TaxTMI 
TaxTMI 
2019 (8) TMI 902
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....nt made by it as Contractual obligation while computing LTCG which is not maintainable as per Income Tax Act, 1961." Grounds of Assessee's cross-objections: "1. Under the facts and circumstances of the case, the Ld. CIT(A) has erred by confirming the action of Ld. AO of adopting the value so adopted by the stamp authority i.e. 18,99,76,208 instead of transaction value of Rs. 18,63,71,000 as full value of the consideration and confirming the addition of Rs. 35,99,208. 2. Under the facts and circumstances of the case and in law, Ld. CIT(A) has erred in not deciding ground of Appeal no. 2 before him while Ld. AO has erred in:- (i) not considering the valuation report of a registered valuer, submitted during the course of assessment proceedings in right prospective. (ii) Referring the case to DVO u/s 55A for determining the fair market value of property. (iii) Drawing inferences for referring the case to DVO which were based on incorrect assumption of facts and without providing opportunity of being heard, hence, against the principle of natural justice. (iv) not considering the submission made during the course of assessme....
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....ied on by the assessee firm. During the year under consideration, the assessee firm sold a property measuring 3290 sq.yds situated at old Khasra No. 286/1 & 282/2 (new khasra No. 463), Rampura Roopa (presently Main Tonk Road, Near Glass Factory, Jaipur) for a consideration of Rs. 18,63,71,000/- to M/s Triveni Kripa Enterprises. In its return of income, the assessee firm has shown the capital gains on sale of the property as under:- Date of sale 06/12/2010 Sale consideration Rs. 17,61,42,188/- Purchase Date 1/4/1981 Purchase Cost Rs. 2,72,94,000/- Indexed cost of acquisition Rs. 19,40,60,340/- Loss Rs. 1,79,18,152/- 3. As per sale deed, the land was initially allotted to Vasudev Nagarmal on 02.12.1943 by the then Maharaja of the Jaipur State. Subsequently, the land was sold to M/s Jaipur Glass and Potteries and thereafter, to Sh. Sri Narayan Bajaj on 13.11.1964. In the year 1980, the assessee firm M/s Bajaj Bros came into existence with Shri Sri Narayan Bajaj as one of its partners and the said land became the asset of the assessee firm. Further, it is also apparent from records that the Sub-Registrar has determined the value of this property a....
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....the Stamp Duty Authority, the ground so raised by the Revenue effectively relates to determination of indexed cost of acquisition where the adoption of the FMV as on 1.4.1981 basis the DVO's report was deleted by the ld CIT(A) holding that the reference to DVO itself is not valid and hence, the valuation so determined by the DVO cannot be adopted. Further, the Revenue has challenged the action of the ld. CIT(A) in allowing at Rs. 1 cr u/s 48 while computing the long term capital gains. In its cross appeal, the assessee firm has challenged the adoption of the full value of consideration as per the valuation done by the Stamp Duty Authority as against the transaction value recorded in the sale deed. Further, the assessee firm has challenged the action of the ld. CIT(A) in non adjudication of grounds of appeal on merits relating to determination of FMV as on 01.04.1981 by the Assessing Officer. 7. Firstly, we take up the matter relating to adoption of the Stamp Duty Valuation for the purpose of determining the full value of consideration u/s 50C of the Act. In this regard, the ld. AR submitted that the value determined by Stamp Valuation Authority is Rs. 18,99,70,208/- as against t....
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....ee had dismissed the appeal filed by the Revenue where the CIT(A) had deleted the unexplained investment in house construction on the ground that the difference between the figure shown by the assessee and the figure of the DVO is hardly 10 per cent. Similarly, we find that the Pune Bench of the Tribunal in the case of ITO vs. Kaaddu Jayghosh Appasaheb, vide ITA No. 441/Pn/2004 for the asst. yr. 1992-93 and relied on by the learned counsel for the assessee following the decision of the J&K High Court in the case of Honest Group of Hotels (P) Ltd. vs. CIT (2002) 177 CTR (J&K) 232 had held that when the margin between the value as given by the assessee and the Departmental valuer was less than 10 per cent, the difference is liable to be ignored and the addition made by the AO can not be sustained. Since in the instant case such difference is less than 10 per cent and considering the fact that valuation is always a matter of estimation where some degree of difference is bound to occur, we are of the considered opinion that the AO in the instant case is not justified in substituting the sale consideration at Rs. 20,55,000/- as against the actual sale consideration of Rs. 19,00....
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....ssed by the Stamp Valuation Authority. The case of the appellant is not covered under Sub-section 3 of Section 50C. Therefore, it is held that the AO has rightly adopted u/s 50C, the full value of consideration accruing to the appellant, as a result of the transfer of the asset at Rs. 18,99,70,208/- as against the sale consideration of Rs. 18,63,71,000/- declared by the appellant. Hence, this ground of appeal is dismissed." 10. We have heard the rival contentions and perused the material available on record. We find that during the course of assessment proceedings, the Assessing Officer observed that the value determined by the stamp duty authority is higher than what has been stated in the sale deed and the assessee has not disputed the value so adopted by the stamp duty authority and accordingly, he has adopted the full value of consideration of Rs. 18,99,70,208/- as against stated sale consideration of Rs. 18,63,71,000/- for the purpose of determining the capital gains in the hands of the assessee as per the provisions of section 50C of the Act. In terms of section 50C(2), where the assessee objects to such valuation and states that the same exceeds the FMV of the property, t....
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....ive rates of a particular locality and not of a particular property and depending upon various factors, the value of two properties in the same locality may vary. Therefore, we find that the concept of determining a tolerable range has to be appreciated more so in the context of deeming fiction where the liability is fastened on the assessee based on such stamp duty valuation and a fact which has lately been recognized by the legislature whereby tolerance range of 5% has been specified by way of third proviso to section 50C(1) has been inserted by the Finance Act, 2018, w.e.f. 1-4-2019 which reads as under: "Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and five per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration." 13. In the instant case, the variation is only Rs. 35,99,208/-, which is 1.49% of the value determined by the Stamp Valuation Authority which should thus be ignored and the value so declared....
