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2016 (5) TMI 712 - ITAT PUNE

2016 (5) TMI 712 - ITAT PUNE - TMI - Determination of Long term capital gain - Reference to Valuation Office u/s.55A - Held that:- AO was not justified in referring the matter to the DVO u/s.55A of the Act especially when the value of the capital asset declared by the assessee was more than the fair market value estimated by the AO. It is only when the value adopted by the assessee is less than the fair market value that the AO has power to refer the matter to the DVO u/s.55A of the Act prior to .....

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.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Appellant : Shri Dheeraj Kumar Jain For The Respondent by : Shri J.P. Bairagra ORDER PER R.K. PANDA, AM : The above 2 appeals filed by the revenue are directed against the separate orders dated 31-01-2014 passed by the CIT(A), Aurangabad relating to Assessment Year 2010-11. Since identical grounds have been taken by the revenue in both these appeals, therefore these were heard together and are being disposed of by this common order. ITA No.672/PN/ .....

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for ₹ 88,65,000/- to M/s. Om Sai Ram Steel and Alloys Pvt. Ltd., Jalna. The fair market value for the purpose of stamp duty was also determined by the State Govt. authorities at ₹ 88,65,000/-. 2.1 On going through the computation of long term capital gain on sale of land, the AO noted that the assessee has shown substantial cost of acquisition of land as on 01-04-1981 at ₹ 12,76,576/- and indexed cost of acquisition at ₹ 80,67,960/-. After reducing the indexed cost of ac .....

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of sale deed as on the date of sale which according to the AO is absolutely a wrong method. Therefore, he held that the fair market value determined as on 01-04-1981 was unreasonable and without any evidence and therefore the same cannot be acceptable. Since the assessee had furnished the valuation report showing substantial variation with fair market value and the value adopted is on wrong method, the AO made a reference to the District Valuation Officer of the Income-tax Department Nagpur u/s .....

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ost of acquisition as on 01-04-1981 by different methods at ₹ 32,34,000/- in which assessee share for 12,300 sq.mtrs worked out at ₹ 9,84,000/- which was already estimated by the earlier Government approved valuer Shri C.V. Chandekar with some variation. Rejecting the various explanations given by the assessee the AO held that the assessee had overstated the value of capital asset as on 01-04-1981 by showing substantial cost of acquisition at ₹ 12,76,576/- as against ₹ 2, .....

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y u/s.55A of the I.T. Act. Relying on various decisions including the decision of Hon ble Bombay High Court in the case Puja Prints Vide ITA No.248/2012 order dated 15-01-2014 it was submitted that the Hon ble High Court in the said decision has held that amendment to section 55A(a) by substituting the words is at variance with its fair market value for the words is less than its fair market value is applicable from 01-07-2012 and cannot be considered as clarificatory having retrospective applic .....

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aharashtra in 1989 and the ready reckoner rate for the property sold by the assessee is ₹ 200/- per sq.mtr in the year 1989 whereas the DVO has considered ready reckoner rate at ₹ 125/- per sq.mtr. It was submitted that rate as on 01-04-1981 is 40% of ready reckoner rate of 1989. However, the DVO in the instant case has valued the property at a minimum value by adopting various slab rates, i.e., for first 4,000 sq.mtrs at ₹ 1,00,000, next 3000 sq.mtrs at ₹ 1,20,000/- and .....

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the value adopted by the assessee as on 01-04-1981. 6. Based on the arguments advanced by the assessee the Ld.CIT(A) allowed the claim of the assessee by observing as under : 8. I have carefully considered the facts of the case and rival contentions. On perusal of the same, it has been noticed that in order to decide the appeal, following two issues are required to be decided- (1) Whether the reference made by the AO. for determination of Fair Market Value of the property to the Departmental Va .....

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ntenable. On perusal of provisions of section 55A of the Act, it has been noticed that the said section confers jurisdiction for reference to the DVO only when the AD. is of the opinion that the value of the impugned asset claimed by the assessee is less than the Fair Market Value. In the case under appeal, the A.O. is of the opinion that value of the impugned asset as on 01/04/1981 claimed by the assessee is more than its Fair Market Value. The above proposition of law is supported by the follo .....

