TaxTMI 
TaxTMI 
2020 (1) TMI 125
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.... 2452/Ahd/17 Mahendrabhai K. Patel 2013-14 01.09.2017 23.03.2016 143(3) of the Act 2. At the beginning of the hearing, it was stated on behalf of the assessee that all the three matters captioned above are inter-connected and involves common issue. Accordingly, all the three matters were heard together for adjudication purposes. 3. We shall take assessee's appeal in ITA No. 629/Ahd/2019 pertaining to Dashrathbhai G. Patel concerning AY 2013-14 as a lead case for adjudication. ITA No. 629/Ahd/2019 - AY- 2013-14 (in case of Dashrathbhai G. Patel 4. The ground of appeal raised by assessee reads as under: "1. The Ld. CIT(A) has erred in not appreciating the submission as abstracted by him in his appeal order page 2 to 16 para 3 and therefore, inter alia erred in confirming the addition as per page 16, para 4 of the appeal order and therefore, the addition confirmed may please be deleted. 2. That, Ld. CIT(A) has also erred in not appreciating the fact that the whole proceedings started by AO including issuance of notice u/s 143(2) is itself bad in law and void and liable to be quashed. 3. Ld. CIT(A) has erred in facts and / or in law in not appreciating the f....
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.... the property of the previous owner and/or the assessee before 1st April, 1981, the assessee adopted the fair market value (FMV) of the immovable property as on 01.04.1981 and substituted the same as cost of acquisition. The cost acquisition was thus substituted at Rs. 48,59,313/- (1/4th of 1,94,37,250/-) as on 01.04.1981 as supported by the valuation certificate dated 16.07.2013 from the Registered Valuer (RV). The FMV as on 01.04.1981 being 'cost of acquisition' was increased by applying cost inflation index in terms of Section 48 of the Act. The indexation of Rs. 48,59,313/- was worked out to Rs. 4,14,01,347/-. The assessee accordingly claimed the 'adjusted cost of acquisition' at Rs. 4,14,01,347/- based on the FMV of Rs. 48,59,313/- (towards his 1/4th share) as on 01.04.1981 determined as per the valuation carried by the RV namely Dr. Alpesh C. Patel. The AO disputed the FMV adopted by assessee as on 01.04.1981 at Rs. 48,59,313/- (being 1/4th of the total valuation at Rs. 1,94,37,250/-) and invoked the provisions of Section 142A of the Act and made reference to the District Valuation Officer (DVO), Income Tax Department, Ahmedabad vide reference performa dated 27.11.2015 author....
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....urnished report in terms of Section 55A of the Act which is not permissible in law. 8. The CIT(A) recorded various submissions made on behalf of the assessee in para 3.1 and 3.3 of its order but, however, did not find merit in the plea of the assessee. The action of the AO was thus confirmed vide reasoning as noted hereunder: "I have carefully considered the assessment order, grounds of appeal raised and submissions of the appellant. The appellant has filed two additional grounds which are decided to be accepted are decision. The appellant has taken two original grounds saying that the reference to DVO was not proper and the DVO has not formed his opinion on the basis of correct facts. Both the grounds are taken together for adjudication. The AO has not accepted the valuation as on 1/04/1981 and referred the matter to the DVO on 27/11/2015. The DVO has sent report on 17/03/2016. The DVO, A'bad after considering the evidence produced by the assessee and after taking in to account all the material gathered by him had estimated the fair market value of the alleged property at Rs. 1,96,800/- as on 01/04/1981. Detailed show cause notice was issued by AO after receiving the report....
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....any counts but the matter of substance is getting ignored in his contentions. The AO has no discretion after a report from DVO and all objections of appellant have been fairly handled by the AO, hence the decision taken by AO is logical and as per I.T. procedure. In such circumstances, case laws relied by the appellant are distinguishable. The original ground No. 1 & 2 are dismissed." 9. Further aggrieved by the denial of relief by the CIT(A), the assessee preferred appeal before the Tribunal to impugn the action of Revenue authorities. 10. Before the Tribunal, the learned AR for the assessee submitted at the outset that the action of the AO for substitution of FMV of capital asset estimated as on 01.04.1981 was prima facie bad in law as the reference was made to the DVO by the AO for determination of FMV under s.142A of the Act whereas in contradiction to such conferment of jurisdiction under s.142A of the Act, the notice was initially issued by the DVO to the assessee under s.50C of the Act and thereafter by way of corrigendum, the order was framed by DVO under s.55A of the Act. It was thus contended that the DVO has travelled beyond the scope of reference so made to him by AO ....