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....es consideration, in lieu of assignment of his rights, the appellant would give a sum of Rs. 1,00,00,000/- to Shri Ram Chandra Agarwal and which was paid through account payee cheque. 18. It was submitted that Section 48 of the Act deals with the mode of computation of capital gain and contains that from the value of sale consideration, under clause (i) of section 48, expenditure incurred wholly and exclusively in connection with such transfer shall be reduced. It is also important to note that clause (i) of section 48 allows deduction of the expenditure incurred in connection with transfer and it is not restricting the expenditure for transfer only. Hence, the said expenditure ought to be reduced while making the final computation of Long Term Capital Gain, since without paying said amount, the sale under consideration could not be affected. Therefore, the said expenditure is very well incurred wholly and exclusively in connection with such transfer and rightly claimed and deductable. 19. It was submitted that the Ld. A.O. did not decline the said claim but simultaneously, did not reduce the same also while making the final computation of the Long Term Capital Gain and it ma....
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....e has agreed to sell the property to Mr. Ram Chandra Agarwal in terms of agreement to sell dated 27.09.2009 which was subsequently amended vide agreement dated 27.12.2009 and thereafter on 13.09.2010 and as on the date of signing of MOU, Mr Ram Chandra Agarwal has already paid a sum of Rs. 4,11,01,111/- to the assessee firm. It has been further stated in the MOU that Mr. Ram Chandra Agarwal has agreed to assign his rights in the property in favour of M/s Triveni Kripa Enterprises Pvt. Ltd and has also agreed with M/s Triveni Kripa Enterprises Pvt. Ltd for higher sale consideration of Rs. 18,63,71,000/- to be paid to the assessee firm as against the earlier sale consideration of Rs. 17,27,25,000/- agreed upon between the assessee firm and Mr. Ram Chandra Agarwal. And in consideration thereof, the assessee firm shall pay a sum of Rs. 1 cr to Shri Ram Chandra Agarwal and the amount of Rs. 4,11,01,111/- already paid by Shri Ram Chandra Agarwal shall be considered towards payment of part consideration by M/s Triveni Kripa Enterprises Pvt. Ltd. Basis the said understanding between the parties, the assessee firm has paid a sum of Rs. 50,000,00/- on 26.10.2010 and another Rs. 50,000,00/- o....
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....lso filed an application u/s 144A to the Addl. CIT, Range-6, Jaipur for seeking necessary direction to the Assessing Officer. In this regard, our reference was drawn to the direction issued by the Addl. CIT, Range-6, Jaipur u/s 144A wherein the relevant findings are as under:- "4. I have considered the submissions made by the assessee in its application u/s 144A dated 18/3/2014, report of the Assessing Officer and the submissions made by the assessee during the course of hearing on 21/3/2014. After due consideration, the position emerged is discussed as under:- (a) On perusal of the case records, I find that the assessee filed the copy of the valuation report of the registered valuer, Shri G.S. Bapna in support of the fair market value of the asset as on 1/4/1981. It is on the basis of the value of Rs. 2,72,94,000/- that the assessee has claimed the benefit of indexed cost of acquisition. The Assessing Officer referred the matter to the DVO u/s 55 A of the IT Act, 1961 on 8/1/2014 after considering the following factors for forming an opinion in the matter :- "The assessee has filed copy of valuation report of Shri G.S. Bapna, registered valuer in support....
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....n Sec. 55 A is not applicable from a particular assessment year, but it is effective from the date 01/07/2012 on all pending proceedings. Prior to 1/7/2012, Assessing Officer was not empowered to make a reference in a case in which the fair market value as on 1/4/1981 was shown at a higher value as the word used in the section was "where in the opinion of the Assessing Officer value of asset as claimed by the assessee is less than its market value". If the fair market value of the asset is taken at a higher figure, then the capital gain being offered for tax would be lower. It is with an intention to cure this lacuna or mischief that the amendment has been brought in with effect from 01/07/2012, enabling the AO to refer the case w.e.f. 1/7/2012 if he is of the opinion that the value of the property as on 01/04/1981 estimated by the Registered Valuer is at variance with the fair market value of the asset as on 01/04/1981. This is a curative and procedural amendment made effective from the date 01/07/2012 as specifically mentioned in the memorandum explaining the provisions of Finance Bill. If the intention of the Legislature was to make the amendment with effect from a particular as....
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....sessment proceedings, the assessee has filed a copy of the valuation report of the register valuer, Shri G.S. Bapna (copy enclosed for ready reference), in which the value of the land as on 1/4/81 has been taken at Rs. 90,98,000/- if it is considered as residential and Rs. 27294000/- if it is taken as commercial. For the purpose of computation of long term capital gain, it is necessary to arrive at the value of the land as on 1/4/1981. I am of the opinion that the value estimated by the register valuer is at variance with the fair market value of the asset having regard to the nature of the asset and its use at the relevant time. Therefore, I consider it necessary to refer the below- mentioned case for determination of the fair market value of the case on the relevant date as indicated below." This is also in consonance with Sec. 55A(b)(ii) as the AO found that it was necessary to refer the matter having regard to the nature of the asset and other relevant factors." 25. It was accordingly submitted by the ld. CIT DR that the reference to the DVO was made by the Assessing officer after the amendment with effect from 01.07.2012 and the same being curative and procedural amendment,....
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....made by a registered valuer, if the Assessing Officer is of opinion that the value so claimed is less than its fair market value. (b) in any other case, if the Assessing Officer 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," 29. It was submitted that a perusal of the above referred legal provision makes it abundantly clear that a reference to the DVO for the relevant period can be made, where the A.O. is of the opinion that the value so claimed is less than the FMV whereas, in the instant case, the A.O. is of the opinion that the value so claimed was more than the FMV. Thus, it is very much clear that the reference was made without having any jurisdiction to make such reference. Hence, the same is illegal and, therefore, consequently the subsequent DVO report is also illegal. 30. It was submitted that during the assessment proceedings,....
