TaxTMI 
TaxTMI 
2014 (10) TMI 34
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....g the assessing officer to adopt valuation at Rs. 2, 04, 11, 552/- i. e. in proportion of the area which bears to the valuation of land on 12. 06. 1995 at Rs. 12, 82, 41, 000/-. 2)Apportionment of Preliminary Costs (Rs. 36, 87, 001-) &Common Amenities (Rs. 76, 96, 000/-): a)The learned CIT (A) has erred in confirming that the aforesaid costs should be apportioned / allocated proportionately to Building A in the ratio of Bldg. A i. e. 25, 671 sq. ft. to total saleable area i. e. 1, 15, 000 sq. ft. instead of attributing the entire above expenditure to Building A. 3)Apportionment of Interest cost Rs. 69, 69, 203/-:a)The learned CIT (A) has erred in confirming that the aforesaid interest cost should be apportioned / allocated proportionately to Building A in the ratio of Bldg. A i. e. 25, 671 sq. ft. to total saleable area i. e. 1, 15, 000 sq. ft. instead of attributing the entire above expenditure to Building A. b)Alternatively and without prejudice to the above the learned CIT (A) ought to have accepted the alternative argument of the appellant for allowing the interest cost of Rs. 46, 08543/- incurred up to assessment year 2000-01 against Bldg. A and interest cost for t....
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....ollowing part project completion method and was offering income on the year of completion of building, that during the year under appeal, Building A was completed as per completion certificate dt. 11. 10. 2000 of the Pune Municipal Corporation. It was claimed before the AO that the entire project was to be financed by the project manager on which it was to be paid interest, that the assessee was required to pay the project management fees based on the sale price realised on sale of flats. As per the AO, the assessee had offered income by way of capital gain u/s. 45(2) of the Act. For the purpose of calculating capital gain, it had adopted indexed cost at Rs. 51, 99, 000/-with reference to FMV as on 01. 04. 1981. Indexed cost was based on the report of a registered valuer. AO observed that the assessee had disclosed the total saleable area of the entire project at 1, 15, 000 sq. ft, wheresas saleable area of Building A was disclosed at 25, 671 sq. ft. , that he had apportioned the expenses in certain ratio. After considering the facts of the case and arguments of the assessee, the AO estimated the value of the property on 12. 06. 1995 at Rs. 29, 51, 916/- and at Rs. 5, 88, 875....
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....Act, 1976, (ULCA)applied to land area in excess of 500 sq. mts. Assessee's father had urban area of 9926. 7759 sq. mts. As per the order, dt. 27. 09. 1990, of the competent authority under the ULCA, the surplus land in the case of the assessee was determined at 1609. 10 sq. mts. The DVO adopted the said portion of the plot for valuation of the property as on 01. 04. 1981. The assessee objected to the same stating that appeal against the order of the competent authority was pending and finally the matter was decided in his favour and hence ultimately no area was found to as surplus land under the ULCA. The assessee in his further objection dt. 30. 12. 2005 stated that whatever was decided in 1982 by the competent authority should not have been considered final without considering the result of the pending appeal. After considering the objections of the assessee and reply by the DVO, FAA held that area covered by ULCA as non-vacant , as on 01. 04. 1981, was to be taken at 1, 689. 10 sq. mtrs. For the purpose of valuation of the property as on 15. 05. 1995, the DVO had considered the extent of surplus land at 474. 26 sq. mts. The assessee objected to the same stating that appeal filed....
