TaxTMI 
TaxTMI 
2012 (10) TMI 84
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....am, Ashram Road, Ellis Bridge, Ahmedabad which had been sold to Jai Shri Swaminarayan com. Co-operative Society Ltd. Two sales deed were executed for Rs.4,25,50,000/- each on 14.07.2005. Ld. A.O. observed that it was a high class society in one of the posh area of Ahmedabad. During the year 05-06, the property rate was booming. Looking to the status of the property, there was strong reasons to believe that the assessee had underestimated value of the sale consideration by adopting lower rate. Similarly, the fair market value as on 1.4.81 was not correctly taken. Hence, the case was referred to the District Valuation Officer, Valuation Cell, Income Tax Department. As per the Valuation Report furnished by the DVO, the sale value as on 14.07.2005 was determined at Rs.13,73,90,000/- as against the declared sale value of Rs.8,51,00,000/- by the assessee. Similarly, the valuation as on 1.4.81 was determined at Rs.94 lacs as against that shown by the assessee at Rs.1,03,00,000/-. 4. The reference was made u/s 142A of the IT Act in prescribed Performa u/s 55A of the IT Act read with Section 16A of the Wealth Tax Act to the DVO on 05.11.2008. There was a difference between sale price dis....
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.... itself is not in accordance with the provisions of the I.T. Act. 5.1.3. Section 55A empowers the A.O. to make reference to the DVO with a view to ascertain the fair market value for the purposes of Chapter IV. Thus a reference can be made with a view to ascertain the fair market value to arrive at the cost of acquisition u/s.55(2)(b). In the instance case, the appellant opted for the F.M.V. as on 1-4-81 to be the cost of acquisition. The value adopted of Rs. 1,03,00,000/- is supported by the report of a registered valuer. Therefore, the case falls under section 55A(a) (and Section 55A(b) has no applicability). In such a situation, the A. O. can make a reference if he is of the opinion that the value claimed by the appellant is less than the F.M.V. In such an event the AO's opinion would tantamount to saying that the cost of acquisition adopted is to be increased and the capital gain admitted shall be reduced. This is a contradiction in terms. Perusal of the assessment records does not show that A.O. formed any such opinion. Anyway A. O. did not call for a report on the value as on 1-4-81, though DVO furnished the same. In case the A. O. was resorting to the provisions of Sec. 1....
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....A. O. - (i) substituting the admitted sale consideration by the FMV arrived at by the DVO and (ii) substituting the admitted FMV as on 01- 04-1981 by the FMV arrived at by the DVO are not confirmity with the provisions of the Act. The case laws relied upon by the appellant cited at 310 ITR 31 (Guj) and 209 ITR 568 (Guj) are squarely applicable to the facts of the case. Since the A O's action is not upheld legally, I do not consider is necessary to go into the appellant's grievances on the merits of valuation on both the above mentioned counts. A. O. is directed to delete the addition made to the Capital Gain returned by the appellant. 6. Now, the Revenue is before us against the order of the CIT(A). The ld. CIT D.R. Shri S.K. Gupta vehemently argued that the A.O. was justifying in referring the property under consideration for fair market value to the DVO on the date of sale as well as on 1.4.81. From the side of the assessee, ld. Sr. Counsel Shri S.N.Soparkar has argued that the assessee had shown the sale price in the sale deed @ Rs.18,687 per sq. mtr. Whereas Stamp Valuation Authority has calculated the stamp value @ 14,500 per sq. mtr. Sale price is much more than valuation ....
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.... identical in the group case of my family, I may kindly be allowed to proceed with the figures of the property as a whole since the reference to the DVO as well as the Report of the DVO is made for the property as a whole. Break up of the amounts within my family members can be ascertained from the chart enclosed (page-1). 4. While passing Assessment Order, the AO in para-3.1 has observed that "during the year 2005-06, the property rate was booming. Looking to the status of the property, there was a strong reason to believe that the assessee had under estimated the value of sale consideration by adopting lower rate. Simultaneously, the Fair Market Value as on 1.4.81 was not correctly taken. Hence, the was referred to the DVO." 5. The AO further states that "as per the Valuation Report furnished by the DVO, the sale value as on 14.11.05 was determined at Rs.13,73,90,000/- as against the declared value at Rs.8,51,00,000/- by the assessee." 6. As far as the question of full value of consideration is concerned, the provisions of section 48 are very clear. As per the provisions of section 48, capital gains shall be computed by deducting from the full value of consideratio....
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....Singh vs. ACIT - 116 ITD page 388 have held that - "Whether capital gain in respect of an asset is to be computed and taxed on basis of provisions contained under section 48 and it cannot be computed on basis of fair market value of asset as determined by valuation officer - Held, yes" (f) The Jurisdictional Hon. ITAT A- Bench, Ahmedabad in the case of Harshvadan Mangaldas (HUF) vs. ITO - In ITA No.3757/Ahd/2002 have held that - "We see merit in the contention. The computation of capital gains can be made only on the basis of what the assessee receives as consideration for the transfer. This is only Rs.3,92,156/-. Section45(3) inserted subsequently also says so, supporting the assessee's contention. We accordingly direct the AO to compute the capital gains taking the sale consideration at Rs.3,92,156/-." Since this is an unreported decision, the text of the whole Judgement is enclosed. (Pages 62 to 64). 8. On the other hand, the AO has not made a reference to the DVO u/s. 55A (a)/(b) for estimation of market value prevailing on the date of sale of the property i.e. the full value of consideration. As may be observed from the notice u/s. 16A(4) (Pages 41 and 42) the refe....