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....gher in the opinion of the Assessing Officer. From the forgoing discussions, it is clear that Ld. A.O. agrees that before the amendment, no such reference could be made under such circumstance but due to an amendment with effect from 1.7.2012, such reference can be made. Under the circumstances, without repeating the judgments relied upon during the assessment proceedings, the surviving issue emerges as under:- "Whether the said amendment to section 55A(a) made by the Finance Act, 2012, wherein, it is specifically mentioned that it is applicable w.e.f. 1.7.2012 can apply to the proceedings relevant to the assessment year 2011-12 ?" 33. It was submitted that the Ld. A.O. at Page 10-11 of his assessment order has held that the intention to bring the amendment is to remove lacunae and it is a curative amendment. On perusal of the memorandum explaining the provision of the Finance Bill, 2012, nowhere, it is written that the amendment is to remove any lacunae. It is only written that in a particular situation, reference cannot be made and that can lead to lower amount of capital gain which does not mean that it is to remove lacunae. It was submitted that it is only expanding....
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....spective effect which is not the intent of the legislature. It is further submitted that such error of assuming power is a result of not recognizing the principle of independence of each assessment year for applicability of provisions of the Act. 36. It was accordingly submitted that basis the forgoing discussions, it clearly shows that the amendment is applicable only for the transactions which are entered on or after 1.7.2012. The view is further supported by the following judicial pronouncements in this regard: (a) Hon'ble Bombay High Court in the case of CIT Vs. Puja Prints [2014] 360 ITR 697 (Bom) while deciding the case on the issue of reference under section 55A(a) of the Act, observed that:- "8. 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 the 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 the 2012 amendment was made effective only from 1 July, 2012. The Parliament has not given retrospective effect to the amendment. Therefor....
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....A is in two parts and permits a reference to DVO if the Assessing Officer is of the opinion that (i) the fair market value of the asset exceeds the value of the asset so claimed by the assessee by more than such percentage of the value of the asset 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. Sub-clause (i) of clause (b) also for the same reasons recorded above; would have no bearing on the fair market value as on 1.4.1981. The Assessing Officer had not resorted to sub-clause (ii) of clause (b). In any case, clause (b) would apply where clause (a) does not apply since it starts with the expression "in any other case". In other words if the assessee has relied upon a Registered Valuer's Report, the Assessing Officer can proceed only under clause (a) and clause (b) would not be applicable." On perusal of the order, it is clear that the clause as it stood at the relevant time shall be applicable. The relevant time here means the assessment year under consideration and it is further stated that the amendment shall be applied only afte....
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....) at para No. 4.3 of his order which reads as under:- "I have gone through the assessment order, direction given by Addl. CIT u/s 144A, statement of facts, grounds of appeal and the submission of the appellant carefully. Appellant challenged the reference made u/s 55A to DVO by the AO for determination for fair market value. In support of the contention appellant placed reliance on various case laws. I have also gone through the various judicial pronouncements relied upon by the Appellant. The abstract from judgment of Hon'ble Bombay High Court in the case of CIT Vs. Puja Prints 360 ITR 697, is "This submission is in face of the fact that the 2012 amendment was made effective only from 1 July,2012. The 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 Valuation Officer only if the value declared by the assessee is in the opinion of Assessing Officer less than its fair market value." Commissioner of Income Tax vs. Gaur....
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....he above judgments, I am of the considered view that the 2012 amendment was made effective only from 1 July,2012. 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 2011-12. At the relevant time, very clearly reference could be made to Departmental Valuation Officer only if the value declared by the Appellant is in the opinion of AO less than its fair market value. (ii) AO observed that appellant is otherwise covered by the provision of section 55A(b). However, appellant submitted that even u/s 55A(b) reference can not be made. In support of the contention appellant placed reliance on various case laws. I have gone through the judicial pronouncement relied upon by the appellant carefully. The abstract from judgment of Hon'ble Bombay High Court in the case of CIT Vs. Puja Prints 360 ITR 697, is "In this case, it is an undisputable position that the issue is covered by Section 55A(a) of the Act. Therefore, resort can not be held to the residuary clause provided in Section 55A(b)(ii) of the Act." Hon'ble Gujarat High Court in the case of Commissioner of Income Tax vs....
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....apital asset for the purposes of this Chapter, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer- (a) in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the Assessing Officer is of opinion that the value so claimed is at variance with its fair market value; (b) in any other case, if the Assessing Officer 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, and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clauses (ha) and (i) of sub-section (1) and sub-sections (3A) and (4) of section 23, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall with the necessary modifications, apply in relati....
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....ility towards the capital gains can be examined during the course of assessment proceedings. Therefore, the formation of the opinion by the Assessing officer has to be during the course of assessment proceedings and not prior or subsequent to the completion of the assessment proceedings. As per the unamended provisions, the Assessing officer has to form an opinion that the value so claimed by the assessee is less than its fair market value. Therefore, only in a scenario, the value so claimed by the assessee of the capital asset is less than its fair market value in the opinion of the Assessing officer, the matter can be referred to the valuation officer. In a scenario, where the value so claimed by the assessee is more than its fair market value, the matter couldn't be referred to the valuation officer. However, the amended provisions takes care of both the scenarios and has provided that where the value so claimed by the assessee is at variance with its fair market value, the matter can be referred to the valuation officer. In the instant case, the Assessing officer has invoked the amended provisions and has held that the value so claimed by the assessee is at variance with its fa....
