2021 (5) TMI 825 - AT - Income Tax

Tribunal rules Assessing Officer's DVO reference invalid under Section 55A(a) for 2012-13 assessment.

The Tribunal allowed the assessee's appeal, ruling that the Assessing Officer's reference to the District Valuation Officer was not valid under the ... LTCG - transaction of sale of land - HELD THAT:- While considering the similar contention of assessee in the said held that 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 wrest while 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. In view of the above factual and legal discussion and keeping in view the consistent decision of Hon’ble Jurisdictional High Court in Gauranginiben S Sodhan [2014 (2) TMI 78 - GUJARAT HIGH COURT] and CIT vs. Pooja Prints [2014 (1) TMI 764 - BOMBAY HIGH COURT] -grounds of appeal raised by the assessee are allowed. Issues Involved:1. Determination of Long Term Capital Gains (LTCG).2. Validity of the indexed cost of acquisition adopted by the assessee.3. Legality of the reference made by the Assessing Officer (AO) to the District Valuation Officer (DVO) under Section 55A of the Income Tax Act.Issue-wise Detailed Analysis:1. Determination of Long Term Capital Gains (LTCG):The primary issue in this appeal is the determination of LTCG. The assessee declared LTCG of Rs. 9,40,565, while the AO determined it to be Rs. 1,48,41,340. The difference arose due to the valuation of the cost of acquisition of the land sold by the assessee. The AO, after obtaining a report from the DVO, reworked the LTCG to Rs. 2,64,97,840 and allowed a deduction under Section 54B of Rs. 1,16,56,500, resulting in a taxable LTCG of Rs. 1,48,41,340. The CIT(A) upheld the AO's determination, finding the valuation by the Registered Valuer to be 'absurd, arbitrary and unrealistic.'2. Validity of the Indexed Cost of Acquisition Adopted by the Assessee:The assessee adopted the indexed cost of acquisition based on a valuation report by a Government Approved Valuer, which valued the property at Rs. 290 per sq.mtr as of 01.04.1981. The AO, however, referred the matter to the DVO, who valued the property at Rs. 63.50 per sq.mtr. The CIT(A) accepted the DVO's valuation, rejecting the assessee's valuation as lacking a scientific basis. The Tribunal noted that the assessee's valuation was based on a higher rate than the Fair Market Value (FMV) and that the amendment to Section 55A(a) effective from 01.07.2012, which allows for variance with FMV, was not applicable retrospectively to the assessment year in question.3. Legality of the Reference Made by the AO to the DVO Under Section 55A:The Tribunal focused on whether the AO's reference to the DVO was valid under the unamended provisions of Section 55A(a). The Tribunal cited the decision in Ranchodbhai C. Patel vs. ITO and other relevant case laws, including the jurisdictional High Court's decision in CIT Vs Gauranginiben S Sodhan and the Bombay High Court's decision in CIT Vs. Pooja Prints. These decisions established that the unamended Section 55A(a) only allowed for a reference to the DVO if the value claimed by the assessee was less than the FMV. Since the assessee's claimed value was higher than the FMV, the AO's reference to the DVO was invalid under the unamended provisions applicable for the assessment year 2012-13.Conclusion:The Tribunal allowed the assessee's appeal, holding that the reference to the DVO was not in accordance with the law as the amended provisions of Section 55A(a) were not applicable retrospectively. Consequently, the additions based on such reference were deleted. The Tribunal's decision was consistent with the jurisdictional High Court's rulings and other relevant case laws, emphasizing that the AO's reference to the DVO lacked the necessary legal basis under the provisions applicable for the assessment year in question.