TaxTMI 
TaxTMI 
2022 (6) TMI 1199
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.... has adopted one of two possible views, then the order of the AO cannot be treated as erroneous even if the Ld. CIT disagrees with the view adopted by the AO. 3. In the facts and circumstances of the case, the Ld. CIT should have appreciated that the power given to the AO u/s 55A to refer valuation of a capital asset to a Valuation Officer is a discretionary power and cannot be influenced, and that too, based only on a report of the Valuation Officer. 4. In the facts and circumstances of the case, the Ld. CIT should have appreciated that the report of a Valuation Officer is nothing more than an opinion, as held by a catena of judicial precedents, and cannot form the basis for interference in the order of the AO, especially so when the AO has recorded a categorical finding in regard to the valuation undertaken by the Registered Valuer based upon whose valuation the assessee has computed Long Term Capital Gain and has accepted the same. 5. In the facts and circumstances of the case, the Ld. CIT has erred in placing reliance on the Explanation 2 to section 263, thus ignoring the settled principle of finality of proceedings, and, further, placing reliance on judicial precedent....
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.... 3 Long Term Capital Gain Rs. 2,02,99,000 4 Less Deduction u/s 54EC (-) Rs. 50,00,000 5 Net Long Term Capital Gain Rs. 1,52,99,100/- In support of indexed cost of acquisition, the assessee has filed valuation report of property as on 01.04.1981 as the property was inherited and was acquired by the assessee before 01.04.1981 as per section 55(2), if the asset is acquired before 01.04.1981 that have been cost of acquisition will be (i) actual cost of acquisition or (ii) FMV (fair market value) on 01.04.1981 at the option of the assessee. As per valuation report, the value of the property as on 01.04.1981 of one third property was Rs. 14,00,000/- and it was accepted by the AO. At the time of hearing proof for brokerage was asked by the AO but the assessee could not furnish the document except Rs. 2,37,500/-. Consequent to that brokerage of Rs. 7,00,000/- was disallowed and long term capital gain was recalculated as under: Sl. No. Particulars Amount 1 Full value of consideration Less Allowed Brokerage Rs. 3,55,72,600 (-) 2,37,500 Rs. 3,53,35,100 2 Less Indexed cost of Acquisition (-) Rs. 1,43,36,000 3 Long Term Capital Gain Rs. 2,09,99,000 4 ....
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.... AO u/s 143(3) dated 27/12/2017 for A.Y.2015-16 is erroneous in so far as it is prejudicial to the interest of revenue and hence, the said assessment order is required to be revised u/s 263 of the Act Therefore. a show cause notice u/s. 263 was issued to the assessee vide letter No CIT(IT&TP/Kol/Revision/Notice u/s263/2018-19/5428 dated 04/03/2019 asking to explain as to why the assessment order dated 27/12/2017 may not be revised/ set aside in accordance with the provisions of section 263 of the income Tax Act 1961. 6. In response to the notice u/s 263, Mr. Kalyanasundaram and Mr. Swagato Banerjee attended the proceedings and filed the reply. The relevant portions of the reply are as follows: 1. At the time of passing the order of assessment u/s 143(3) (assessment order), the Learned Assessing Officer ("Ld. AO') had made inquiries in regard to the computation of long-term capital gains Based upon such inquiries, the Ld. A0 had disallowed assessee's claim towards part of the brokerage expenses and then passed the assessment order that is now the subject of this Revision. 2. Whist passing the assessment order, the Ld. AO has specifically recorded his acceptance of t....
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....There is, therefore, no statutory requirement on the part of the AO to refer the valuation to a Valuation Officer and he is to proceed based on his opinion after going through the records called for/made available to him In the instant case the AO has accepted the Valuation Report and has specifically recorded his acceptance of the same. It is evident that he has applied his mind to the entire matter of computation of capital gains because he has, in fact specifically disallowed part of the claim for brokerage expenses made by the assessee. f. In summary, it is respectfully submitted that based merely on an opinion of DVO without there being anything more to substantiate its conclusions an acceptance of Valuation Report submitted by the assessee that has been accepted by the Ld. AO under the discretionary powers available with him cannot be treated as erroneous calling for interference u/s 263. 5. The assessee relies on the following judicial precedents in support of its submissions: a. ACIT v Dhariya Construction Co 328 1TR 515(SC) in which it was held that the DVO report is merely an opinion and cannot lead to reopening of assessment. b. Jitendar Singh Chaddha v Pr. C....
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.... the valuation report submitted by the DVO. I find that there is wide variation in the Valuation of property. As against the total valuation of the property determined by the DVO at Rs. 27,36,720/, the registered valuer has determined the total value of property at Rs. 42,00,000/-, Therefore, there is a variation of 55% in the value of property. In other words the assessee has taken the cost of acquisition at 55% more than what has been estimated by the DVO. It can be seen that the valuation report of Registered Valuer determining the cost of acquisition of the sold property as being inflated and in order to determine the correct value of such property. it was necessary for the AO to have referred this property to DVO. Therefore, it cannot be held that the assessment order was passed by the AO u/s.143(3) vide order dated 27/12/2017 with due application of mind. As the reference to DVO was not made by the AO, he could not get the correct value of the property to determine the cost of acquisition of the sold property and hence, he ended up in passing of assessment order taking a high value of the cost of acquisition, resulting into assessing short amount of Long Term Capital Gain on ....
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....estimate made by a registered valuer is at variance with its fair market value [Section 55A(e)] or if the AO is of the opinion that it is necessary to do so (emphasis supplied). The reference to the Valuation Officer is, therefore, discretionary and is a power that has specifically been vested in the A0. A difference in valuation does not lead to a Conclusion that facts have been erroneously assumed without there being anything more to substantiate that the valuation conducted by the DVO represented a fair value. e. There is. Therefore, no statutory requirement on the part of the AO to refer the valuation to a Valuation Officer and he is to proceed based on his opinion after going through the records called for/made available to him. In the instant case the AO has accepted the Valuation Report and has specifically recorded his acceptance of the same It is evident that he has applied his mind to the entire matter of computation of capital gains because he has, in fact specifically disallowed part of the claim for brokerage expenses made by the assessee. f. In summary, it is respectfully submitted that based merely on an opinion of DVO without there being anything more to subst....
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....ue stated in a deed of transfer cannot be necessarily be considered a fair value of the price at which the transfer took place Admittedly, this is a rebuttable presumption but nonetheless reflects market realities." 7. According to the ld. AR after having perusal of valuer's report, the AO made addition of Rs. 7,00,000/- in respect of LTCG. Therefore according to ld. AR AO's order cannot be held to erroneous or prejudicial to the interest of revenue and Ld. CIT (International Taxation) lacked jurisdiction to intervene in the order of AO. The ld. AR further submitted the following decisions to advance his argument: "i. Monoj Kumar Biswas vs Principal Commissioner of Income Tax-9, (ITAT, Kolkata) ii. Jitindar singh Chadha vs Pr. CIT-18 (ITAT, Delhi) iii. Pr. CIT-2 vs J. Upendra Construction Pvt. Ltd. (HC, Guj) iv. Narayan Tatu Ranne vs ITO, Ward-27(1) (Mumbai ITAT)" 8. Per contra, the ld. CIT, DR submitted that in the facts of this case, the AO ought to have referred report of DVO and he shall take decision as per law to determine the actual cost of acquisition of the property sold and to determine the correct amount of long term capital gain earned by the assessee on ....
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....dicial 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/s 263 of the Act, we have to examine as to w....
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....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 sub-section (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 perusal of the report/estimate of t....
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.... 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 less than the stamp du....
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....ur 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 and the date of registr....