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....alue of the property. This amendment will take effect from 1st day of July, 2012." 44. Therefore, the intent and purpose behind the amendment is to enable the Assessing officer to make a reference to the Valuation officer where he is of the opinion that the value adopted by the assessee as on 1- 4-1981 is higher than the fair market value of the asset as on that date and in order to check whether the adoption of a higher value for the cost of the asset as the fair market value as on 1st April, 1981, has lead to a lower amount of capital gains being offered for tax. It is therefore an empowering provision wherein the Assessing officer has been given requisite power and authority w.e.f 1.07.2012 to refer the matter relating to valuation of a capital asset to the valuation officer. The question however remains in respect of which all transanctions, the Assessing officer is empowered to make a reference to the valuation officer with effect from 1.07.2012. 45. In this regard, we refer to the decision of the Hon'ble Bombay High Court in case of CIT vs. Puja Prints (Supra) wherein it was held that the Parliament has not given retrospective effect to the amendment and the la....
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....luation Officer only if the value declared by the assessee is in the opinion of Assessing Officer less than its fair market value. 9. The contention of the revenue that the reference to the Departmental Valuation Officer by the Assessing Officer 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 Act. Therefore, resort cannot be had to the residuary clause provided in Section 55A(b)(ii) of the Act. In view of the above, the CBDT Circular dated 25 November 1972 can have no application in the face of the clear position in law. This is so as the understanding of the statutory provisions by the revenue as found in Circular issued by the CBDT is not binding upon the assessee and it is open to an assessee to contend to the contrary. 10. The contention of the revenue that the Assessing Officer is entitled to refer the issue of valuation of the property to the Departmental Valuation Officer i....
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....er 1.7.2012. We are, however, concerned with the period prior thereto. Clause (b) of section 55A is in two parts and permits a reference to DVO if the Assessing Officer is of the opinion that (i) the fair market value of the asset exceeds the value of the asset so claimed by the assessee by more than such percentage of the value of the asset 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. Sub-clause(i) of clause (b) also for the same reasons recorded above, would have no bearing on the fair market value as on 1.4.1981. The Assessing Officer had not resorted to sub-clause(ii) of clause (b). In any case, clause (b) would apply where clause(a) does not apply since it starts with the expression "in any other case". In other words if assessee has relied upon a Registered Valuer's Report, Assessing Officer can proceed only under clause (a) and clause (b) would not be applicable. 16. In the present case, admittedly the assessee had relied on the estimate made by the Registered Valuer for the purpose of supporting its value of the asset.....
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....(in ITA No. 1582/PUN/2015 dated 31.10.2017) wherein, following the decision of the Hon'ble Bombay High Court in case of Puja Prints (supra), it was held as under:- "9. We have heard the rival contentions and perused the record. The issue which arises in the present appeal is against the determination of cost of acquisition of plot of land as on 01.04.1981. The assessee during the year under consideration had sold piece of land and the issue which arose in the present appeal was the cost of acquisition to be adopted as on 01.04.1981 in order to compute the income from long term capital gains on sale of said land, in the hands of assessee. The assessee in this regard furnished the valuation report as on 01.04.1981 and claimed the cost of plot as on 01.04.1981 at Rs. 68,71,658/- and declared the indexed cost of acquisition at Rs. 1,60,59,301/-. The Assessing Officer on the other hand, was of the view that the cost of acquisition declared by the assessee as on 01.04.1981 was higher and Assessing Officer made reference to the Stamp Valuation Authority in this regard and relying on the report of the Stamp Valuation Authority, adopted the cost of acquisition as on 01.04.1981 at R....
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....mental Representative that reference was made after 01.07.2012 is not tenable in law as the amendment made in section is substantive in nature which is relevant to assessment year commencing after the date of amendment i.e. FY 2012-13 relevant to AY 2013-14, hence, it is not applicable for the assessment year 2010-11, as the assessment involved is prior to period of 01.07.2012. In view of these facts and circumstances, we are of the considered opinion that the law has been settled by the decision of Hon' ble Bombay High Court, Hon'ble Gujarat High Court, Mumbai tribunal and Pune Tribunal. Therefore, the AO was not justified in referring to DVO or adopting valuation based on valuation report. The amendment in section 55A was qua prior period to 01.07.2012 and not qua proceeding prior to 01.07.2012. Hence, respectfully the following the ratio laid down in above judgements of Hon'ble High Courts and Tribunal as referred above, hence, Ground No. 1(1) to (5) of the appeal are allowed." 51. We also refer to decision of the Co-ordinate Bench in case of Sonali Roy vs. Pr. CIT, Kolkata (in ITA No. 1329/Kol/2017 dated 28.02.2018) wherein it was held as under:- "5. We ....
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....t that the amendment in section 55A of the Act was effective from 01.07.2012. Now, the issue arises whether amendment u/s 55A of the Act is applicable from the Assessment Year 2012-13 i.e. the year under consideration. It is well settled law that if the amendments are applicable from the first day of assessment year then it would be applicable from the relevant assessment year. For example if the amendment under the statute is brought 1.4.2009 then it would be applicable from the AY 2009-10. Similarly if the amendments are brought on any date other than the 1st day of April then it would be applicable to the subsequent assessment year. For example if the amendment under the statute is brought 30.9.2009 then it would be applicable from the AY 2010-11. In holding so, we find support & guidance from the judgment of Hon'ble Supreme Court in the case of Karimtharuvi Tea Estate Ltd. Vs. State of Kerela reported in 60 ITR 262 where it was held as under: "10. Now, it is well-settled that the Income-tax Act, as it stands amended on the first day of April of any financial year must apply to the assessments of that year. Any amendments in the A....
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....ier decision in case of Gauranginiben S. Shodhan Indl. (supra). We therefore find that there is convergence of views as evident from these decisions of Hon'ble Bombay and Hon'ble Gujarat High Court that the amendment brought in by the Finance Act, 2012 in section 55A(a) has to be read prospectively and not retrospectively. Secondly, such amendment shall apply to transactions (subject matter of determination of capital gains) which are effected during the period starting on or after 1.07.2012. No contrary jurisdictional or any other High Court decision has been cited before us and therefore, in absence of any jurisdictional High Court decision, these decisions of Hon'ble Bombay and Gujarat High Courts are binding on us. 53. Further, we find that the Coordinate Benches are also of the consistent view and having been following the legal proposition so laid down by the Hon'ble Bombay and Gujarat High Court. The Coordinate Bench in case of Sonali Roy (supra) drawing support from the decision of the Hon'ble Supreme Court in case of Karimtharuvi Tea Estate (supra) has further clarified that the amendments which are being applicable from any date other than first April of assessment yea....
