TMI Blog2009 (7) TMI 1297X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that there was a long-term capital loss of ₹ 1,69,533 on transfer of a portion of land instead of a long-term capital gain of ₹ 18,79,866 arrived at by the AO. 5.That the appellant craves for leave to add, delete or modify any of the grounds of appeal before or at the time of hearing. 2. During the course of hearing the learned representatives of the parties submitted that ground Nos. 2 and 4 of the appeal are linked with ground No. 1 of the appeal. 3. The relevant facts giving rise to ground No. 1 of the appeal are that the assessee filed return disclosing a loss of ₹ 9,92,600. The AO completed the assessment determining the net profit at ