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Rashmikant Baxi (Huf) Versus Income Tax Officer, 19 (3) (2) , Mumbai

2015 (12) TMI 510 - ITAT MUMBAI

Validity of reference made to the Departmental Valuation Officer under section 55A - Held that:- Reference to DVO can be made in two situations; first, the value is adopted based on report of registered valuer and second, in any other case. In assessee's case, fair market value adopted as on 01.04.1981 is based on valuation report of registered Valuer. Therefore, Assessing Officer should have applied the provisions of 55A(a) and according to said provision, fair market value claimed by assessee .....

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correct.

Assessing Officer was not justified in rejecting the valuation report of assessee as on 01.04.1981 obtained by him from registerd Valuer and referred the same to DVO. Accordingly, the order of CIT(A) was set aside and Assessing Officer is directed to allow the claim of assessee as prayed. - Decided in favour of assessee. - ITA Nos. 3711 & 6871/Mum/2012 - Dated:- 30-9-2015 - Shailendra Kumar Yadav, JM And Ashwani Taneja, AM For the Appellant : Shri Anuj Kisnadwala & Shri N .....

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r under section 55A of the Income-tax Act, 1961; ii. Not following the decision of jurisdictional High Court in the absence of any other contrary high court decision on the matter under consideration; iii. Upholding the AO's rejection of valuation report as on 1 April 1981 obtained by the Appellant from government approved registered valuer valuing the land at ₹ 22,46,250/-. iv. Adopting the fair market value of land at R.4,94,600 as on 1 April 1981 based on the estimate made by Depart .....

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r of Income-Tax (Appeals)-30, Mumbai, erred in i. Levying penalty of ₹ 6,48,272 under section 271(1)(c) read with Explanation 1 thereto of the Income-tax Act, 1961 for furnishing inaccurate particulars of income; ii. Levying penalty under section 271(1)(c) of the Incometax Act, 1961 for addition of income on account of difference in valuation of capital asset as on 1 April 1981 by two expert valuer's." 4. Briefly stated facts of the case are that assessee is a resident individual .....

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een valued at ₹ 22,45,250/- and after indexation the value was arrived at ₹ 1,23,76,838/-. The said valuation has been taken as per the valuation report dated 24.09.2007 of M/s. Star Architects. Assessing Officer observed that said property is situated at Rajkot, Gujarat which was a very small city in the year 1981 and the valuation report does not appear to be acceptable looking into the status of the property. Therefore, valuation as per the valuation report was found to be on high .....

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ic method. So, he held that valuation report of registered value being out of personal experience of valuer and therefore, does not stand to professional scrutiny and hence this could not be relied upon. In view of above, matter was referred to DVO, Mumbai u/s.55A(b)(ii) of the Income Tax Act. However, till date of passing of assessment order no report was received from DVO. Therefore, Assessing Officer estimated the value as on 1.4.1981. Registered valuer valued the property at ₹ 2000 per .....

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llowing indexation the same was worked out at ₹ 69,97,700/-. Thus, against Nil capital gain shown by assessee, Assessing Officer worked out long term capital gain at ₹ 57,02,300/- before allowing exemption u/s.54 of Income Tax Act. After allowing exemption u/s.54 taxable income was arrived at ₹ 55,13,900/-. The valuation report of DVO, Rajkot was received on 13.04.2011 vide letter dated 08.04.2011. As per valuation report of DVO, fair market value of said property was valued at .....

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ar lower than the value estimated at ₹ 12,70,000/- by Assessing Officer in order passed u/s.143(3) dated 28.12.2010 long term capital gain needed to be recalculated and to be enhanced. This being so accordingly show cause notice was issued to assessee asking to show cause as to why income of assessee should not be enhanced by ₹ 28,60,863/-. Show cause reads as under: "In your case assessment was completed u/s 143(3) of the I. TAct, on 28/12/2010. During the year under considerat .....

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report dated 24/09/2007 by M/s Star Architects. The Valuation Report has been keenly perused. On verification, it was found that the value had no instance of land sale in the year 1981, available with him. It is also seen that the value has not been adopted by the valuer on scientific basis. He has not cited any comparable instances before deriving the fair market value as on 10/04/1981. This being so, the A.O. did not rely upon the report of the Registered Valuer on the ground that the said rep .....

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70,000/-. By adopting the value at ₹ 12,70,000/- and indexing the same at ₹ 69,97,700/-, the capital gain was arrived at ₹ 57,02,300/-, which was subsequently rectified to ₹ 38,18,296/-. Thereafter, the valuer's report was received from the Valuation Officer, I. T. Department, Rajkot and a copy of which is also marked to you, wherein the fair market value of the said property as on 01/04/1981 is valued at ₹ 4,94,600/-. The revised working of L.T.C.G. is worked o .....