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....d argued that the assessee had not raised the said ground either before the AO or before the First Appellate Authority (FAA), that he should not be allowed to argue the issue of reference made by the AO to the valuation officer, before the Tribunal for the first time. Authorised Representative (AR)submitted that additional ground was vital for deciding the main issue, that it was only a legal ground and new facts were not to be investigated. In his support he placed reliance on the following cases: a)National Thermal Power Co. Ltd. vs. CIT 229 ITR 383 (SC), b)Ahmedabad Electricity v CIT, 199 ITR 351(Bom-FB), 3. 1. First we would like to take up the issue of admission of Additional ground. Income-tax Appellate Tribunal(Tribunal), the last fact finding authority, is supposed to decide the disputes between the Sovereign and the citizens, so that correct tax liabilities can be determined. For that purpose it adjudicates the grounds of appeal filed before it. It may happen that the assessee or the AO may raise an Additional Ground (AG)of appeal and Tribunal has to decide it. The case before us, is one of such cases, where AG has been raised. As stated earlier, AR and DR had arg....
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....ciple on which the assessment had been based by the AO, that the objection raised in those grounds went to the root of the assessment. Second important case about the AG is the case of Byramji & Co. In that matter Hon'ble Nagpur High Court had deliberated upon rule 21 of the Appellate Tribunal Rules, 1946. Hon'ble Court (11 ITR 286)held as under: "The Appellate Tribunal may grant leave to urge an additional ground of appeal even though it has not been added to the memorandum of appeal by means of a proper amendment. There is also nothing in the rules which provides that an application for leave to urge an additional ground should be stamped or verified. Though it is for the Appellate Tribunal to exercise its discretion in granting leave to urge an additional ground of appeal, this discretion has to be exercised judicially and not arbitrarily, and if it is found that it has been exercised arbitrarily, such exercise of discretion can be interfered with by the High Court. Where the additional ground of appeal sought to be urged was a question of law which did not involve any further investigation into facts upon which the Appellate Tribunal refused to grant leave to urge i....
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....s. The words pass such order as the Tribunal thinks fit include all powers. But the word thereon in section 254 of the Act, restricts the jurisdiction of the Tribunal to the subjectmatter of the appeal. There is nothing in the Act which restricts the Tribunal to the determination of questions raised before the departmental authorities. All questions, whether of law or fact, which relates to the assessment of income, might be raised before the Tribunal. It has the power to pass any order it thought fit after giving the parties appropriate opportunity. But, such orders must be passed on the subject-matter of the appeal. The subject-matter of the appeal must be viewed in the context and the background of the facts and circumstances of each case. 3. 2. Certain principles regarding raising and admission of an AG by the Tribuanl;culled out from the above discussion and various other decisions of the Hon'ble Courts;can be summarised as under: i). Normally, an assessee;who has not put forward a particular claim or ground before the AO or the FAA;cannot seek to urge the same before the Tribunal except with its permission. ii). Tribunal cannot refuse to entertain an AG arbitrarily, ....
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....ning an AG by the Tribunal is not a mere question of discretion, but it involves a question of jurisdiction also. If an assessee files an application for permission to raise additional grounds of appeal in relation to the subject-matter which is already before the Tribunal by way of an appeal, the matter will merely rest on the discretion of the Tribunal. But, where an assessee seeks to bring in new items which had not been questioned by him before the assessing and appellate authorities and which had nothing to do with the subject-matter of the appeal before the Tribunal as originally filed by way of additional grounds of appeal, the question will arise as to whether the Tribunal will have jurisdiction to entertain the additional grounds without excusing the delay in filing the appeal and hence the Tribunal will be justified in refusing to excuse the delay in filing such additional grounds of appeal dealing with a new subject-matter. viii). An assessee is entitled to the claim for further depreciation on the enhanced value of the assets or other deduction or exemption or relief, as a result of the appeal effect of the decision of the Supreme Court, in form of an AG. ix). AG ....
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....ed from handling a point, whether of law or fact which relate to an assessment, which appertains to the assessee's assessment merely because nobody else had handled it before or because it had not occurred either to the assessee or to the Department to raise and urge that point at earlier stages of the proceedings. In the matter under appeal it is not the case of the DR that necessary facts for deciding the controversy involved in the additional plea are not available on record. It is also not a case where facts are to be investiga -tedrather it is a pure legal issue that has been raised before us. So, in our opinion, merely because the plea in the AG was not taken by the assessee before the FAA, it could not be a ground to refuse the application for permission to raise an AG. So, AG raised by the assessee, is admitted. 4. Now, we would take up the controversy with regard to reference made by the AO for valuation of the property owned by the assessee at Pune. District valuation officer (DVO) determined the FMV of the plot as on 01. 04. 1981 and 12. 06. 1995 at Rs. 45, 97, 600/- and Rs. 12, 82, 41, 000/- respectively, whereas the AO took the value of the plot at Rs. 29, 51, 9....
