TaxTMI 
TaxTMI 
TaxTMI 
2016 (9) TMI 1532
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....firming validity of the learned DVO's Report, which was adopted by the A.O., for making the assessment as the learned DVO has estimated the value of the asset as on 1.4.1981 on the basis of irrelevant considerations and non-comparable sale instances and without disposing off the appellant's objections by passing a speaking order. 4. The Id. CIT(A) is not justified in confirming the additions made by the A.O. to the returned income on the basis of DVO's report and in upholding the income assessed by the A.O. at Rs. 45,84,024/-. 5. The order of the Id. CIT(A) is bad in law and on facts." 3. When this appeal was called out for hearing, learned representatives fairly agreed that whatever we decide in the case of Smt. Seema Chadha Vs. ACIT (ITA No.66/RPR/13) will apply mutatis mutandis in this case as well. 4. Vide our order of even date, we have upheld the plea of the assessee in the said case and reasoned as follows: "3. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 4. Section 55A, as it stood prior to substitution of words "is at variance with its fair mark....
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.... on 1.4.1981 is concerned, it is not a common knowledge that the underhand dealings in real estate transactions were more of a rule than an exception, and, for this short reason alone, the comparable sale instances cannot be conclusively fair indicator of the actual prevailing market rates. It was because of this widespread practice of understatement of sale consideration in a large number of cases that legal remedies were introduced from time to time. Such being the facts, the sale consideration instances alone, as admittedly is the basis of the DVO report, cannot be sound basis of valuation. In any event, this issue is now covered, in favour of the assessee in the case of ACIT Vs Kabir Chadha and vice versa (order dated 19.12.2014) wherein the coordinate bench has observed as follows: "5. We have heard the rival submissions and perused the material before us. The undisputed facts of the case are that the assessee had sold a part of land, that he got it valued by a registered valuer, that he adopted the value given in the valuation report of the plot as on 01.04.1981, that the AO was of the opinion that value shown by the assessee was very high and thus he had tried to avoid pay....
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....x Act)is less than the fair market value of the asset. Other cases in which a reference may be made to the VO would be where the Income Tax Officer is of the opinion that the fair market value of the asset exceeds the value of the assets as claimed by more than 15 percent of the value claimed or by more than Rs. 25,000, whichever is less or where, having regard to the nature of the asset and the relevant circumstances, the Income tax Officer considers it necessary to do so. It will be seen that in a case where the assessee has opted for substitution of the cost of acquisition of an asset by its fair market value as on January 1,1954, the fair 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 I TA N o .67/RPR/ 2013 Assessment Year: 2008-09the 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....
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....for valuation of the registered valuer, is not a substitute for pre decisional formation of opinion. (330 ITR506). In the matter of Hotel Joshi, Hon'ble Rajasthan High Court has held that for invoking sub-clause (ii) of clause (b) of section 55A of the Act, the AO ITA No .67/RPR/2013 Assessment Year: 2008-09 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 and having regard to the nature of the asset and other relevant circumstances (242 ITR 478). It will be useful to discuss a few cases, dealing with section 55A of the Act. In the case of Anant Mills Ltd. a reference under clause (b)(ii) of section 55A of the Act was made by the 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 ....
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..... Therefore, the invocation of section 55A(a) was not justified. (ii) That the amendment to section 55A(a) of the Act in 2012 by which the words "is less than its 5 ITA No. 180/BLPR/2011 Kabir Chadhha fair market value" were substituted by the words "is at variance with its fair market value" 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 assessee's case was section 55A(a) as existing during the period relevant 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 refe....
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..... However, as the submissions were made on the merits, we have independently examined the same. We find that section 55A(a) of the Act very clearly at the relevant time provided that a reference could be made to the Departmental VO only when the value adopted by the assessee was less than the fair market value. In the present case, it is an undisputed position that the value adopted by the respondent- assessee of the property at Rs. 35.99 lakhs was much more than the fair market value of Rs. 6.68 lakhs even as determined by the Departmental 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 clarificatory and should be given retrospective effect. This submission is in face of the fact that....