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- TAXABLE LONG TERM CAPITAL GAIN Rs.66,79,159/- Thus, as against the L.T.C.G. assessed at ₹ 38,19,296/- the correct L.T.C.G. is worked out at ₹ 66,79,159/-. Therefore, please show cause as to why your income should not be enhanced by ₹ 28,60,863 (Rs.66,79,159 - ₹ 38,18,296)." 5. In response to aforesaid show cause, learned Authorized Representative of assessee filed letter dated 20.12.2011. In aforesaid letter, assessee has challenged the very validity of reference t .....

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following two cases- In a case when the value adopted by the Assessee is based on estimate made by the registered valuer; and b. In any other case, namely when the value of the asset as claimed by the Assessee is not supported by an estimate made by a registered valuer. During the year the Appellant sold land located at Kasturba Road, Rajkot, Gujarat for ₹ 1,27,00,000 and derived long term capital gains(L TCG) which was invested in new residential house for exemption under section 54F of .....

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39;s case is covered by section 55A(a) of the Act and not otherwise. It has been further held in the above decisions that for rejecting the value claimed by the Appellant as on 01.04.1981 and making reference to DVO under section 55A(a) of the Act, the AO should form an opinion that the value so claimed by the Appellant is less than its fair market value. In the Appellant's case the value adopted by the Appellant is ₹ 22,46,250 which is more than the FMV of ₹ 12,70,000 as estimat .....

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as on 01.04.1981 under section 55A(b)(ii) is invalid and bad at law. As the reference to DVO under section 55A of the Act is invalid and bad at law the question of adopting the value as per DVO's report (which is called for under section 55A of the Act) does not arise. 3. Some other Judicial Pronouncements supporting Appellant's view - Mrs. Asha Bharat Shah vs. ITO (Mum) ITA No. 1716/Mum/2010." 2.3 In addition to the above submissions the learned AR of the appellant has also relied .....

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and it was submitted that valuation report of registered valuer may be accepted and fair market value given therein as on 1.4.1981 may be accepted at ₹ 22,46,250/-. However, CIT(A) having considered the same, upheld the order of Assessing Officer. 6. Same has been opposed before us inter alia submitted that CIT(A) was not justified in upholding the validity of reference made to the DVO u/s.55A of the Income Tax Act. Not following the decision of Hon'ble Jurisdictional High Court in abs .....

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ancing long term capital gain by ₹ 28,60,863/- was not justified. In this background, learned Authorized Representative opposed the order of CIT(A) and on other hand, Learned Departmental Representative supported the orders of authorities below. 7. After going through rival submissions and material on record, we find that issue before us is whether Assessing Officer was justified in applying the provisions of Section55A(b)(ii) of the Act at relevant point of time. As stated above, during t .....

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luation report dated 24th September, 2007 of M/s. Star Architects, Government approved registered valuer. Assessing Officer after not accepting the claim of assessee referred the matter to DVO u/s.55A(b)(ii) for ascertaining fair market value of land as on 01.04.1981. After obtaining DVO report, Assessing Officer rejected the fair market value adopted by assessee and completed assessment u/s.143(3) of the Act estimating the fair market value as on 01.04.1981 at ₹ 12,70,000/- (being 10%) of .....

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imed 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) in any other case, if the Assessing Officer is of opinion - (i) that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such per-centage of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf; or (ii) that .....

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laimed by assessee can be rejected only if fair market value is less than fair market value as per Assessing Officer. As fair market value claimed by assessee as on 1st April, 1981 is higher than that estimated by Assessing Officer provisions of 55A should not be invoked. The provisions of Section 55A(b)(ii) as resorted by Assessing Officer for referring the matter to DVO can be invoked only in case the valuation report is not submitted by assessee. Thus, reference made by Assessing Officer u/s. .....

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Tribunal by observing as under: "3. We have perused the judgment of the Tribunal. It is explicitly clear that the questions sought to be raised are with regard to the quantum of valuation which is only a finding of fact and there is absolutely no question of law involved in the above appeal. 4. The Tribunal in its order dated 23rd July, 2008 has categorically observed thus: "5. The first issue that arises for our consideration is whether the reference made by the Assessing Officer to t .....

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es where the value of capital asset shown by the assessee is less than its fair market value of land as on 1st April, 1981 shown by the assessee on the basis of approved valuer's report being more than its fair market value, reference under S.55A was not valid. Respectfully following the propositions laid down these two cases by the coordinate benches we uphold the contention of the assessee and hold that the reference made by the Assessing Officer to the DVO u/s 55A in the peculiar facts an .....

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