TaxTMI 
TaxTMI 
2014 (10) TMI 473
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....le opportunity. She did not appreciate that merely communicating to the appellant's representative on his cell phone at the fag end of the month in which the assessment was getting barred by limitation amounted to affording opportunity. 1. 5The Ld. CIT (Appeals) erred in upholding the assessment also on the ground that no unabsorbed depreciation would be available to the appellant by ignoring the legal position brought to her notice. Your appellant, therefore, submits that the assessment made by ITO and confirmed by CIT (Appeals) is illegal and void and, therefore, bad in law. B:MERITS: 1. The Ld. CIT (Appeals) erred in confirming the market value of land as on 1. 04. 8lbased on DVO's report at Rs. 7 18444/- as was adopted in earlier assessment order in total disregard of Hon ITAT's directions and accordingly erred in confirming the long term capital gain at Rs. 8495945/- as was done earlier. 1. 1The Ld. CIT (Appeals) in confirming the above erred in holding that reference to DVO could have been under section 55A of the Act. 1. 2The Ld. CIT (Appeals) erred in holding that the appellant did not do anything to bring the material and information by ignoring the fact that the sam....
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....ubstantial material on record for deciding the fair market value as on 1/4/1981 and also to verify the claim of expenses made by the assessee. Accordingly, the AO referred the matter u/s. section 55A of the Act for determination of fair market value was on 1/4/1981 to the District Valuation Officer(DVO). He vide his preliminary valuation report, dated 7/12/2007, determined the FMV of the property in question as on 1/4/1981 at Rs. 40. 77/-per square metre. The assessee raised objections against the same, however, the AO adopted the value determined by the DVO and calculated the LTCG on the sale of land at Rs. 84, 95, 945/-. In the final valuation report of the DVO, dated 31/12/2007, he valued the land and the same amount as mentioned in the preliminary valuation report after taking into account the observations raised by the assessee. The assessee preferred an appeal before the FAA and he by order dated 10/10/2008 confirmed the order of the AO. An appeal was filed before the ITAT. Vide its order, dated 17/9/2010, the Tribunal again restored the issue of the FMV of the land as on 1/4/ 1981 to the file of the AO to decide the same in compliance with the directions of the ITAT dated. ....
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....net sale value was declared at Rs. 1, 24, 20, 358/-. , that out of the sale value expenses incurred in connection with the sale at Rs. 14, 25, 840/ were deducted, that from the amount remaining indexed cost of acquisition based on market value as on 1/4/1981 was taken at Rs. 30, 07, 000/- (at Rs. 155 per square metre), that it was deducted from the amount of Rs. 1, 05, 54, 570/-, that the value as on 1/4/1981 was supported by the valuer's report, that in the original assessment the AO had estimated the market value of the land at Rs. 25 per square metre and had ignored the valuer's report and the expenditure claimed in connection with the transfer, that the ITAT had in its order, dated 9/10/2006, had directed the AO to bring substantial material on record for deciding the FMV of the property in question, that the assessee had placed necessary evidence before the AO but he ignored that and referred the matter for valuation under section 55A of the Act to the departmental-valuer, that he had assessed the case of the assessee by relying on the preliminary-valuation report of the DVO, that by doing so the AO had not discharged his powered judicially, that the FAA did not deal with all ....
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....puting the capital gains tax arising on the said asset if the AO was of the view that the value as declared by an assessee was not correct, that provisions of section Section 55A of the Act empowered the AO to refer the valuation of a capital asset to DVO. The FAA referred to the decisions of Vijay Kumar A. Shah (126 TTJ 910) Chaturbhuj Vallabhdas - HUF(ITA No. 3439/Mum/2007, AY 2004-05 order dated 20. 12. 2010). Deliberating upon the provisions of section 55A of the Act, he held that the sub-clause (ii) of clause (b) of section covered all the cases / instances for determining the FMV of the asset which were not specifically provided under clause (a) and sub-clause (i) of clause (b) are covered under sub-clause (ii) of clause(b) of section 55A of the Act, that the language of the section 55A and particularly subclause (ii) of clause (b)do not stipulate the condition, expressly or impliedly, that no reference can be made if the claim of the assessee was supported by the valuation report of registered valuer, that the reference to the DVO was specifically provided under the statute to ascertain the FMV of the capital assets, that if the contention of the assessee was accepted that t....
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.... the DVO if the value shown by the assessee was more, that no reason was given in the assessment order for rejecting the valuer's report. He relied upon the matters of Urmila Bawa(11SOT661)and Lalitaben B Kapadia (115TTJ938). DR argued that the order was supported by the report of the DVO, that the AO had made a reference once he found the valuation report filed by the assessee was unreliable, that there was no basis of the valuation report of the DVO. 5. We have heard the rival submissions and have perused the material on record. The issue before us is determination of FMV of a plot of land as on 01/04/1981 for calculating LTCG. Facts of the case have been discussed at length in earlier paragraphs of the order, so, same are not being repeated here. In our opinion, it would be useful to reproduce the order of the Tribunal dated. 26. 09. and the said order reads as under: "n our opinion the Registered Valuers are being granted licence under Income-tax Act for preparing such reports. The report of a registered valuer pointing out valuation of capital asset is an expression of opinion of an expert. His report can be out rightly rejected if it is established that it is not a genuine ....