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....and thus not comparable with the instances quoted on behalf of the Revenue. 10.4 The learned AR referred to the decision of the Delhi Tribunal in Sumit Khurana vs. ACIT ITA No.1877/Del/2011 order dated 15th July, 2011 for the proposition that no reference can be made under s.142A of the Act to the Valuation Officer for estimating the full value of consideration of the property for the purpose of computation of capital gains under s.48 of the Act. It was also contended that reference to Valuation Officer under s.142A of the Act could be made for the purposes of estimating the value of any investment referred to in Section 69, 69A or 69B of the Act. Section 48 of the Act which provides for mode of computation of income chargeable under the head 'capital gains' provides for reference to valuation of capital asset only under s.55A of the Act for the purposes of determination of FMV of capital asset for which circumstances are not shown to be existing in the instant case. The learned AR further referred to the decision of Ahmedabad Tribunal in ITO vs. Chandrakant & Ors. in ITA No. 3139/Ahd/2009 & Ors. order dated 08.04.2011 for the proposition that Section 142A of the Act is limited i....
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....ssuance of notice under s.142A of the Act is not a legal impediment for applying the FMV as determined by the DVO. It was submitted that the DVO has demonstrated over valuation of FMV as on 01.04.1981 in a rational manner which does not call for any interference. 12. We have carefully considered the rival submissions. The moot controversy in the instant case revolves around correctness of the action of the Revenue in substituting FMV of capital asset as on 01.04.1981 determined by the Registered Valuer appointed by the assessee with the FMV determined by the DVO on a reference made by AO concerning land sold during the year. 12.1 To begin with, we note that the provisions of Section 55 of the Act, at the relevant time, provided that for computation of capital gains, an assessee was entitled to an option to adopt FMV value of asset as on 01.04.1981. The assessee is also entitled to claim deduction for cost of improvement incurred after 01.04.1981, if any. Section 48 of the Act correspondingly provided for applicability of cost of inflation index on such FMV for claiming enhanced deduction towards cost of acquisition also. 12.2 The assessee in the instant case sold certain parcels....
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.... by the assessee is that while the reference for valuation has been made by AO under s.142A of the Act, the DVO has passed the order under s.55A of the Act which is prima facie unsustainable and bad in law. Having regard to the legal objection, we take notice of the provisions of Section 142A of the Act which has been invoked for determination of FMV in terms of Section 142A of the Act as applicable to the relevant assessment year in question. We observe that power to make reference under s.142A of the Act is not general but is restricted to the matters concerning Section 69, 69A or 69B of the Act. We also pause to take note of circular no. 1/2015 dated 21.01.2015 explaining amendments carried out by Finance (No.2) Act, 2014 whereby provisions of Section 142A of the Act was substituted w.e.f. 01.10.2014. In the aforesaid circular also, Board did not express any material departure from the erstwhile provision except that erstwhile provisions of Section 142A of the Act did not envisage rejection of books of accounts as a pre-condition per se before making reference to Valuation Officer. The time limit for furnishing report by the valuation report was also found absent by the Board. T....
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....er are also recognized by the Income Tax Department under a license issued by the Board. Therefore, a report framed by the RV cannot be summarily demeaned as a spurious document or something from anybody from the street. Hence, there must be some justifiable reason to trigger a caution in the mind of a quasi judicial authority before embarking upon reference to another valuer. 13.3 It may be pertinent to observe here that such valuation need not be conservative or for the advantage of the Revenue but it needs to be fair. The exercise of valuation is technical and complex issue which should be appropriately left to the wisdom of the experts, having regard to many imponderables which enter the process of valuation. A valuation carried out by the expert cannot be assailed unless there is some material to show a tangible reason which demonstrates fundamental wrong approach or a fundamental error going to the root of the matter. It is so because valuation is an art, besides being a science and is subjective and thus cannot be expected to be absolute. There is always an element of subjectivity involved in the exercise of valuation and some amount of guesswork is typically involved in s....
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.... was not material since the property was acquired before 01.04.1981 and consequently FMV as on 01.04.1981 could be adopted to be the cost of acquisition for the purposes of subsequent indexation and determination of capital gains chargeable to tax. Thus, the reference made under s.142A of the Act for twin reasons noted above is not sustainable in the facts of the case. The reference under s.142A of the Act is also uncalled for as the unaccounted income, if any, in relation to assets acquired in earlier years could not be brought to ambit of taxation under s.69, 69B etc. of the Act in the impugned assessment year. 13.5 It will also be pertinent to note that Section 55A of the Act is a comprehensive Section for making a reference to DVO for the purpose of capital gains under Chapter IV-E of the Act concerning taxability of capital gains on transfer of capital asset. The FMV of capital asset as on 01.04.1981 is squarely governed by Section 55A of the Act. The AO thus could make appropriate reference under s.55A of the Act subject to the fulfillment of the pre-requisites of Section 55A of the Act. Needless to say, a specific provision would override general provision. 13.6 Notwithst....