2021 (2) TMI 1005 - AT - Income Tax

Tribunal invalidates AO's reference under Section 55A, allows appeal on long-term capital gains issue.

The Tribunal allowed the assessee's appeal, holding that the reference made by the Assessing Officer (AO) under Section 55A was invalid as per the ... Capital gain computation - reference u/s.55A - CIT(A) upholding substitution of fair market value as on 01.04.1981 as worked out by DVO on a reference made u/s.55A by Assessing Officer of co-owner of the appellant - HELD THAT:- The value of the land shown by the assessee as on 1.4.1981 based on the registered valuer report is considered, it would reveal that the same was in fact even higher than the value subsequently determined by the valuation officer and therefore, the Assessing Officer was not empowered to refer the matter to the valuation officer even as per erstwhile provisions of section 55A(a) prior to amendment by the Finance Act, 2012. Considering the decision of Gauranginiben S Shodhan [2014 (2) TMI 78 - GUJARAT HIGH COURT] and Pooja Prints [2014 (1) TMI 764 - BOMBAY HIGH COURT] when the transaction of sale of land was taken during the financial year 2011-12 relevant to the assessment year 2012 -13, the amended provision of section 55A(a) would not be applicable and one shall be guided by the erstwhile provision of un-amended section 55 A(a) of the Act. Therefore, respectfully following the same, we allow the ground No. 1 raised by the assessee Issues Involved:1. Validity of reference under Section 55A by the Assessing Officer.2. Applicability of amended provisions of Section 55A post Finance Act, 2012.Issue-wise Detailed Analysis:1. Validity of Reference under Section 55A by the Assessing Officer:The primary issue revolves around whether the reference made by the Assessing Officer (AO) to the District Valuation Officer (DVO) under Section 55A was valid. The assessee argued that the reference was invalid and bad in law, as the amendment to Section 55A by the Finance Act, 2012, effective from 01.07.2012, was not applicable to their case. The assessee sold agricultural land and used a Government Approved Valuer's estimate of Rs. 750 per sq.mt. The AO, however, referred the matter to the DVO, who valued the land at Rs. 35.89 per sq.mt, leading to a substantial addition to the capital gains.The Tribunal noted that similar facts were considered in the case of Ranchodbhai C. Patel and Rakshaben Jayantibhai Patel, where it was held that the AO could not make a reference under the amended Section 55A for transactions prior to 01.07.2012. The Tribunal relied on the decisions of the Hon'ble Jurisdictional High Court in CIT vs. Gauranginiben S Shodhan (366 ITR 238) and the Hon'ble Bombay High Court in CIT vs. Pooja Prints (360 ITR 967), which clarified that the amendment to Section 55A was prospective and not retrospective.2. Applicability of Amended Provisions of Section 55A Post Finance Act, 2012:The Tribunal examined whether the amended provisions of Section 55A, which allowed the AO to refer to the DVO if the value claimed by the assessee was at variance with the fair market value, applied to the assessment year 2012-13. The Tribunal referred to the Memorandum explaining the Finance Bill, 2012, which indicated that the amendment aimed to empower the AO to make such references from 01.07.2012 onwards.The Tribunal cited the Hon'ble Bombay High Court's decision in CIT vs. Puja Prints, which held that the amendment was not retrospective. Similarly, the Hon'ble Gujarat High Court in CIT vs. Gauranginiben S. Shodhan Indl. emphasized that the law applicable at the time of the transaction should be considered, and the amendment to Section 55A was not applicable to transactions before 01.07.2012.The Tribunal concluded that for the financial year 2011-12, relevant to the assessment year 2012-13, the unamended provisions of Section 55A applied. Under these provisions, the AO could only refer the matter to the DVO if the value claimed by the assessee was less than its fair market value. In the assessee's case, the value claimed was higher than the DVO's valuation, making the reference invalid.Conclusion:The Tribunal allowed the assessee's appeal, holding that the reference made by the AO under Section 55A was invalid as per the unamended provisions applicable for the assessment year 2012-13. The Tribunal directed the deletion of the addition made under the head 'long term capital gains' related to the cost of acquisition substituted by the fair market value as on 01.04.1981. The appeal was thus allowed in favor of the assessee.