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ation as on 01/04/1981 to the DVO who has valued the same at ₹ 6.68 Lakhs. The Hon'ble Jurisdictional High Court has held that as the value of the property declared by the assessee was not less than its fair market value, reference to DVO u/s 55A is not permissible. The Hon'ble Court has further held that the amendment in section 55A(a) by substituting the words "is at variance with its fair market value" for the words "is less than its fair market value is applicabl .....

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ld that reference to DVO can only be made in cases where the value of capital asset shown by the assessee is less than its Fair Market Value; value of land as on Ist April, 1981, shown by the assessee on the basis of approved valuer's report being more than its Fair Market Value, reference u/s 55A was not valid . (3) Smt.Sarala N. Sakraney Vs. ITO [2011]130 ITD 167 (Mum) In this case, it has been held that Fair Market Value of the property as on Ist April, 1981, declared by the assessee as p .....

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red to above. (5) Hiraben Iayantilal Shah Vs. Income Tax Officer [2009] 310 ITR 31 (Guj) In this case, it has been held that the reference made by AO u/s 55A to DVO on 26th April, 1996, for determining the value of property as on 1st April, 1981 and on the date of sale was without jurisdiction for the reasons that return was filed by assessee only on 27th August, 1996, value of property as on 1st April, 1981, as declared by assessee supported by estimate of registered valuer was higher than esti .....

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de to section 55A w.e.f. 01/07/2012. In order to remove the , ,above hurdle for referring the property for valuation, where as per the AO. the value of the property is different from the value adopted by the assessee, the legislature has replaced the words "is less than its fair market value", by the words "is at variance with its fair market value" by Finance Act, 2012 w.e.f. 01/07/2012. It is also evident that the amendment is prospective. In view of the above facts and dis .....

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by the appellant is allowed. 9. The second issue to be decided is whether the valuation of the land as on 01/04/1981 claimed by the appellant or arrived at by the D.V.O. is to be adopted for arriving at capital gain on sale of impugned agricultural land. In this regard, it is to be noted that while deciding the first issue, it has been held that the reference made by the A.O. u/s 55A of the Act for valuing the impugned property is bad-in-law and hence the value of the property' claimed by th .....

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less than the value of the impugned property for stamp duty purpose. Further, in view of the submission of the appellant on this issue, it has been noticed that the value of the impugned property as on 01/04/1981 adopted by the appellant is reasonable and the contention of the appellant is also supported by the decisions relied on by him in his written submission reproduced in the earlier paragraph. In view of the above facts and discussion, for arriving at the capital gain in respect of sale of .....

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report of the registered valuer is based on valuation given by the stamp duty authorities. Further, the provisions of section 50C, 56(2) and 43 CA also lay down that while adding income of the assessee the sale consideration is to be considered at the value of the property for stamp duty purposes and the same cannot be considered less than the value of the impugned property for stamp duty purposes. 8. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us with the following g .....

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to the Memorandum to Finance Bill, 2012 explaining the scope and intent of introduction of provisions of section 55A of the IT Act, 1961. 3. Under the facts and circumstances of the case the view upholding by the learned CIT(A) is not in accordance with the Memorandum to Finance Bill, 2012 explaining the scope and intent of provisions of section 55A of the IT Act, 1961 as it was very clearly stated in section 55A that, in a case where capital asset become property of the assessee before 1.4.1981 .....

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itive or negative variances. 5. It is inconvincible to think that, the provisions would apply to instances after 1.7.2012 when section by itself speaks of valuation as on 1.4.1981. It is clear that, powers are intended to be provided to the AO for reference to valuation substantially variance in respect of value as on 1.4.1981. 6. Under the facts and circumstances of the case the variance in the value adopted as on 01-04-1981 being substantial, the reference made by to the DVO was correct. This .....

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section 55A are not applicable to the pending cases. 10. The Ld. Counsel for the assessee on the other hand submitted that the assessment year involved is A.Y. 2010-11 and the amendment brought into the provisions of section 55A are w.e.f. 01-07-2012 and therefore applicable to A.Y. 2013-14 and onwards. Since the Ld.CIT(A) has followed the decision of Hon ble jurisdictional High Court in the case of Puja Prints (Supra), therefore, the grounds raised by the revenue have to be dismissed. 11. We h .....

