TMI Blog2003 (10) TMI 271X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,02,000 to Shri Chanan Dass S/o Rewal Dass, r/o AG-26, Shalimar Bagh, Delhi-110 052. After indexing, the cost declared was Rs. 187,570 The AO considered the sale price of the plot to be low. Accordingly, the Income-tax inspector of the ward was deputed to visit the site and make local enquiries and thereafter submit his report. A perusal of the assessment order bears out that the inspector of the ward contacted shop keepers and residents of the area and submitted his report saying that the value of the plot was understated and the prevailing rate was much higher. In view of the same, the matter was referred to the District Valuation Officer, IT Department under s. 55A of the Act for determining the fair market value of the plot on the date of the sale i.e.6th June, 1997. The AO made a reference to the valuation cell; invoking s. 55A relying upon Jindal Strips Ltd. vs. ITO (1979) 10 CTR (P H)(FB) 103 : (1979) 116 ITR 825 (P H)(FB). Reliance was also placed upon William De Noronha vs. Asstt. CIT (1998) 145 CTR (All) 222 : (1997) 227 ITR 27 (All). 4. The Valuation Officer, Unit-III; IT Department determined the value of the plot at Rs. 24,10,621 on the date of sale. As per the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dt.5th March, 2001which was also taken into consideration by the AO. 6. Accordingly, relying upon Killick Nixon Co. vs. CIT (1967) 66 ITR 714 (SC), the AO was of the view that the onus lies upon the assessee to prove, that whatever amount mentioned in the sale deed is correct. The AO accepted the valuation report of the Valuation Officer and capital gain was worked out as a result of which addition was made to the extent of Rs. 20,77,272." 3. Before the CIT(A), the specific challenge posed to the reference made to the DVO without affording an opportunity to the assessee was dismissed by the CIT(A). This has been discussed in the impugned order in paras 7 8. They read as under:- "7. In appeal before the first appellate authority, it was contended that the reference was made to the Departmental Valuation officer without affording an opportunity to the assessee. Accordingly, no addition could be made on the basis of the said report unless it is proved that the actual consideration received by the assessee was nothing more than the amount disclosed by the assessee. It was further contended that there is no basis on which a notional income was added in the hands of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s further contended that the rights acquired by a person by transfer by power of attorney is a limited right. As a result of that the amount received by the assessee was not much whereas the DVO has considered instances where; complete rights are acquired by the person who succeeds in its bids in auction. In support of this claim, our attention was invited to paper book p. 3 which is the agreement to sell and purchase. 13. Page 5 of the paper book and internal p. 3 of the documents was also specifically referred to in order to contend that the unearned increase was also to be paid and borne by Shri Chanan Dass and the assessee would have no liability for the same. It was further contended that the comparison was made by the DVO with a plot of land which was a kilometer away. Accordingly, the valuation of the two could not be the same. It was vehemently contended that in view of the fact that the assessee has received an amount of Rs. 4 lakhs odd and in the absence of any evidence with the Department that the assessee had, in fact received,a higher amount, there was no reason to take a notional value. It was further contended that there was no provision for that matter on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alter notice and in the presence of the assessee's representatives. The DVO's report has been confronted to the assessee and the objections of the assessee have also been considered and apart from this, the DVO has made an effort to give reasons for not accepting the contentions of the assessee. Accordingly, full and proper opportunity at all stages has been afforded to the assessee. For the proposition that before a reference has to be made, no opportunity is to be granted to the assessee, reliance was placed upon William De Noronha Ors. vs. Asstt. CIT Ors. (1998) 145 CTR (All) 222 : (1997) 227 ITR 27 (All) at p. 29. It was further contended by him that the learned authorised representative himself has stated that the comparison is with a land which is sold within a radius of one kilometer away. As such, the assessee could have no grievance. 16. With regard to the judgments relied upon by the learned authorised representative, it was stated that the issue decided by the Hon'ble Supreme Court in K.P. Varghese's case pertained to s. 52 of the Act which no longer stands on the Statute. As such, the decisions of the High Courts and Supreme Court which have been relied upon by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot an outright sale. Referring to internal p. 2 of the agreement, the following paragraph was further highlighted: 'That the actual physical possession of the said plot has been delivered to the second party on the spot in vacant condition and the second party has taken possession thereof and is fully entitled to sell and transfer the same in the manner he may like, or construct any construction and the first party, his heirs, successors and assigns shall have no claim, title and interests whatsoever in the paid property.' 