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....aimed is less than its fair market value ; (b) in any other case, if the AO is of opinion- (i) that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf ; or (ii)that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do. " By an amendment, w. e. f. 01. 07. 2012 , words "is less than its fair market value" were substituted by the words "is at variance with its fair market value" . For better understanding of the purpose of introducing it in the Act, we one has to take note of the Explanatory Notes to the section. Circular No. 96 of 25. 11. 1972 is relevant in this regard. We would like to reproduce a portion of the circular and same reads as under: "Under the new provisions, an Income Tax Officer may refer the valuation of any capital asset to a VO in a case where the assessee has got the assets valued by a registered valuer and the Income Tax Officer is of the opinion that the value as estimated by the registered valuer (i. e. , a person registered as....
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....other cases mentioned as (ii) above and which are covered by the provisions of clause (b) of section 55A, the AO is empowered to make a reference to the Valuation Officer, where the AO is of the opinion that the fair market value of the asset exceeds the value of the assets as claimed by more than 15 % of the value claimed or by more than Rs. 25, 000, wherever is less or where, having regard to the nature of the asset and other relevant circumstance, the AO considers it necessary to do so. In other words, section deals with cases where the basis for FMV of the asset is the valuation report itself and the assessee fails to adopt the value of the asset in accordance with the estimate of such valuation report and cases where the basis for such FMV of the asset is other than the valuation report. The other situation envisages the existence of such circumstances, that make reference necessary. In such a case, nature of the assets and other relevant factors also play a decisive role. 4. 1. We would like to mention the broad principles emerging out of various judicial decisions of the Hon'ble Courts with regard to reference to be made by the AO to the DVO u/s. 55A of the Act: i).....
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....209 ITR 568) v). The purpose of section 55A of the Act is not to enable the AO to make a roving and fishing inquiry for finding out materials for reopening or revising a completed assessment. Pendency of an assessment including reassessment is a sine qua non for giving jurisdiction to the AO to make a reference under the said section of the Act. It has no relevance and cannot be applied after the assessment is completed and before the reassessment has commenced, that is, to consider the question whether the completed assessment is based on undervaluation. vi). A valuation report is only an opinion of a valuer. The same does not amount to information within the meaning of section 147 nor can it form a ground for reason to believe that the assessee had failed to disclose his income fully and truly within the meaning of section 147 of the Act. The reason to believe of an AO cannot be substituted by an opinion of a valuer. In other words, the valuation report could, at best, be considered as a mere reason, but could not be a reason to be believed by the assessing authority vii). The scope of section 55A of the Act is confined to ascertaining the fair market value of a capital ....
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....5A of the Act, AO is required to form an opinion on the basis of the material on record that reference to the DVO for ascertaining the FMV of an asset, is necessary having regard to the nature of the asset and other relevant circumstances(242 ITR 478). Hon'ble Gujarat High Court in the case of Hiaben Jayantilal Shah(310ITR31)has held that as per the clause(b) of section 55A of the Act, the AO has to record an opinion that (i) the FMV of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage or by more than such an amount as may be prescribed ;or (ii) having regard to the nature of the asset and other relevant circumstances, it is necessary to make such a reference. Clause (b) of section 55A of the Act can be invoked only when the value of the asset claimed by the assessee is not supported by the valuation report of a registered valuer. xii). The assessee can be said to be effectively prejudiced only when action is taken by the incometax authorities on the basis of the report submitted by the DVO. Even otherwise there is no provision in the Act which deals with the situation as to what would happen to a reference made to the DVO u/s. 55A ....
