2012 (11) TMI 790 - AT - Income Tax

Tribunal invalidates Valuation Officer reference, remands lawyer's fee deduction issue back to AO for review.

The Tribunal upheld the CIT(A)'s decision, declaring the reference to the Valuation Officer under section 55A(b)(ii) of the IT Act as invalid based on ... Whether reference made by the Assessing Officer to the DVO u/s. 55A is bad - 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 valuers’s report being more than its fair market value, reference under S. 35A was not valid - 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 - in favour of the assessee Deduction of lawyer’s fee – Held that:- AO in the absence of any documentary proof has disallowed the claim of the assessee for the deduction of Lawyer fees of Rs.4,00,000/-, the assessee’s share being Rs.1,00,000/- from the sale proceeds of the property – matter remanded to AO Issues:1. Validity of reference to Valuation Officer under section 55A(b)(ii) of the IT Act.2. Allowance of deduction for lawyer's fee without documentary evidence.Issue 1: Validity of reference to Valuation Officer under section 55A(b)(ii) of the IT Act:The appeal concerned the assessment year 2007-08 where the assessee declared income from capital gains, but the assessment was completed at a higher income by adding capital gains and disallowing a deduction. The Revenue appealed against the CIT(A)'s order, specifically challenging the validity of invoking section 55A(b)(ii) of the IT Act. The AO referred the Fair Market Value determination to the District Valuation Officer, leading to a discrepancy in valuation. The CIT(A) allowed relief to the assessee based on various decisions, declaring the reference under section 55A as invalid. The Revenue argued that the AO was justified in making the reference, citing previous Tribunal decisions. However, the Tribunal upheld the CIT(A)'s order, emphasizing that the reference was invalid based on past judgments and the Hon'ble Jurisdictional High Court's decision. The Tribunal differentiated this case from previous decisions cited by the Revenue, concluding that the AO's reference to the Valuation Officer was not valid in this context.Issue 2: Allowance of deduction for lawyer's fee without documentary evidence:Regarding the deduction of lawyer's fee without documentary proof, the AO disallowed the claim due to lack of evidence, but the CIT(A) accepted it as genuine and directed the AO to allow the deduction. During the hearing, both parties agreed to refer to the Tribunal's decision in a similar case for further examination. The Tribunal decided to set aside the matter to the AO for a fresh review, aligning with the approach taken in the co-owner's case. Consequently, the Tribunal partially allowed the Revenue's appeal for statistical purposes, sending the issue back to the AO for reconsideration in accordance with the Tribunal's directions and legal provisions.In conclusion, the judgment addressed the validity of the reference to the Valuation Officer under section 55A(b)(ii) of the IT Act and the allowance of a deduction for lawyer's fee without documentary evidence. The Tribunal upheld the CIT(A)'s decision on the first issue, emphasizing the invalidity of the reference based on relevant precedents and the Jurisdictional High Court's ruling. For the second issue, the Tribunal referred the matter back to the AO for a fresh review, following the approach taken in a similar case.