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.... fair market value as on 1.4.81. 3. I further state that the letter and the report dt.29.12.08 is neither a proposal under section 16A(4) nor is it an order u/s.16A(5). The letter and the report therefore do not have any legal existence and/or any evidenciary value. 4. I further state that the subject of the letter states that it is the case for determining fair value of the property. However, it has turned out to be an estimation of full value of consideration. 5. The letter dt.29.12.08 refers to your letter dt.5.11.08 being a reference made to the DVO. It is not established as to whether the reference made is for estimation of fair market value as on 1.4.81 or for estimation of full value of consideration or both and whether the reference is made u/s.55A(a) or u/s.55A(b). Whatever it may be, I strongly state that in the first place, there is no section under the Law which enables the A.O. to make a reference for estimation of full value of consideration. Secondly, if at all a reference can be made, it has to be a valid reference for estimation of fair market value either u/s.55A(a) or u/s.55A(b) as may be applicable. 6. Even otherwise, for the A.O. to make adjustment ....
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.... way of Registered Sale Deed at Rs.8,51,00,000/- which is much more than the Jantri prevailing on that date for the purpose of imposing Stamp Duty be accepted as the correct amount for working out taxable capital gains as envisaged u/s.48. III. GROUND NO.3. 1. The third ground before your Honour is against the AO estimating Fair market value of the property as on 1.4.1981 at Rs.94,00,000/- as against the same estimated as per the report of the registered valuer at Rs.1,03,00,000/-. 2. I may mention that the values stated above are for the whole property being residential house at Shri Sadan, Near M.J. Library, Ellisbridge, Ahmedabad. My share in the market value as on 1.4.81 is Rs.9,86,977/- as against the same estimated by the AO at Rs.9,00,736/-. 3. For the sake of convenience and since issues are identical in the group case of my family, I may kindly be allowed to proceed with the figures of the property as a whole since report of the Registered Valuer, the reference to the DVO as well as the report of the DVO is made for the property as a whole. 4. The market value as on 1.4.81 at Rs.1,03,00,000/- is taken on the basis of report of Approved and Registered ....
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....imed it at a sum of Rs.6,25,000/-as per the registered valuer's report. Therefore, the Assessing Officer was required to form an opinion that the value so claimed was less than the fair market value. The estimated value proposed by the Valuation Officer was shown at Rs.3,97,000, which was less than the fair market value shown by the assessee as on April 1, 1981. Therefore, clause (a) of section 55A of the Act could not be made applicable. Clause (b) of section 55A of the Act can be invoked only in any other case, namely, when the value of the asset claimed by the assessee was not supported by an estimate made by a registered valuer. In the facts of the present case, clause (b) of section55A of the Act also could not be invoked." (b) In the case of M.V. Shah, Official Liquidator, Anant Mills Ltd., vs. U.J. Matin & Another reported in 209 ITR page 568 Hon. Gujarat High Court has held that- "Held, that reference under clause (b)(ii) of section 55A could have been made if the I.T.O. was of the opinion that having regard to the nature of the asset and other relevant circumstances, it was necessary so to do. In this case the asset was a piece of land. There was nothing special a....
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....olkatta Bench-C has held that - "Assessee's case was that since at assessment stage, valuation report prepared by a registered valuer was furnished in support of claim of value of asset transferred by assessee as on 1.4.1981, only clause (a) of section55A was applicable - However, AO submitted that valuation of asset as on 1.4.1981 instead of being undervalued by registered valuer was rather overvalued by him, that was why reference was made to DVO -Whether .since DVO actually valued property at lesser figure and said valuation was finally accepted by AO, provisions of section 55A in matter of making reference to DVO were not satisfied - Held, yes." (g) In the case of Smt. Krishnabai Tingre vs. ITO reported in 101 ITD page-317, Hon. ITAT Pune Bench-A has held that - "Whether AO can make reference to DVO under sec. 55A(a) only when in his opinion fair market value disclosed by assessee is less than fair market value and under section 55A(b) only where value of property disclosed by assessee is not based upon approved valuer's report - Held, yes." (h) In the case of Urmila Bawa vs. ACIT., reported in 11 SOT page- 661 Hon. ITAT Delhi Bench has held that - "Whether r....
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....bjections vide letter dt.30.12.08 (pages 43 to45), objections filed by the Registered Valuer vide letter dt.31.12.08 (Pages 46 and 47), my letter dt.30.12.08 in reply to AO's notice dt.29.12.08 (pages 48 and 49). Report of the DVO u/s. 16A(5) (pages 50 to 53) and my letter dt.31.12.2008 addressed to the AO (pages 58 and 59), 12. I request your Honour to kindly take into consideration the submissions, circumstances and evidences reflected in my above letters and accept the market value estimated by the Registered Valuer at Rs.1,03,00,000/- as against the same estimated by the DVO at Rs.94,00,000/-. 8. We have perused the orders of the authorities below, gone through the written submission of the assessee and heard the arguments from both the sides. In Section 48, the A.O. can compute the capital gain on the basis of full value of consideration received or accruing as result of the transfer of capital assets. The Hon'ble Supreme Court as well as other High Courts as held that expression of full value consideration cannot be construed to the market value of the assets transferred but only means the full value of the things received by the transferor as held in the case of CIT vs....