21. The learned Departmental Representative, referring to p. 5, stated that the assessee had appointed Shri Pawan Kumar Gupta nominee of the purchaser as his general/special attorney regarding the said property; who was to perform all acts. deeds and things in connection with the transfer of the said property in favour of the purchaser and get his name registered. It was also contended that the fact that expenses pertaining to stamp and registration of the sale deed were to be borne by the purchaser further supports the case of the Revenue. It was also contended that, in fact, reliance placed by the learned authorised representative on internal p. 3 of agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d objections, no fault has been pointed out in the report of the DVO apart from situational and size criteria which had been taken into account by the DVO. It was also contended that it has been successfully demonstrated by him that adequate opportunity was given to the assessee at all stages. In the ultimate analysis, reliance was placed upon the impugned order." 10. Accordingly, the submissions made before us by either side have been brought out in detail which have been reproduced in the earlier part of this order. The issue of ascertaining the fair market value of the property for the purpose of capital gain under s. 55A of the Act has been adjudicated by us in the following manner vide paras 24 to 32: "24. We have heard the rival submissions and perused the material.placed on our files. We are of the view that it would be appropriate to briefly discuss the cases relied upon by both the sides. First and foremost, reliance has been placed upon K.P. Varghese's case by the learned authorised representative. We have taken into consideration the fact that s. 52 has been deleted by the legislature from the statute by the; Finance Act, 1987 w.e.f.1st April, 1988. The decision rend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the Tribunal held: 'As regards the power of the AO to make a reference to DVO for determining the cost of construction of property, a bare reading of s. 55A shows that by inserting this provision the legislature intended to empower the AO to make a reference to DVO for arriving at the correct valuation of property including the cost of construction for the purpose of computing the total income of the assessee as envisaged under Chapter IV. Nowhere in this section it is mentioned that the AO is to make a reference for ascertaining the fair market value of the capital asset for the purpose of capital gains only. This inference cannot be drawn only because of the reason that s. 55A falls under Sub-Chapter 'E', i.e., capital gains, of Chapter IV. Had it been the intention of the legislature, the legislature would have mentioned the word 'for the purpose of this Sub-Chapter 'E' in place of the word 'for the purpose of this Chapter' But this was not done by the legislature. Moreover, as per the Indian Evidence Act, a Presiding Officer may seek expert opinion in a particular field for arriving at correct conclusion, if he feels that expert opinion is necessary. Similarly, in the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such a process. The power of second reference could also be traceable to s. 142(2) which, empowers the ITO to make inquiries which he considers proper for the purpose of obtaining full information in respect of the income of any persons.' 29. The order of the Indore Bench of the Tribunal which has been relied upon by the learned Departmental Representative has also taken into consideration the decision of the Madras High Court in the case of C.T. Laxmandas. Their Lordships of the Madras High Court dissented upon the judgment of the Punjab Haryana High Court in the case of Jindal Strips which has narrowed the scope of s. 55A only to 'capital gains'. Their Lordships of the Madras High Court had relied upon the decision of the A.P. High Court in the case of Daulatram Ors. vs. ITO and held as under: I am in entire agreement with the view taken by the Division Bench of the Andhra Pradesh High Court, referred to supra, and prefer to follow the same in preference to the decision of the Full Bench of thePunjaband Haryana High Court, referred to above. The plea on behalf of the petitioner that except for the purpose of capital gains for no other purpose s. 55A could be availed of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue which was before their Lordships of the Allahabad High Court, it is seen that as far as the reference to the Valuation Officer is concerned, under s. 55A, the said issue has been held against the assessee. 31. Learned Departmental Representative has also placed reliance on the Third Member order of Patna Bench of the Tribunal in the case of Shanti Complex vs. ITO (1997) 63 ITD 181 (Pat)(TM) for the contention that the reference made to the DVO is valid in law. Learned authorised representative has vehemently stated that this decision is on the applicability of s. 69 and addition made is on the basis of unexplained investments and does not pertain to capital gains. 