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....assessment, rather he referred to the report of the DVO. In these circumstances, the first issue to be decided is whether the AO had complied with the order of the Tribunal. Second issue to be determined is whether the reference made by the AO to the DVO was valid especially when a report of a registered valuer was available and the FMV shown in it was higher. The Tribunal had directed the AO to gather information as stated above, but he referred the matter to the DVO. Thus, he did not comply with the directions of the Tribunal. In our opinion his action of making a reference to the DVO was not as per the directions of the Tribunal. Therefore, we agree with the argument of the assessee that order of the Tribunal were not followed by the AO while passing the order u/s. 143(3)r. w. s. 254 of the Act for the first time. It was only second time of the passing order to give effect to the Tribunal the AO had made efforts to find out the details from the office of the sub-registrar. That clearly shows the failure on part of the AO to follow the instructions of the Tribunal. 5. 1. Now, we will take up the issue of reference made by the AO the DVO u/s. 55A of the Act. The provisions of th....
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....air market value as claimed by him may be higher than its actual fair market value. The provisions of section 55A(a) and (b)(i) will therefore, not apply in such a case. It will, however, be open to the Income-tax Officer to make a reference to the VO under section 55A(b)(ii). " A perusal of the Memorandum explaining the reasons behind the introduction of the section and the explanatory notes for introduction of amendment to section w. e. f. 01. 07. 2012 proves that the section was inserted in the Act with the deliberate object of empowering the AO to find out the market value of capital assets for the purpose of Chapter IV. In our opinion, intention of the Legislature is obvious that the AO can make a reference to the DVO for determining the value of a capital asset. We are of the opinion that for the purpose of ascertaining the FMV of a capital asset, the statute has provided two group of cases namely : (i) the case mentioned at clause (a) above, where the value of the asset as claimed by the assessee is in accordance with the estimate by the registered valuer ; and (ii) other cases mentioned at clause (b) above. In the cases mentioned as (i) above, the AO assumes jurisdictio....
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....e AO and the asset in question was a piece of land. Deciding the writ petition filed by the assessee, Hon'ble Gujarat High Court held that reference could have been made, if the AO was of the opinion that having regard to the nature of the asset and other relevant circumstances, it was necessary so to do, that there was nothing special about the nature of the asset which would have justified the AO to make a reference to the VO. No other relevant circumstances could be pointed out, that no attempt was made to justify the action of the AO under any other provision of Sec. 55A. Finally, it was held by the Hon'ble Court that the reference to the DVO was not in accordance with law and it had to be quashed. (209 ITR 568). Hon'ble Gujarat High Court in the case of Hinaben 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....
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....ction 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 section 55A of the Act is to be made when the value of the property disclosed by the assessee is less than the fair value and not vice versa thereby ignoring the provisions of section 55A(b)(ii) of the Act, and paragraphs 26 to 28 of Circular No. 96, dated November 25, 1972, of the Central Board of Direct Taxes (see [1973] 91 I....
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....ntion 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 sustainable in view of section 55A(a)(ii) of the Act is not acceptable. This is for the reason that section 55A(b) of the Act very clearly states that it would apply in any other case, i. e. , a case not covered by section 55A(a) of the Act. In this case, it is an undisputable position that the issue is covered by section 55A(a) of the Ac....
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....e 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. In our opinion law laid down by the cases relied upon by the FAA is not a good law now in light of the above referred two cases of the Hon'ble Bombay High Court. So, reversing the order of the FAA, we decide the fist ground in favour of the assessee. 6. The next Ground of appeal is regarding not allowing the benefit of set-off of unabsorbed depreciation to the assessee. In the first round of litigation the Tribunal has directed the AO to pass a speaking order as to why he had rejected the set-off of unabsorbed depreciation of earlier years as claimed by the assessee. In the order passed the AO held that the assessee had not made any submissions to justify the claim, that there was no express provision in the Act to set-off unabsorbed depreciation against long term capital gains, that it had stopped its manufacturing activities since 10/10/1991, that the assessee had shown only LTCG as its income for the year under consideration, that the unabsorbed....
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.... Tribunal was right in allowing setting-off the income derived during the year under consideration under the head 'Income from other sources' from the unabsorbed depreciation, relevant to the assessment year 1996-97 despite closure of business by the assessee ?" Following is the judgment of the Hon'ble Court: "Section 32(2) of the Act relates to carry forward of unabsorbed depre-ciation. It has undergone various changes. It was amended by the Finance Act, 2000, with effect from April 1, 2001, and as applicable to the assess-ment year 2001-02, i. e. , the assessment year in question, the first proviso and the word "further" in the second proviso were deleted. The proviso so omitted reads thus : "Provided that the business or profession for which the allowance was originally computed continued to be carried on by him in the previous year relevant for that assessment year. " The effect of omission of the aforesaid proviso was enumerated by the Central Board of Direct Taxes, vide Circular No. 794, dated August 9, 2000 ([2000] 245 ITR (St. ) 21, 40) that the unabsorbed depreciation allowance could be set off against the income under any other head even where the business was ....