TaxTMI 
TaxTMI 
2019 (6) TMI 1571
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....or AY 2012-13) was taken as the lead case wherein the assessee has taken the following grounds of appeal:- "1. That the CIT(A) erred in not treating the reference to DVO u/s 55A as illegal & uncalled for. 2. That the CIT(A) erred in confirming the reference to DVO as rightly made by AO as per the amended provision u/s 55A w.e.f. 01/07/2012. 3. That the CIT(A) erred in treating the registered valuer's report as fallacious & erroneous." 3. Briefly stated, the facts of the case are that the assessment was completed u/s 143(3) r/w section 147 wherein long term capital gain amounting to Rs. 10,92,200/- has been brought to tax in the hands of the assessee for A.Y 2012-13. The assessee, along with co-owners, had sold a piece of land for a total sale consideration of Rs. 97,35,000/-. Given that the Stamp Duty Authority has adopted the Jantri Value of the said piece of land at Rs. 2,43,51,300/-, the notice u/s 148 was issued as assessee's share of the sale consideration has escaped taxation and provisions of section 50C are attracted. 4. During the course of reassessment proceedings, the AO referred the matter to DVO, Surat on 24.11.2015 for determination of....
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....declared by the assessee is at variance from the fair market value. Accordingly, the AO determined the index cost of acquisition by applying the FMV as on 01.04.1981 at Rs. 10.19 per sq.mtr as against Rs. 380 per sq.mtrs adopted by the assessee and given the assessee's share in the property (9.09%), long term capital gains has been determined at Rs. 10,92,200 which has been brought to tax in the hands of the assessee. 7. Being aggrieved, the assessee carried the matter in appeal before ld. CIT(A). The assessee reiterated the submissions made before the Assessing Officer. It was further submitted that the contention of the AO that the amended provisions of section 55A will apply with retrospective effect is not correct. It was submitted that the law applicable to the year under consideration is the law prior to the amendment and as per the unamended law, the AO cannot make a reference to the DVO u/s 55A of the Act. 8. The ld. CIT(A) held that the AO found a large variance in the valuation of the property and therefore, reference to the DVO was made u/s 55A and 50C of the Act. The DVO has valued the property as on 01.04.1981 at Rs. 10.19 per sq. mtr. as against the value determ....
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....o Section 55(A)(a) i.e. substitution of words "is at variance with its FMV" w.e.f. 01/07/2012 is applicable retrospectively & the old law that FMV as on 01/04/1981 was supported by Reg. Valuer's report, then to make a reference u/s 55A(a) of the Act, AO has to form an opinion that FMV as on 01/04/1981 claimed in Reg. Valuer's report is less than FMV, is not applicable. In support, the assessee relies upon the following judgements in his favour: * CIT vs. Umedbhai International (P) Ltd. (2011) 330 ITR 506 (Cal) * CIT vs. Smt. Mina Deogun (2016) 288 CTR (Cal) 703 * Hiraben Jayantilal Shah vs. ITO (2009) 227 CTR (Guj) 666 * CIT vs. Daulal Mohata (HUF) ITA No. 1031/2008 Mumbai HC * Royal Calcutta Turf Club vs. DCIT (2011) 189 TTJ (Kol) 433 Contention of AO 10. It was further submitted by the ld AR that the contention of AO is that the amended provision w.e.f. 01/07/2012 is applicable with retrospective effect. It was the contention of the AO that the said amendment is clarificatory but that is ill founded, the parliament has not given retrospective effect to the amendment. Thus the law applicable to the year under appeal is the....
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....risdiction of the Assessing officer to refer the matter to the DVO for ascertaining the fair market value of the asset as on 1.4.1981 as per amended provisions of section 55A of the Act. He accordingly supported the findings of the lower authorities. 13. We have heard the rival contentions and perused the material available on record. The relevant provisions which are under consideration are contained in section 55A, it would, therefore, be relevant to refer to the said provisions which reads as under: "55A. With a view to ascertaining the fair market value of a capital 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 a....
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....by the assessee with the fair market value as on 1.4.1981 is based on and in accordance with the estimate made by the registered valuer. The third condition is that the Assessing Officer should form an opinion that the value so claimed by the assessee is less than its fair market value (as per unamended provisions) or is at variance with its fair market value (as per the amended provisions). The formation of the opinion by the Assessing officer therefore has to be seen and examined in the context of determining the liability towards the capital gains and the liability 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 ref....
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.... Accordingly, it is proposed to amend the provisions of section 55A of the Income-tax Act to enable the Assessing Officer to make a reference to the Valuation Officer where in his opinion the value declared by the assessee is at variance from the fair market value. Therefore, in case where the Assessing Officer is of the opinion that the value taken by the assessee as on 1-4-1981 is higher than the fair market value of the asset as on that date, the Assessing Officer would be enabled to make a reference to the Valuation Officer for determining the fair market value of the property. This amendment will take effect from 1st day of July, 2012." 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 ....
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....words "is less then the 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 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. 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 ....
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....mate made by the Registered Valuer, if the Assessing Officer was of the opinion that the value so claimed was less than its fair market value as on 1.4.1981. It would not be the case of the Assessing Officer that the value of the asset shown as on 1.4.1981 was less than the fair market value. Such clause, therefore, as it stood at the relevant time, had no application to the valuation as on 1.4.1981. We are conscious that with effect from 1.7.2012, the expression now used in clause (a) of section 55A is "is at variance with its fair market value". The situation may, therefore, be different after 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 abo....
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.... from 01.07.2012 i.e. by finance Act 2012 the transaction taken place in FY 2010-11 relevant to assessment year 2011-12 and the amended provision would not be applicable on this transaction." It is noted that the aforesaid decision of the Coordinate Bench has since been affirmed by the Hon'ble Gujarat High Court in Tax Appeal No. 1204 of 2018 dated 8.10.2018. 20. Our reference was also drawn to the Co-ordinate Bench decision in case of ACIT, Nashik vs. Shri Bhima Dada Kharate, Nashik (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 valuatio....
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....s of appeal raised by the Revenue." 21. Our reference was also drawn to the Co-ordinate Bench decision in case of Shri Mahdevbhai Mohanbhai Naik, Surat vs. ITO, Ward3(1)(1), Surat (in ITA No. 820/Ahd/2016 dated 11.07.2018) wherein it was held as under:- "12. Thus, the contention of the Learned Departmental 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 judgeme....
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....set 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 80[Assessing] Officer is of opinion that the value so claimedat variance with its fair market value]; There is no doubt 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 ca....
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.... to 1.7.2012, amended provisions were held not applicable. Similarly, in case of Late Shantaben P Patel, Ahmedabad (supra), the Hon'ble Gujarat High Court has reiterated the legal position that for the transaction falling in financial year 2010-11 relevant to AY 2011-12, the matter is covered by the earlier decision in case of Gauranginiben S. Shodhan Indl. (supra). We therefore find that there is convergence of view 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 High Court decision has been cited before us and in any case, the decision of the Hon'ble Gujarat High Court, being the jurisdictional High Court is binding on us. 24. 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....