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....he value subsequently determined by the valuation officer and therefore, the Assessing Officer was not empowered to refer the matter to the valuation officer even as per erstwhile provisions of section 55A(a) prior to amendment by the Finance Act, 2012. 57. Now coming to another related issue which is contended by the ld. CIT DR that even where there is registered valuer report, there is no bar in making reference under clause (b)(ii) of section 55A of the Act and in that sense, the argument of the ld AR regarding amendment in clause (a) to section 55A becomes irrelevant and the report of the DVO can thus be relied upon by the AO. In this regard, our reference was drawn to the findings and directions of the Addl. CIT u/s 144A which reads as under: "(d) The matter of valuation was referred u/s 55A of the IT Act, 1961 and the report of the DVO was also received u/s 55A of the IT Act, 1961. In col. No. 1.7 of the reference, the section was mentioned as 55A(a). In this regard, it may be stated that with the amendment of Sec. 55 A w.e.f. 01-072012, the AO is empowered to invoke clause (a) as he was of the opinion, after considering the relevant factors, that the value shown ....
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....nly when FMV has been adopted without the Registered Valuer report, a reference can be made under clause (b) which is not the case of the Appellant:- (a) Hon'ble Bombay High Court in case of Puja Prints (supra) where in Para 9 of the order, it was held as under: "9. The contention of the revenue that the reference to the Departmental Valuation Officer by the Assessing Officer is sustainable in view of 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 Act. Therefore, resort cannot be held to the residuary clause provided in Section 55A(b)(ii) of the Act. In view of the above, the CBDT Circular dated 25 November,1972 can have no application in the face of the clear position in law. This is so as the understanding of the statutory provisions by the revenue as found in Circular issued by the CBDT is not binding upon the assessee and it is open to an assessee to contend to the contrary." (b) In the case of CIT vs. Gauranginiben (supra), the Hon'ble Gujarat High Court has observed:- ....
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....n that having regard to the nature of the asset, it is necessary so to do. So, in the cases other than the case where there is no valuer's report given by the assessee, the Assessing Officer is empowered to make reference under section 55A(b) and not otherwise. Thus, the issue was directly covered by the decision of Ms. Rubab M. Kazerani's case (supra). [Para 6]". 59. It was further submitted that the AO himself was well aware of this legal position and in his report to the Addl. CIT u/s 144A, reproduced at page 12 of assessment order, he has admitted that S. 55A(b) is not applicable. Quite strangely, the Addl. CIT in para (d) of his order (page 17 of the assessment order) held that S. 55A(b)(ii) is also applicable. However, all the above cited decisions clearly rule out applicability of 55A(b). In the present, case only and only sub-section 55A(a) was applicable. Thus, it is clear that when the assessee adopted the FMV based on a report of the Registered Valuer, reference cannot be made under clause (b) of section 55A of the Act although, in the instant case, the reference has been made expressly under section 55A(a). 60. In the instant case, we find that it is an undisputed....
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....not possible in the earlier regime and accordingly, the amendment has been made. It was further submitted that there are number of subsequent judgments and more particularly judgment of the Hon'ble Bombay High Court in case of CIT vs. Puja Prints [2014] 360 ITR 697 (Bom) on the similar issue and therefore, in view of the subsequent High Court decision, the decision of the Mumbai Tribunal should not be relied upon. It was further submitted that the said decision of the Mumbai Tribunal has been rendered without considering the Hon'ble Supreme Court decision in case of Amiya Bala Paul (Civil Appeal No. 4657 OF 2000 dated 7.07.2003) wherein it was held that the report of the Valuation Officer obtained without proper reference cannot be used by the AO under any section for computing the income in the hands of the assessee. It was submitted that subsequent to the decision of the Hon'ble Supreme Court, section 142(A) was inserted and similar amendments were made in section 55A. It was accordingly submitted that neither power of the reference to DVO exist in any form with the AO nor such valuation report can be used when specific provisions for reference are not available at first place. I....
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....e to operate within the established judicial and administrative procedure. Hence, the judgment in the case of Pooran Mal is not applicable to the facts of the case under consideration. 66. It was further submitted that in the instant case, immediately after reference was made to the DVO, it was brought to the notice of the A.O. that such reference could not be made. If the A.O. is permitted to act on the belief that even if any report is obtained illegally, it can hold good, such kind of situation can only lead to an absurd legal and administrative mechanism where the provisions and procedures contained in the Act would become irrelevant. It is not the desired situation and apparently indicates that the aforesaid decisions relied upon are not relevant to the matter under consideration. 67. We have heard rival contentions and also carefully gone through the decisions relied upon by both the parties. We find that it is a consistent view of the Coordinate Benches right from Chaturbhuj Vallabhdas (HUF) (Supra) to subsequent decisions in case of Vijay P. Karnik vs. Income-tax Officer and thereafter, in case of Pradeep G. Vora v. Income Tax Officer that the report of a valuation of....
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....me American Judges of the American Supreme Court have spelt out certain constitutional protections from the provisions of the American Constitution. .....A Power of search.......... ........ It, therefore, follows that neither by invoking the spirit of our Constitution nor by a strained construction of any of the fundamental rights can we spell out the exclusion of evidence obtained on an illegal search. So far as India is concerned its law of evidence is modeled on the rules of evidence, which prevailed in English law, and courts in India and in England have consistently refused to exclude relevant evidence merely on the ground that it is obtained by illegal search or seizure. In Barindra Kumar Ghose and others v. Emperor (1) the learned Chief Justice Sir Lawrence Jenkins says at page, 500 : Mr. Das ...... In Emperor v. Allahabad Khan ..... In Kuruma v. The Queen (2) where the Privy Council had to con-sider the English Law of Evidence in its application to Eastern Africa, Their Lordships propounded the rule thus : 'The test to be applied, both in civil and in criminal cases, in considering whether evidence is admissible is ....
