Tribunal allows appeal due to invalid DVO reference under section 55A(a)

The Tribunal allowed the appeal of the assessee as the reference to the Departmental Valuation Officer (DVO) was deemed invalid under the unamended provisions of section 55A(a). Consequently, the addition based on the DVO's valuation was deleted. The issue of additional evidence submitted by the assessee during appellate proceedings was not considered, as the primary ground for appeal had already been decided in favor of the assessee. The appeal was partly allowed in favor of the assessee.

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Issues Involved:

1. Validity of reopening the assessment under section 147 of the Income Tax Act.
2. Adoption of the cost of acquisition as on 01.04.1981 by the Assessing Officer (AO) based on the Departmental Valuation Officer (DVO) report instead of the assessee's valuation.
3. Admission of additional evidence by the Commissioner of Income Tax (Appeals) [CIT(A)] during appellate proceedings.

Detailed Analysis:

1. Validity of Reopening the Assessment:

The assessee initially contested the reopening of the assessment under section 147 of the Income Tax Act. However, during the hearing, the Authorized Representative (AR) of the assessee did not press this ground. Consequently, the Tribunal dismissed this ground as not pressed.

2. Adoption of Cost of Acquisition as on 01.04.1981:

The core issue revolved around the fair market value (FMV) of the land as on 01.04.1981. The assessee had sold a piece of land and claimed the indexation cost based on a valuation of Rs. 350 per sq. meter, as determined by a government-approved valuer. The AO, suspecting the valuation to be excessive, referred the matter to the DVO, who suggested a much lower valuation of Rs. 48 per sq. meter.

The Tribunal noted that the amended provision of section 55A(a), which allows the AO to refer to the DVO if the value is at variance with the FMV, was effective from 01.07.2012. This amendment was not applicable retrospectively to the assessment year in question (2012-13). The Tribunal emphasized that, according to the unamended section 55A(a), the AO could only refer the matter 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 reference to the DVO was deemed invalid.

The Tribunal relied on precedents from the Hon'ble Gujarat High Court in CIT v/s Gauranginiben S. Sodhan [367 ITR 238 (Guj.)] and the Hon'ble Bombay High Court in CIT v/s Pooja Prints [360 ITR 697 (Bom.)], which held that the amended provisions of section 55A(a) are not applicable retrospectively. Thus, the reference made by the AO was invalid, and the addition based on the DVO's valuation was deleted.

3. Admission of Additional Evidence:

The assessee had submitted additional evidence during the appellate proceedings before the CIT(A), which included a second valuation report from another registered valuer estimating the value at Rs. 225 per sq. meter. The CIT(A) did not admit this additional evidence.

Given that the Tribunal had already allowed the appeal on the primary issue of the invalid reference to the DVO, the consideration of the additional evidence became academic. The Tribunal did not delve into this issue further.

Conclusion:

The Tribunal allowed the appeal of the assessee on the primary ground that the reference to the DVO was invalid as per the unamended provisions of section 55A(a). Consequently, the addition made by the AO based on the DVO's valuation was deleted. The issue of additional evidence was rendered academic and was not adjudicated further. The appeal was partly allowed in favor of the assessee.

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