Akil Kureshi, J. - Facts are identical. Issues involve same parties. We may, therefore, refer to facts as arising in Tax Appeal No.149 of 2013.
2. Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal ("the Tribunal" for short) dated 13.7.2012 raising following questions for our consideration.
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Whether in the facts and circumstances of the case, the Hon'ble ITAT has erred in law in confirming the order of learned CIT(A) deleting the addition of Rs.81,57,643/- on account of long term capital gain u/s. 48 of the Act by the Assessing Officer on the basis of valuation report called for under section 55A(b)(ii) of the Income-Tax Act? |
(b) |
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Whether in the facts and circumstances of the case, the Hon'ble ITAT has erred in law in completely overlooking the provisions of section 55A(b)(ii) of the Income-Tax Act while passing the impugned order confirming the deletion of the addition on account of long term capital gain? |
(c) |
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Whether in the facts and circumstances of the case, the Hon'ble ITAT has erred in law in confirming the order of CIT(A) deleting the addition on account of long term capital gain made by the AO after holding that the AO has not brought on record any material to prove that the assessee has received much more than what was disclosed in the sale deed, even though the same was not the requirement of any of the provisions of the Income Tax Act for computation of capital gain?" |
3. Issue pertains to computation of capital gain in the hands of respondent assessee for which purpose the Assessing Officer had made a reference to the Departmental Valuation Officer("DVO" for short). The Tribunal, in the impugned judgment, held that such reference was not competent. It would be necessary to give brief facts before adverting to the legal controversies.
4. For the Assessment Year 2006-07, the assessee filed return of income declaring total income of Rs.2.25 lakhs. Such return was taken in scrutiny by the Assessing Officer, who noticed that the assessee was a co-owner of a house property in Jai Shri Swaminarayan Commercial Co-operative Society Ltd., which was sold by two sale deeds executed on 14.7.2005 for Rs.4,25,50,000/-. The Assessing Officer noted that the property was situated at Ashram Road, Ellisbridge, Ahmedabad, which is a posh area. He was of the opinion that the property rates were booming during the period of sale. He, therefore, recorded that looking to the status of the property, there was strong reason to believe that the assessee had underestimated the value of sale consideration by adopting lower rate. Simultaneously, fair market value as on 1.4.1981 was also not correctly taken. He, therefore, referred the question of such valuation to DVO. DVO opined that the fair market value as on 14.11.2005 was Rs.13,73,90,000/- against declared sale value of Rs.8,51,00,000/- by the assessee. DVO also opined that value as on 1.4.1981 should be assessed at Rs.94,00,000/- as against that shown by the assessee of Rs.1,03,00,000/-.
5. The Assessing Officer issued a show cause notice to the assessee why such estimated rates not be adopted for the purpose of fair market value of the property as on 1.4.1981 and on the date of sale. After hearing the assessee, the Assessing Officer by adopting such valuation, added a sum of Rs.81,57,643/-to the total income of the assessee by way of capital gain.
6. The assessee carried the matter in appeal. CIT(Appeals) by order dated 9.11.2009 held that reference itself was not maintainable. CIT(Appeals) discussed at considerable length various provisions contained in Chapter IV of the Income-Tax Act, 1961 ("the Act" for short) besides section 55A thereof.
7. Revenue carried the matter in appeal before the Tribunal. The Tribunal, for reasons somewhat different from those adopted by CIT(Appeals), dismissed the Revenue's appeal. Revenue has thereupon filed present Tax Appeal questioning those decisions.
8. Having heard learned counsel for the parties, we notice that section 55A, as it stood at the relevant time, provided as under:-
"55A. Reference to Valuation Officer.— With a view to ascertaining the fair market value of a capital asset the purposes of this Chapter, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer—
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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 less than its fair market value; |
(b) |
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in any other case, if the Assessing Officer is of opinion— |
(i) |
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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) |
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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-section(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 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." |
9. For the record we may note that words "is less than its fair market value" came to be substituted by Finance Act, 2012 with effect from 1.7.2012 by the words "is at variance with its fair market value".
10. Section 55A of the Act, as is clear from its language, permits reference to DVO by the Assessing Officer under certain circumstances. Such reference, however, is with a view to ascertaining the fair market value of capital asset for the purposes of chapter IV. In the present case, the reference was made to DVO for ascertaining the fair market value of the capital asset as on 1.4.1981 as well as on the date of sale. We may, therefore, separately examine whether such reference was competent with reference to the above mentioned dates.