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....levant to the assessment year 2006-07. At the relevant time, very clearly reference could be made to the Departmental VO only if the value declared by the assessee was in the opinion of AO less than its fair market value. (iii)That section 55A(b) states that it would apply in any other case, i. e. , a case not covered by section 55A(a). There was no dispute that the issue was covered by section 55 A(a). Therefore, recourse could not be had to the residuary clause provided in section 55 A(b)(ii). Therefore, the Central Board of Direct Taxes Circular dated November 25 1972 (see [1973] 91 ITR (St. ) 1), could have no application in the face of the clear position in law. Hence, the reference to the Departmental VO by the AO , was not sustainable in view of section 55A(a)(ii). The following questions of law have been formulated by the Revenue for consideration by this court : (a)Whether, on the facts and in the circumstances of the case and in law, the Income-tax Appellate Tribunal was right in holding that the reference made by the AO to the VO per se is bad in law ? Further, whether the Income-tax Appellate Tribunal was justified in observing that the reference to the DVO under ....
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....ntal Valuation Officer. In fact, the AO referred the issue of valuation to the Departmental VO only because in his view the valuation of the property as on 1981 as made by the respondent-assessee was higher than the fair market value. In the aforesaid circumstances, the invocation of section 55A(a) of the Act is not justified. The contention of the Revenue that in view of the amendment to section 55A(a) of the Act in 2012 by which the words "is less than its fair market value" is substituted by the words "is at variance with its fair market value" is clarifactory and should be given retrospective effect. This submission is in face of the fact that the 2012 amendment was made effective only from July 1, 2012. Parliament has not given retrospective effect to the amendment. Therefore, the law to be applied in the present case is section 55A(a) of the Act as existing during the period relevant to the assessment year 2006-07. At the relevant time, very clearly reference could be made to Departmental VO only if the value declared by the assessee is in the opinion of AO less than its fair market value. The contention of the Revenue that the reference to the Departmental VO by the AO is....
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....d parameters were not fulfilled. In other words, it is not clear as to whether the reference was made under clause 55A(a) or 55A(b)(ii) of the Act and if it was made under section 55A(b)(ii) then what were the relevant circumstances for making such reference. Recording of reasons for invoking a particular section of the Act and justification for invoking the specific clause are not available and nor were they brought to our notice. As the value shown by the assessee was not less than the FVM, so, in our opinion, there was no justification for making any reference to the DVO, by the AO in the year under consideration. Amendment to the section 55A of the Act is effective from 01. 07. 2012. So, reversing the order of the FAA, we decide the additional ground in favour of the assessee. As we have held that the additional ground is to be decided in favour of the assessee, so, we hold that Ground no. 1 is academic in nature. Same is allowed for statistical purose. As far as decision of Chaturbhj Vallabhdas HUF, relied upon by the DR, is concerned we are of the opinion that same stands reversed by the judgments of Hon'ble jurisdictional High Court delivered in the cases of Daulat Mohta(HUF....
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....ents were entered into with the Project Manager in this regard, that Management Fees was paid separately for other buildings, that the entire Management Fees of Rs. 46. 20 lakhs allotted to building A. Dismissing the appeal filed by the assessee, FAA held that the breakup of cost of construction and land showed that interest was paid to the project manager, that interest payment related to entire project. 5. 2. Before us, AR submitted that as per agreement with buyers of the flat the assessee was under an obligation to provide the facilities like swimming pool, health club etc. which were for the common use of all the flat owners of the entire project and expenses have therefore been rightly allocated to Phase 1 viz. Bldg. A of the project. He relied upon page 157(para12) of the paper book and page 206 (para 2)of Supplementary PB. DR supported the order of the FAA. 5. 3. We have heard the rival submissions and perused the material before us. We find that while adjudicating the issue FAA has not passed a speaking order. He has not considered the alternative argument raised by the assessee, he has endorsed the order of the AO without assigning any reason. In these circumstances....