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n 01-04-1981 at ₹ 12,76,576/-. After reducing the indexed cost of acquisition at ₹ 80,67,960 from the sale consideration of ₹ 80,65,000/- the assessee has declared an amount of ₹ 7,97,040/- as long term capital gain. According to the AO the cost of acquisition adopted by the assessee as on 01-04-1981 at ₹ 12,76,576/- appears to be on the higher side for which he made a reference to the DVO u/s.55A of the I.T. Act for determining the fair market value as on 01-04-198 .....

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was not justified in making addition of ₹ 66,68,712/- by referring the matter for valuation to the DVO u/s.55A of the I.T. Act. 12. We do not find any infirmity in the order of the CIT(A). We find the provisions of section 55A reads as under : 55A - Reference to Valuation Office With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the [Assessing] Officer may refer the valuation of capital asset to the Valuation Officer - (a) In a case where .....

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t variance with its fair market value the AO has the power to refer the matter to the DVO where the value declared by the assessee is more than the fair market value. We find identical issue had come up before the Hon ble Bombay High Court in the case of Puja Prints reported in 360 ITR 697. We find the Hon ble High Court following its earlier decision in case of CIT Vs. Daulal Mohta (HUF) reported in 360 ITR 680 has observed as under : Regarding Questions (a) and (b): We have considered the riva .....

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een accepted by the revenue. On the aforesaid ground alone, this appeal need not be entertained. However, as submissions were made on merits, we have independently examined the same. 7. We find that Section 55A(a) of the Act very clearly at the relevant time provided that a reference could be made to the Departmental Valuation Officer only when the value adopted by the assessee was less than the fair market value. In the present case, it is an undisputed position that the value adopted by the re .....

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t justified. 8. The contention of the revenue that in view of the amendment to Section 55A(a) of the Act in 2012 by which the words "is less than the fair market value" is substituted by the words " "is at variance with its fair market value" is clarifactory and should be given retrospective effect. This submission is in face of the fact that the 2012 amendment was made effective only from 1 July 2012. The Parliament has not given retrospective effect to the amendment. T .....

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Section 55A(a) (ii) of the Act is not acceptable. This is for the reason that Section 55A(b)of the Act very clearly states that it would apply in any other case, i.e. a case not covered by Section 55A(a) of the Act. In this case, it is an undisputable position that the issue is covered by Section 55A(a) of the Act. Therefore, resort cannot be had to the residuary clause provided in Section 55A(b)(ii) of the Act. In view of the above, the CBDT Circular dated 25 November 1972 can have no applicati .....

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d upon the decision of the Guwahati High Court in Smt. Amiya Bala Paul (supra). However, the Apex Court in Smt. Amiya Bala Paul (supra) has reversed the decision of the Guwahati High Court and held that if the power to refer any dispute with regard to the valuation of the property was already available under Sections 131 (1), 136(6) and 142(2) of the Act, there was no need to specifically empower the Assessing Officer to do so in circumstances specified under Section 55A of the Act. It further h .....

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d order has merely remanded the issue to the Assessing Officer to determine the date on which the respondent assessee acquired the property for the purpose of working out the cost of acquisition. No specific submissions in regard to this issue was made by the revenue during the oral submissions. In any event, an order of remand in these facts does not give rise to any substantial question of law. 12. Accordingly, we see no reason to entertain questions (a), (b) and (c) as formulated by the reven .....

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ding that the AO was not justified in referring the matter to the DVO u/s.55A of the Act especially when the value of the capital asset declared by the assessee was more than the fair market value estimated by the AO. It is only when the value adopted by the assessee is less than the fair market value that the AO has power to refer the matter to the DVO u/s.55A of the Act prior to 01-07- 2012. Since the assessment year involved in the instant case is A.Y. 2010-11 and since the value adopted by t .....

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angprasad Mehra) : 15. Grounds raised by the revenue are as under : 1. On the facts and circumstances of the case the CIT(A) erred in deleting the addition made at ₹ 99,18,640/- on account of long term capital gain. 2. Under the facts and circumstances of the case the learned CIT(A) erred in coming to a conclusion that the provisions of section 55A of the IT Act,1961 by way of reference to a DVO by the Assessing Officer is operative with effect from 1.7.2012 and in respect of transaction e .....

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