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TaxTMI 
TaxTMI 
TaxTMI 
2021 (9) TMI 603
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....d in setting aside the order dated 18.12.2017, passed by AO u/s. 143(3) and also erred in directing the AO to frame fresh assessment and call for valuation from the competent authority as mandated u/s. 56(2) in relation to the deed of sales agreement and conveyance. 8. For that the assessee/appellant had entered agreement of transfer/sale in the FY 2012-13 (AY 2013-14) and as such the provisions of section 56(2)(vii)(b)(ii) which was amended from AY 2014-15 onwards has no applicability in the instant case." 3. The facts of the case are that the assessee had filed return of income for AY 2015-16 on 29.04.2016 disclosing a total income of Rs. 13,25,990/-. The assessee and his wife on 06.02.2013 (i.e. in FY 2012-13, AY 2013-14) had entered into an agreement with the developer/seller for booking two flats with parking space at premises No. 35/A, Middle Road, Santoshpur, Kolkata-700 075 for a consideration of Rs. 60,00,000/-. According to the assessee, the said agreement was entered on 06.02.2013 (AY 2013-14) when the property was under construction. According to the assessee, the assessee had paid sums of Rs. 3,00,000/-, Rs. 21,00,000/- and Rs. 36,00,000/- in AYs 2013-14, 2014-15 an....
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....s. 263 of the Act wherein the main thrust of his allegation that AO erred in relying on the estimate of a private-valuer to compute/accept the market value of the flats and thus he erred in passing the assessment order. Pursuant to the SCN (refer page 1 and 2 PB) the assessee replied vide letter dated 16.10.2019 (refer pages 3-4 of PB) wherein the assessee brought to the notice of the Ld. Pr. CIT that the AO has passed the assessment order after considering the valuation report dated 11.10.2017 of the registered valuer namely Shri Sarbajit Dutta who is an approved valuer as per section 55A of the Act and this valuer has been given Registration Certificate dated 01.11.2011 by the Chief Commissioner of Income Tax (refer page 13 of PB) who has valued the property after inspection at Rs. 67,57,600/- and, according to assessee, thereafter the AO after considering the estimation by the approved valuer of the department, and being satisfied the AO has accepted the estimate and made the addition of Rs. 7,57,600/- which action according to assessee was as per section 50C read with section 55A of the Act. And also the assessee brought to the notice of the Ld. Pr. CIT that section 56(2)(vii)(....
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....at the order passed by the A.O. was erroneous and prejudicial to the interest of the revenue. Thereafter, notice u/s. 263 was issued to the assessee on 12.11.2018."[Emphasis given by us] 6. Here, we can notice that Ld. Pr. CIT has accepted the plea of the assessee in this regard that AO has acted upon the valuation of the flats made by Registered Valuer recognized by the Chief Commissioner of the Income Tax Department. However, the Ld. Pr. CIT was of the opinion that AO still erred in accepting the Registered Valuer's valuation report of flats at Rs. 67,57,600/- when the stamp valuation authority has valued it at Rs. 80,82,150/- and according to Ld. Pr. CIT, the AO ought to have referred the valuation to the Departmental Valuation Officer (hereinafter referred to as 'DVO') to reach a judicious and proper conclusion. 7. It is to be noted that even though the assessee contested the proposed action of the Ld. PCIT and submitted that section 56(2)(vii)(b)(ii) is not applicable, the Ld PCIT ignored the objection and being not satisfied with the submission of assessee, the Ld. PCIT passed the impugned order setting aside the order of the AO dated 18.12.2017 and directed the AO to call ....
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....Y 2013-14 is concerned only Sec. 56(vii)(b)(i) of the Act is existing in force and this provision is not applicable in assessee's case because it is only applicable when an assessee receives an immovable property without any consideration. And since assessee agreed/and purchased the flat for Rs. 60 lakhs, question of applicability of section 56(2)(vii)(b)(i) also does not arise and the amendment brought in by Finance Act 2013 w.e.f. 01.04.2014 by inserting (ii) to sub clause (b) to sec. 56(2)(vii) of the Act is not applicable and Ld. Pr. CIT erred in taking aid of it and thus mis-directed himself to interfere with the assessment order passed by the AO. So, according to Ld. AR, AO's order cannot be held to be erroneous or prejudicial to the interest of revenue and so the Ld. Pr. CIT lacked jurisdiction to intervene in the order of AO. 9. Per contra, the Ld. CIT DR submitted that in the facts of this case, the AO ought to have referred the valuation to the DVO since the sale value of Rs. 60,00,000/- for two flats was very much less than Rs. 80,82,150/- which was the stamp duty value of the property in question. And the AO has simply accepted the valuation report submitted by the reg....
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....r the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to the interest of the revenue'' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue "unless the view taken by the Assessing Officer is unsustainable in law". 11. In the light of the binding judicial precedent and well established principles, while we examine the legal issue as to whether the Ld. PCIT had made out a case as to invoke the revisional jurisdiction u/....
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....on 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall with the necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the [Assessing] Officer under subsection (1) of section 16A of that Act. Explanation.-In this section, "Valuation Officer" has the same meaning, as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).]" Thus we note that section 55A of the Act as amended by the Finance Act, 2012 w.e.f. 01.07.2012 now provides that for ascertaining the fair market value of capital asset, the AO may refer the valuation of a capital asset to a valuation officer in a case where the value of the asset estimated by the registered value of the assessee in the opinion of the AO is at variance with its fair market value. So, it can be discerned that in order to ascertain the fair market value (hereinafter the FMV) of a capital asset, the AO may refer the valuation of capital asset to a valuation officer (hereinafter the DVO) when he is of the opinion that the value of the asset as claimed by the assessee as estimated by a registered valuer is at variance with its FMV. In other words, if the AO after peru....
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....s. 56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources", if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head "Income from other sources", namely :- ....... ...... [(vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,- (a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum; [(b) any immovable property,- (i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;" It is pertinent to note that Sub-clause (ii) (infra) was inserted to Clause (vii)(b) to Sub-section (2) of section 56 by the Finance Act, 2013 w.e.f. 01.04.2014 which reads as under: "(ii) for a consideration which is....
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....ransferred in his favour and, consequently, some right of the vendor is extinguished. Moreover, Explanation 2 to Section 2(47) of the Act which was added by Finance Act, 2012 with retrospective effect on 1.4.1962 clearly provides that transfer of an asset includes disposing of or parting with an asset by way of an agreement. Thus, we note that the process of sale is initiated from the date of sale agreement, the character of the transaction vis-à-vis Income Tax Act should be determined on the basis of the conditions that prevailed on the date of transaction was initially entered into and not on the date of conveyance deed executed, because by executing the conveyance deed, the assessee has only completed the contractual obligation imposed upon it by virtue of the sale agreement. Further, we note that by Finance Act 2013, w.e.f. AY 01.04.2014, the Parliament has accepted the above principle for the purpose of computing deemed income on acquisition of immovable property u/s. 56(2)(vii) by inserting 1st proviso to section 56(2)(vii) which reads as under: "Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property an....