32. Thus, after fully analyzing the position of law and the facts of the present case, it is eminently home out that as far as the position of law is concerned, till the action was contemplated under s. 52, the decision of the apex Court in the case of K.P. Varghese held the field and the subsequent decision of the Supreme Court in the case of Godavari Corpn. Ltd. and the decision of the Delhi High Court in the case of CIT vs. Late Gulshan Kumar as such are no longer good law as the said section does not stand o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds against the said reference are also rejected." 12. The DVO's report has also been considered by us and the finding arrived at therein has been arrived at after careful consideration. We have taken note of the fact that the assessee has made submissions in response to the DVO's report and has participated before him. Thus, the undisputed fact is that the DVO's report has been confronted to the assessee and in fact, he has given due consideration to the contentions raised before him. In the impugned order, we have also taken note of the fact that in the course of the hearing before us, no infirmity has been pointed in the DVO's report which fact has been discussed by us in paras 35 to 39. We have also taken note of the fact that apart from not pointing out any defects in the DVO's report before us or arguing that despite taking assessee's submissions into consideration, the DVO's report still suffered from some other defect the assessee has, unfortunately sought to rely only upon decisions and not considered it necessary to counter the report of an expert by a valuation report of some other recognized expert and has merely contested the issue on legal principles without referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of transfer by power of attorney and not a case of sale. After due consideration, we are of the view that the said argument deserves to be dismissed. While discussing the submissions of the learned Departmental Representative, we have reproduced at length from the agreement to sell and purchase entered into by the assessee. A perusal of this document eminently bears; out that it is a case of sale and not transfer by power of attorney irrespective of the fact that at this stage, the assessee wants to ascribe to it the nomenclature of transfer by power of attorney. Without repeating or reproducing from the text of the said document which has already been done in the earlier part of this order, we are of the view that these arguments of the assessee deserve to be dismissed. 36. We have also taken into consideration the fact that apart from the value which the: assessee has returned, no valuation report by any registered valuer has either been placed on record by the assessee before any of the tax authorities nor any effort has been made to show that any such valuation has been made by the assessee in support of his contention that the correct value is the returned value by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perusal of paper book p. 16 shows that on account of size, deduction has been given to the extent of 0.10 per cent Thus the objection of the assessee to the DVO's report has been considered. Vide para (e) at p. 24, it has been stated by the assessee that no consideration was given to the fact that there was a dispute of ownership of the said plot between the assessee and his brothers and the matter was ultimately mutually settled between the brothers. Thus it was stated that it is a known fact that the history of the ownership and disputes attached thereto always have a far-reaching impact on the valuation of properties. However, in the course of arguments before us. nothing has been stated in reference to this and even in the written submissions, the said submission has not been supported by any dispute pending before any Forum, As such, nothing turns on this bald statement. 38. Similarly, at p. 24 para (f) it is stated by the assessee that the purchaser of the properties sold in an auction derives a clear title over the property without any further obligation whereas in case of a purchaser of a leasehold plot in normal sale, the unearned increase is to be paid which affects the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion the decision of the apex Court relied upon by the assessee, namely, CIT vs. Ranchi Club. Accordingly, on the basis of this, it was contended that the matter may be restored for necessary verification. 