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....o admit the evidence against the accused if the court was of the view that the evidence had been obtained by conduct of which the prosecution ought not to take advantage. But that was not a rule of evidence but a rule of prudence and fair play. It would thus be seen that in India, as in England, where the test of admissibility of evidence lies in relevancy, unless there is an express or necessarily implied prohibition in the Constitution or other law evidence obtained as a result of illegal search or seizure is not liable to be shut out. In that view, even assuming, as was done by the High Court, that the search and seizure were in contravention of the provisions of section 132 of the Income-tax Act, still the material seized was liable to be used subject to law before the Income-tax authorities against the person from whose custody it was seized and, therefore, no Writ of Prohibition in restraint of such use could be granted. It must be therefore, held that the High Court was right in dismissing the two Writ Petitions. The appeals must also fail and are dismissed with costs". 12. Thus, in view of the decision of the Hon'ble Supreme Court in the case of Pooran Mal (sup....
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....onnotation and a definite statutory effect and, therefore, unless the conditions precedent for making such reference are satisfied, in exercise of his general power of enquiry, the AO cannot make a reference under the said provision. (ii) Reference to VO u/s. 55A can be made only to ascertain FVM of capital asset for determining capital gains. Valuation obtained in a case not involving capital gains has no statutory effect. (iii) The AO loses his power in the matter of valuation only where the VO makes a report. If the VO does not submit his report, the power of valuation has to revert to the AO. Unless the VO sends his report, there is no bar on the AO 's completing the assessments taking the value of the asset referred for valuation in the best possible method in the limiting circumstances of the situation. So, if, till the expiry of limitation, no report of valuation comes from the DVO, the original power of the AO to value the asset himself revives. (iv) Reference under clause (b)(ii) of section 55A can be made, if the AO is of the opinion that having regard to the nature of the asset and other relevant circumstances, it was necessary so to do. ....
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....46 or section 250 or 251 of the Act to the Valuation Officer. Sub-section (3A) of section 23 and the proviso to sub-section (5) of section 24 of the Wealth-tax Act, 1957, dealing with appeals before the FAA and the Tribunal, specifically provide for opportunity of hearing to be granted to the Valuation Officer. There are no corresponding provisions in sections 250 and 254 of the Act. Mutatis mutandis application of certain provisions of sections 16A, 23 and 24 of the Wealth-tax Act vis-a-vis section 55A could not change the position. (ix) The power of the AO under sections 131(1) and 133(6) is distinct from and does not include the power to refer a matter the under u/s. 55A of the Act. A report of the VO under section 55A may be considered by the AO, as a piece of evidence if it is relevant. However, the power of inquiry granted to an AO under sections 133(6) and 142(2) does not include the power to refer the matter to the VO for an enquiry by the latter. We are of the opinion that if the power to refer any dispute to a VO was already available in sections 131(1), 133(6) and 142(2) of the Act, there was no need to specifically empower the AO to do so in certain circumstanc....
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....nt order. Obviously, the assessment order cannot be deferred in view of the limitation prescribed for passing the same. The report of the DVO as and when received by the AO, may be acted upon by him and if he does so, the validity of that action can be questioned by the assessee. Section 55A does not create any bar on the DVO to value the property on the basis of a valid reference made by the AO . 71. Further, we find that similar view has been taken earlier by the Hon'ble Supreme Court in case of Smt. Amiya Bala Paul vs. Commissioner of Income-tax [2003] 130 Taxman 511 (SC) wherein it was held as under: "9. The common feature of sections 133(6) and 142(2) is that the Assessing Officer is the fact-finding authority. It is his opinion on the basis of the facts as found on an enquiry conducted by himself which results in the assessment order. A report by the Valuation Officer under section 55A is on the other hand the outcome of an inquiry held by the Valuation Officer himself and reflects his opinion on the evidence before him. Such a report would not be the result of an inquiry by the Assessing Officer under the provisions of section 133(6) or section 142(2). It is true....
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.... for the adjustments made by the registered valuer; (iv) Having regard to the nature of the asset and its use at the relevant time, I am of the opinion that for computation of the long term capital gain, it is necessary to have the report of another technical expert i.e. DVO to whom a reference is made u/s 55A of the IT Act, 1961. Therefore, a reference in the prescribed performa was sent to the DVO on 8.1.2014; vide his office letter No. 1646." 74. In this regard, the ld. AR submitted that a perusal of the reasons given by the Ld. A.O. in Para 4.2 as reproduced hereinabove, to arrive at an opinion that the valuation claimed on the basis of the Registered Valuer's report requires reference to the DVO shows that the said reasons are (a) without any substantive material; (b) mainly because of not considering the report of the Registered Valuer in right perspective; and (c) due to incorrect assumptions of the fact, which could otherwise be avoided by providing opportunity before making Reference. Coming specific on each of the observations of the AO, the ld AR further submitted that:- (a) In the first point, it was observed by the AO that there is a huge differ....
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....rd point, it was pointed out by the AO that for factor of adjustment, there is no basis nor any evidence has been provided by the Registered Valuer. It was submitted that this is incorrect observation as the Registered Valuer has given the basis for adjustment in brief. However, the same could be called in detail if any clarification was required and based upon such clarification, a judicious opinion could be formed, which has not been done in the instant case. It is pertinent to note and rather surprising to see that the DVO in his report while making the factor of adjustment has given the basis or evidence in similar fashion as of the Registered Valuer, which has been accepted whole heartedly by the A.O. The said act of the Ld. A.O. is contradictory and shows that he has used different yardstick of justification according to his own convenience. (d) In the fourth point, a general statement has been made by the AO without any basis and material, which cannot be the basis to form such an opinion. 75. It was submitted by the ld AR that a perusal of the Section 55A(a) shows that there must be a situation, wherein, the A.O. should form an opinion. The word "opinion" has been use....
