicable only w.e.f.
01.07.2012 and has no retrospective effect. Before us, Revenue has
not placed any contrary binding decision in its support. We
therefore relying on the aforesaid decision of Hon’ble Bombay High
Court in the case of Puja Prints (supra) are of the view that in the
present case, AO was not justified in making a reference to the DVO.
We therefore set aside the order of AO and thus the grounds of the
assessee are allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced on 5th day of January, 2018.
Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER
पुणे Pune; �दनांक Dated : 5th January, 2018. Yamini
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to :
अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A)-6, Pune. 4. Prl.CIT-5, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” / DR, 5. ITAT, “B” Pune; 6. गाड� फाईल / Guard file.
आदेशानुसार/ BY ORDER,स
// True Copy //
व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.