42. We have heard the rival submissions and perused the material placed on our files and taken note of the decisions relied upon before us. It is seen that no doubt in the assessment order, the observation of the learned AO is "Charge interest as per rules. Penalty proceedings under s. 271(1)(c) have been initiated, separately". But, whether the computation which is a part of the assessment order as per the decision of the apex Court in the case of Kalyan Kumar Ray has put the assessee to notice that interest under s. 234B is also been charged, is not available before us. Thus, the test as laid down in the case of Uday Mistanna Bhandar/Ranchi Club Ltd. (1997) 137 CTR (Pat) 376 : (1996) 222 ITR 44 (Pat) which has been upheld by the apex Court still needs to be verified and it is to be seen whether the facts of the present case are in conformity with the decision of the apex Court in the case of Kalyan Kumar Ray/Ranchi Club or not, Accordingly, for necessary verification, the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) that no evidence has been brought on record by the Revenue, which would show that consideration over and above the apparent amount has passed. It is also not the Revenue's case before us that the return of the flat to the company by the assessee was a sham transaction or a transaction with a motive for tax avoidance. During the course of the present; hearing, nothing has been brought to our notice, which would show any adverse action having been taken in the case of the transferee and it must be appreciated that this is the Revenue's appeal and any evidence which they want to rely on must be filed by them. In the final analysis, we uphold the action of the CIT(A)." 16. Reliance has also been invited to the order dt.3rd Jan., 2003in ITA No. l428/Del/2002 of a co-ordinate Bench. The decisions considered in paras 26, 27, 28 29 of the impugned order, namely, Jindal Strips (Punjab Haryana High Court), ITO vs. Pradeep Kumar Badjatiya Co.; Daulat Ram vs. ITO and C.T. Laxmandas have also been referred to. Referring to these paragraphs and judgments, if was argued that they pertained to unexplained investment in the cost of construction and property, the ratio of which should no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the present MA. The assessee has attempted to re-argue its appeal and obtain a review of the order which is not permissible under the provisions of the Act. In the course of the hearing, it was stated on behalf of the assessee that the impugned order can be recalled in view of the fact that the Tribunal had recalled its order in the case of Friends Overseas in IT(SS) No. 49/Del/96. It was put to the learned authorised representative that in view of the fact that one of us (JM) is the author of MA No. 23.4/Del/2002 in IT(SS) No. 49/Del/96 of Friends Overseas and, as such, the Bench was in a position to emphatically state that the said order had not been recalled, the learned authorised representative conceded that he is basing his submissions on what he was told by some counsel. At this juncture, it was also indicated by the Bench that in case some order has been recalled, this fact by itself does not lay down the proposition that orders can be recalled at the drop of a hat An order in case it suffers from some mistake apparent from the record can be recalled. Thus, in case this act of recall is warranted in a particular situation, it does not lay down a blanket law that recalli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eby it had challenged addition of Rs. 12 lakhs odd on account of capital gains on the transaction of assessee's 50 per cent share in flat in Kailash building. In the facts of that case, there was no evidence brought to the notice of the Tribunal nor was there any valuation report in support of the Revenue's assertion. As such, the finding arrived at by the Tribunal in that order does not in any way detract from the finding arrived at in the impugned order. Accordingly, reliance placed thereon is misplaced as the said case proceeds on peculiar facts of its own. 23. In Sankta Prasad Gupta in ITA No. 1428/Del/97 the Tribunal vide its order dt. 3rd Jan., 2003, the peculiar facts were that the purchase price of the two properties in question on 7th July, 1997 and 25th July, 1997, had been accepted and their sale on 8th Sept., 1997 and 30th May, 1997, had not been accepted. The Revenue did not rely upon any valuation report and the Tribunal on a perusal of facts did not agree with the finding of the tax authorities in view of the fact that difference of period between the purchase and sale was only two months in the case of the first property and three days in the case of the second pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial on record to prove that the assessee has received more consideration than what he has declared, the AO may take recourse to the provisions of s. 55A for determining the fair market value. Accordingly, it is seen that apart from the fact that the reference to the DVO could be made under s. 55A, the Tribunal therein on a comparison of the two valuation reports came to the conclusion that the case of the assessee was allowed in view of the fact that it was supported by the valuation report of the approved valuer. In the facts as they stand, the only report of an expert is the report of the DVO which has been duly confronted to the assessee and his objections thereto have been taken into consideration. Merely relying upon various decisions and observations in different cases would not help the assessee. The tacts on record have to be taken into consideration and thereto the decisions are replied. 