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....by the registered valuer being at variance with the FMV. In fact, he could not have formed any such opinion as he had no other fact/data to show the variance. The term 'at variance' means difference or discrepancy between the two statements/documents/facts etc. To claim variance, at least two data are required. In the present case, the AO had only one figure given by the registered valuer and he has not made any attempt to collect some more relevant data regarding the FMV to show the variance. It is obvious that the term 'at variance' is used only for comparison between the two or more items. Finding some faults in the methodology adopted by the registered valuer does not give rise to any such 'opinion'. For example, one exit poll comes out with a figure in favour of a political party. If one point out that sample size was small or samples not drawn uniformly etc, then there can be just a doubt about the authenticity of this poll. But, when one says that other exit polls have given various other figures, only then one can say 'at variance'. The AO has failed to form an opinion as required by the law hence, subsequent actions deserves to be deleted. 77. It was accordingly submitt....
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.... 81. In this regard, it was submitted by the ld. AR that the Department has come out with valuation guidelines wherein prescribed procedures, practices and valuation methodology have been laid down to guide the DVO to complete his work in judicious manner. However, the same has not been followed by the DVO in the instant case and therefore, the valuation so determined by the DVO suffers from various infirmities and the valuation report issued by the DVO cannot be relied upon. 82. It was submitted by the ld AR that the DVO in his report has stated that the inspection the property was carried out by him along with the Junior Engineer on 10.07.2004 in the presence of the assessee's partner Mr Bajaj whereas the fact of the matter is that no such inspection was carried out in the presence of Mr Bajaj. Further, in reply to the RTI application, it has been stated by the Department that inspection register which is required to be maintained as per guidelines has not been maintained and even the inspection note has not been maintained. It was further submitted that on the alleged date of inspection, the property was under the possession of the buyer and it was closed, therefore, the DV....
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....area which has not been denied by the DVO as well, therefore, such justification is only to justify his predetermined act, since he himself is of the view that property is of residential use and thus it has desired to show that the land in 1981 was not in an industrial belt. 85. It was further submitted that the finding of the DVO that there was no commercial working from the premises as on 1.04.1981 is contrary to the facts. It is an undisputed fact that the Property was used for factory as well as for trading activity as is evident from the provisional registration certificate of the Rajasthan Sales Tax Department and Central Sales Tax effective from 16.03.1981 to 16.09.1981. Now it is necessary to appreciate the meaning of word "Commercial Activity" prevailing in the year 1981 rather than today's era. In the year 1981, commercial activities were considered to be the activities of manufacturing and trading and a location which was near to the residential area. Such plots which could be used for such activities were having the highest value since in that time, people were not having much of transports, therefore, proximity to the residential area were considered to be the best ....
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.... • The Property is situated approx 200 Meters from Tonk Road Flyover which was there even before 1981; • The said flyover was the first flyover of the Jaipur which shows that there was adequate traffic at that time also on the said road; • Since the Property is a corner property and left side of the plot is on average 85 Feet wide road and that road connects to Gandhi Nagar Railway Station which is only 500 Feet away from the Property; • The open front is 120 Feet and open left side is 240 Feet which provides the flexibility to use it either as a single plot or sub divide into the smaller plots for use in the most advantageous manner; • The Property was used for business purposes. However, the land use permitted in the surrounding areas was not restricted to the industrial use only which means according to the local laws, there was no restriction as far as the use was concerned. Hence, it could and can be used according to the potential possibilities in its most advantageous manner; • The land in the locality wherein the Property is situated was in mixed use in 1981 and which has not been denied by the DVO 8....
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....g the set back; there would be a little space available for construction, (iii) Further, due to odd width, the Sale Instance cannot be further sub divided, hence, reduces the flexibility for any alternative use. The Ld. DVO failed to take into note the advantageous position of the Property while working out the factor for adjustment and had not taken any additional % for the same. Whereas, the advantage considering the shape is factually evident. Frontage 82' 120' NIL Comments:- (i) Both the properties are corner property, however, it is pertinent to note that Property is situated on main National Highway Road having good frontage that will definitely have higher value even compared to a property having same frontage but situated in inner colony lane. (ii) It is further important that in both the cases, two sides can be used as frontage and while comparing the road width of these two sides with corresponding frontage, it is clear that Property is having much more effective frontage on both side independently, hence, having advantage over the Sale Instance. The Ld. DVO has failed to take into account the factor of adjustment on this account. Locality and Surr....
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....ill first floor was found excess and regularized by paying compounding fees which shows that limited FAR was available with the Sale Instance, whereas, the Property is situated on National Highway and on 128 Feet wide road on one side and average 85 Feet wide road on the other side since the FAR are broadly governed by the width of the road, hence, the Property was having much more FAR. Further, the FAR of the Sale Instance was exhausted till the construction of first floor only because the availability of FAR was very less due to narrow width of the road. (ii) The Ld. DVO has failed to consider the said factors for adjustment. Connectivity Property is situated approx 1025' far from Bhawani Singh Road through indirect approach road. From main Railway Station approx 3 Kms. and from Airport 14-15 Kms. On N.H. 12, Railway Station is only 270' far from site and on the way to Airport approx 7 Kms. NIL Comments:- The connectivity of the Property is far better than the connectivity of the Sale Instance as narrated above, however, the Ld. DVO has failed to consider the said factor for adjustment. Road Width Front 31 Feet Wide Road, Side 41 Feet Wide Road Front 12....
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....view on the bifurcation of the sale consideration. 90. It was further submitted that the registered Valuer while making his report considered the factor of adjustment of the locality and surrounding (Corner Plot, location near Gandhi Nagar Railway Station and good location on N.H. Tonk Road) and remaining factors have been considered on lump sum basis while doubling the base rate from Rs. 1,093/- to Rs. 2,186/- and, therefore, have not been addressed separately. The same is available in Part II of his Valuation Report. Further, he has considered the use of the Property as commercial is also correct since he has reported the area as mixed area and considering the concept of the FMV as discussed hereinbefore, one has to take the most advantageous use to ascertain the FMV and therefore it has been correctly taken commercial. Further, after assuming the potential use of the land as commercial the rate arrived after giving the effect of adjustment for factor has been multiplied by three. The said multiplication is very well supported by the practice adopted by the Stamp Authorities for working out the Stamp Duties. In view of the same, the FMV ascertained by the registered Valuer mus....