11. Taking the question of ascertaining the fair market value on the date of sale, we notice that section 48, which is also contained in chapter IV of the Act pertains to method of computation of capital gain. A detailed mechanism has been provided for such computation of the income chargeable under the head "Capital Gains". It provides, inter alia, that the income chargeable under the Head "Capital Gains", shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, the amounts mentioned therein that is the expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of the asset and the cost of any improvement thereto. Main thrust of section 48 of the Act, therefore, is the full value of consideration received or accruing as a result of the transfer of the capital asset as reduced by expenditure mentioned therein and the cost of acquisition of the asset. Section 55A, as we have noticed, refers to the reference to DVO for ascertaining the fair market value of a capital asset. Such ascertainment of fair market value with the aid of the DVO's report would have no relevance for the purpose of determining full value of consideration received or accruing as a result of the transfer of the capital asset for the purposes of section 48 of the Act.
12. In that view of the matter, the reference to DVO for ascertaining the fair market value of the capital asset as on the date of the sale in the present case would be wholly redundant.
13. We are conscious that section 50C of the Act introduced in the statute by Finance Act, 2002 with effect from 1.4.2003 now provides for special provision for full value of consideration in certain cases. The said section provides a deeming fiction under which consideration received or accruing as a result of transfer of a capital asset being land or building or both can be replaced by the value adopted or assessed or accessible by stamp valuation authority for the purpose of payment of stamp duty in respect of such transfer. Sub-section (2) of section 50C, however, permits the assessee to dispute such valuation adopted by the State Stamp Valuation Authority and in such a case, it is open for the Assessing Officer to refer the valuation of the capital asset to a Valuation Officer. Present is not a case of this nature, as is clear from the assessment order in which the Assessing Officer has referred the reference to DVO. Even otherwise, we are informed that in the present case, sale consideration reflected in the sale deeds was higher than the valuation adopted by the Stamp Valuation Authority.
14. Somewhat similar question came up for consideration before this Court in judgment dated 28.3.2011 in the case of CIT v. Girish Damjibhai Patel [Tax Appeal No.1016 of 2009] and allied matters, in which it was held and observed as under:—
"20. Quite apart from the CIT (A) discarding the very Valuer's Report, we find that the reference itself was not competent insofar as he wanted to ascertain fair market value of the land on the date of sale. In absence of any material on record before us by which Assessing Officer could have concluded that the consideration indicated in the sale-deed did not reflect the full consideration received by the assessee, it was not possible to assess the capital gain by estimating what would be the fair market value of the land through valuer's report.
21. Decision of the Delhi High Court in the case of CIT v. Smt. Nilofer I. Singh [2009] 309 ITR 233 was also brought to our notice; wherein, relying on the decision ofGeorge Henderson & Co. Ltd. (supra) and Gillanders Arbuthnot & Co. (supra), the Division Bench observed that expression "full value of consideration" used in Section 48 of the Act does not have reference to the market value but only to the consideration referred to in the sale deed as sale particulars of the assets which have been transferred."
15. Coming to the question of reference to DVO for ascertaining the fair market value as on 1.4.1981 also, we find that such reference was not competent. We have noticed that prior to the amendment in section 55A with effect from 1.7.2012 in a case, the value of the asset claimed by the assessee is in accordance with the estimate 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 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. Any such situation would be governed by clause (a) of section 55A of the Act and the Assessing Officer could not have resorted to clause (b) thereof as held by the Division Bench of this Court in the case of Hiaben Jayantilal Shah v. ITO [2009] 310 ITR 31/181 Taxman 191 (Guj.). In the said decision, it was held and observed as under:—
"10. Under clause(a) of sec. 55A of the Act under the Assessing Officer is entitled to make the reference to the Valuation Officer in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by the Registered Valuer, if the Assessing Officer is of the opinion that the value so claimed is less than the fair market value. In any other case, as provided under clause(b) of Sec. 55A of the Act, the Assessing Officer has to record an opinion that (i) the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage or by more than such an amount as may be prescribed; or (ii) having regard to the nature of the asset and other relevant circumstances, it is necessary to make such a reference."
17. In the result, we see no reason to interfere. However, we have given our independent reasons and should not be seen to have confirmed the reasonings adopted by the Tribunal in the impugned judgment. Tax Appeal is dismissed.