TMI Blog2007 (8) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... this property was shown by the assessee at Rs. 54,26,804. On being called upon to explain the difference, the assessee stated that she had maintained complete books of account and the cost of construction shown by her was as per regular accounts. The AO did not concur with the submission advanced on behalf of the assessee on the ground that the shops shown to have been sold were having much higher value for the purpose of registration. It was further opined that since the provisions of s. 50C were brought into existence w.e.f. asst. yr. 2003-04, hence those could not be invoked in the assessment year in question. It was observed that the value given by the Departmental valuer was on standard rate and the same was correct. Accordingly, the AO adopted proportionate cost of construction at Rs. 23,33,177 in the light of the report of the Departmental valuer and worked out short-term capital gain at Rs. 2,50,823 as against loss of Rs. 61,000 shown by the assessee. This addition was challenged in the first appeal but without any success. 4. Before us, the learned counsel for the assessee contended that the AO was not justified in making reference to the DVO on the premise that there s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accruing as a result of transfer by an assessee of a capital asset being land or building or both, is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of s. 48, is deemed to be the full value of the consideration received or accruing as a result of such transfer. Thus, the reference made by the AO as well as the learned CIT(A) to the higher value of the shops sold by the assessee for the purpose of stamp duty is out of the context and the AO had rightly pointed out that this provision cannot be taken assistance of in the year in question. 6. Coming back to s. 142A in which reference was made to the DVO for determining the cost of construction, we find that this section has been inserted by the Finance (No. 2) Act, 2004, w.r.e.f. 15th Nov., 1972. Circular dt. 15th July, 2005 copy placed in the paper book, provides that the scope of power vested in an AO under s. 131 to make a reference to the Valuation Officer of estimating the cost of construction or properties has been subject-matter of litigation. It is further incorporated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nominated for the purpose by the competent authority. From this it is clear that whenever reference to a Valuation Officer appointed under the WT Act is permissible under the IT Act, it has been statutorily so provided. Apart from the aforesaid, the Valuation Officer is appointed under the WT Act and can discharge functions within the statutory limits under which he is appointed. It is not open to a Valuation Officer to act in his capacity as Valuation Officer otherwise than in discharge of his statutory functions. He cannot be called upon nor would he have the jurisdiction to give a report to the AO under the IT Act except when a reference is made under and in terms of s. 55A or to a competent authority under s. 269L. We are, therefore, of the view that the High Court incorrectly answered the question referred to it in the affirmative. The Tribunal had not erred in holding that the AO cannot refer the matter to the Valuation Officer for estimating the cost of construction of the house property. The appeal is accordingly allowed and the decision of the High Court set aside." With a view to empower the AO for making a reference to the DVO for estimating the cost of construct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, have all the powers that he has under s. 38A of the WT Act, 1957 (27 of 1957). (3) On receipt of the report from the Valuation Officer, the AO may, after giving the assessee an opportunity of being heard, take into account such report in making such assessment or reassessment:" A bare perusal of the section reveals the circumstances and sections under which such reference can be made by the AO. It is discernible that the first section referred to in sub-s. (1) is s. 69. The latter section, in turn, provides that where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the AO, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. Thus, it is clear that s. 69 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had shown investment in shops sold at Rs. 26,45,100 whereas the AO opined that this figure ought to have been and on a reference made to the DVO, he estimated the cost of investment at Rs. 23,33,177. Under these circumstances, it is manifest that the reference made by AO to the DVO under s. 142A is void ab initio and the resultant report supplied by the Valuation Officer is of no consequence insofar as the assessment is concerned. 8. Now we will deal with s. 55A under which the AO is empowered to make a reference to the Valuation Officer This section stipulates that with a view to ascertain the fair market value of a capital asset for the purpose of this chapter, the AO may refer the valuation of capital of 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 AO is of opinion that the value so claimed is less than its fair market value. This clause is not applicable to our case for the reason that the AO had not proceeded on the basis of report of the registered valuer Clause (B) of this section is further sub-divided into two parts. Sub-cl. (i) is applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee or the Revenue before us that the assessee had constructed shops prior to 1st April, 1981. It thus becomes apparent that the specific provisions provided for in the sections in Chapter IV-E for determining the cost of acquisition are not applicable insofar as the facts of our case are concerned. In this scenario, the cost of acquisition as per its meaning in common parlance is the amount spent by the assessee on acquisition of asset, is applicable. 9. Reference as contemplated under s. 55A is for ascertaining the 'FMV of a capital asset' and not for determining the cost of acquisition. The concept of FMV comes into picture in various sections under this chapter. For example, s. 45(1A) provides that the fair market value of other assets on the date of such receipt shall be deemed to be the full value of consideration received or accruing as a result of transfer of such capital asset. Similarly, s. 45(2) also provides that the fair market value of the asset on the date of such conversion on treatment shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. Sec. 45(4) also contemplates a situation in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gued that since the amounts of these credits were small, the same should be treated as genuine. In the opposition, the learned Departmental Representative relied on the impugned order. 14. Having heard both the sides and perused the relevant material on record in the light of precedents taken note of by the authorities below, it is obvious that the assessee had neither produced these two persons for verification before the AO nor even confirmations were filed. It is trite law that in order to establish the genuineness of a credit not only the identity and the capacity of the creditor is required to be proved but also the genuineness of the transaction has to be established. Unless the three requisite conditions are cumulatively satisfied, the AO can validly make addition. Coming to the facts of our case, we find that what to talk of the capacity of the creditors or genuineness of the transaction, even the identity was not established as the confirmation from these two persons were not filed either before the Revenue authorities or before us. In our considered opinion, the assessee miserably failed to establish the genuineness of the credits and is caught within the mischief of s. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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