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.... he has not even considered the concept of commercial potential and ascertained the FMV based on the land used reported by him. Furthermore, while making the comments in Para 7.3 of the report, the Ld. DVO mentioned the details of surroundings which are in the nature of institutional activity rather than commercial, whereas, in the case of the appellant, commercial activities in the surroundings areas were going on. This fact shows that in the case of the appellant, while determining the FMV, the concept of probable use in the most advantageous manner has not been considered and also the activities in surroundings have not been taken care. (iv) The said property is situated on a road having width of 90 Feet as against the same the appellant's Property is on 128 Feet wide road. It is important to note that while assigning the factor on account of location, the width of the road has been considered in the case of Ummaid Mills and + 35% adjustment was made, whereas, in the case of Appellant, on account of width, which is much more, no adjustment has been made but only on account of main road an adjustment has been made that too is +35%. (v) The plot of the Ummaid Mills is not a ....
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....ommon that while fixing the circle rates, authorities do err on the side of excessive caution by adopting higher rates of the land in a particular area as the circle rate. In such circumstances, the DVO's blind reliance on circle rates is unjustified. The DVO has simply adopted the average circle rate of residential and commercial area, on the ground that interior area of the locality, where the assessee's property is situated, is mixed developed area i.e. shops and offices on the ground floor and residence on the upper floors. When DVO's valuation required to compare the same with the valuation by the stamp valuation authority, it is futile to base such a report on the circle report itself. Such an approach will render exercise under Section 50C(2) a meaningless ritual and an empty formality. In our considered view, in such a case, the DVO's report should be based on consideration stated in the registration documents for comparable transactions, as also factors such as inputs from other sources about the market rates. For the reasons set out above and with these observations, we remit the matter to the file of the AO. The DVO will value the property de novo, in the light of our ab....
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.... order where the findings of the DVO disposing off the assessee's objections have been clearly stated and taken note of by the Add. CIT as well before issuing directions u/s 144A of the Act and the same reads as under: "Now regarding the objections raised against the valuation report of the DVO by the assessee, I find that the same have duly been dealt with by the DVO, vide his letter No. 218 dated 19/03/2014, which is placed on the assessment record. In this letter, the DVO has disposed of the objections of the assessee as under:- "This is with reference to your objections dated 13/3/2014 submitted in the matter. In this regard, it is to intimate that your statement objections dated 07/03/2014 was first received by the DVO on 10/3/2014 is totally false and baseless. This is due to the fact that copy of the same letter was first personally handed over by your AR to DVO on 07/03/2014 at 11.00 AM itself and based on that submission only the final orders were passed by the DVO on the same day, i.e. on 07/03/2014. Further, it is also surprising that the draft report was issued to you long back, your good-self in your objections dated 07/03/2014 have never raised detai....
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....below the residential rates. There cannot be a more judicious approach than this. (6) You are actually stating the status of the property at the point of sale and not as on 1/4/1981. So your submission cannot be accepted considering the status of the land existing on 1/4/1981; (7) Reply same as above . (8) The adjustment factor of 35% taken on account of situation and location is appropriate considering the sale reference adopted for calculations. 35% factor adopted is for the relatively better situation and location over that of the sale reference plot which itself has got a very good location just few feets away from the main Bhawani Singh Road. As per the details given above, hope your good-self will now agree that the orders have been passed by DVO considering all the relevant facts and in a judicious manner.". From the above, it is seen that all the objections raised by the assessee against the valuation made by the DVO have duly been considered and disposed of by the DVO in detail as mentioned above. It is quite pertinent to note that the registered valuer, Shri G.S. Bapna himself has taken the nature of the land as "residential" vide S.No.....
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....e assessee was carrying out commercial activities from the premises located at Tonk Road, Jaipur which is subject matter of present proceedings. Therefore, the findings of the Valuation Officer that there were no commercial activities in the premises is not borne out from the records and therefore, cannot be accepted. We find that these are documents brought on record by the assessee and which are issued by the appropriate Government Authorities and cannot be self created by the assessee firm. Therefore, basis this very fundamental difference where the DVO has taken the status of the property as residential whereas the facts on record suggest that the assessee was carrying out commercial activities by itself put a big question mark on the value finally determined by the Valuation Officer. Further, on persual of the sale deed, we find that it talks about the RCC construction which apparently has not been considered by the Valuation Officer. Further, we find that the sale instance taken by the Valuation Officer is a property of size of 372.5 sq.mts as against 2750.77 sq. m in the instant case and given the size of the plot and the potential and possibilities of construction, we find ....
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....ss-objection of the assessee is partly allowed in light of aforesaid directions. Pronounced in the Open Court on 09/08/2019. ============= Document 1 *4. यह कि दà¥à¤µà¤¿à¤¤à¥€à¤¯ पकà¥à¤· पà¥à¤°à¤¥à¤® पकà¥à¤· को इस बात के लिये आशà¥à¤µà¤¸à¥à¤¤ करते हà¥à¤¯à¥‡ अंडरटेकिंग देता है कि पà¥à¤°à¤¥à¤® पकà¥à¤· दà¥à¤µà¤¾à¤°à¤¾ उकà¥à¤¤ समà¥à¤ªà¤¤à¥à¤¤à¤¿ के विकà¥à¤°à¤¯ पतà¥à¤° का निषà¥à¤ªà¤¾à¤¦à¤¨ à¤à¤µà¤‚ पंजीयन उकà¥à¤¤ तà¥à¤°à¤¿à¤µà¥‡à¤£à¥€ कृपा à¤à¤‚टरपà¥à¤°à¤¾à¤ˆà¤œà¥‡à¤œ पà¥à¤°à¤¾. ....