26. It may be pertinent to state here that s. 2(24) defines the word "income". The definition is inclusive and covers "capital gains" chargeable under s. 45. Sec. 4 is the charging section and it provides that income-tax shall be charged in respect of the total income of the previous yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as such proposed to be assessed as capital gains in the hands of the assessee. 27.3 The objections of the assessee against the reassessment proposed were rejected and Rs. 48,500 was included as capital gains and brought to tax. The AO rested his decision to assess a sum of Rs. 48,500 to tax on sub-s. (2) of s. 52. Being of the view that this sub-section did not require as a condition precedent that there should be understatement of consideration in respect of transfer and it was enough to attract the applicability of the said sub-section if the fair market value of the property as on the date of the transfer existed the full value of the consideration declared by the assessee by an amount of not less than 15 per cent of the value so declared which was the, position in the present case. 27.4 The AO could not invoke s. 52 sub-s. (1) for bringing the sum of Rs. 48,500 to tax in view of the fact that admittedly, there was no understatement of consideration in respect of the transfer of the house which was in favour of daughter-in-law and five of his children who were persons directly connected with him and it was not possible to say that the transfer was effected by the assessee wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an amount of not less than 15 per cent of the value so declared. 27.12 Accordingly, in these facts, their Lordships held that sub-s. (2) of s. 52 had no applicability in a case of a honest and bona fide consideration whether the consideration in respect of the transfer has been correctly declared or is disclosed by the assessee even if the condition of 15 per cent difference between the fair market value of the capital asset as date of transfer and the full value of the consideration declared by the assessee is satisfied. 27.13 Thus, the Revenue in order to invoke the said sub-section must show not only the fair market value of the said asset as on the date of transfer exceeds the full market value declared by the assessee by not less than 15 per cent of the value so declared but also that the consideration has been understated and the assessee has actually received more than what is required by him. It is only that the two conditions are satisfied when it could be considered that the Revenue has discharged its burden. Their Lordships while examining as to the purpose why the Parliament has introduced the first condition as a prerequisite for the applicability of sub-s. (2) at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Lordships at p. 618 were careful to observe: "We find that in the present case, it was not the contention of the Revenue that the property was sold by the assessee to his daughter-in-law and five of his children for a consideration which was more than the sum of Rs. 16,500 shown to be the consideration for the property in the instrument of transfer and there was an understatement or concealment of the consideration in respect of the transfer. It was common ground between the parties and that was finding of fact reached by the IT authorities that the transfer of the property by the assessee was a perfectly honest and bona fide transaction where the full value of the consideration received by the assessee was correctly disclosed at the figure of Rs. 16,500. Therefore, on the construction placed by us, sub-s. (2) had no application to the present case and the ITO could have no reason to believe that any part of the income of the assessee had escaped assessment so as to justify the issue of a notice under s. 148. The order of reassessment made by the ITO pursuant to the notice issued under s. 148 was accordingly without jurisdiction and the majority judges of the Full Bench were i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (6) of s. 16A, cls. (ha) and (i) of sub-s. (1) and sub-ss. (3A) and (4) of s. 23, sub-s. (5) of s. 24, s. 34AA, s. 35 and s. 37 of the WT Act 1957 (27 of 1957), shall with the necessary modifications, apply in relation to such reference as they apply in, relation to reference made by the AO under sub-s. (1) of s. 16A of that Act. Explanation In this section, "Valuation Officer" has the same meaning, as in cl. (r) of s. (2) of the WT Act 1957 (27 of 1957)." 27.16 As a consequence to the introduction of the said section in the Statute, the Central Government appointed a large number of valuation officers under s. 12A of the WT Act. 28. The issue before the Tribunal in the appeal proceedings hinged on the material fact that there was in existence a valuation report of an expert which was duly confronted to the assessee. His objections thereto had been considered and as a result the valuation report of the DVO stood modified. Even after that the assessee's objections were considered, situational variance and size considerations were considered. In the course of the hearing, on behalf of the assessee, no defects in the valuation report were pointed out. Merely, reliance was pla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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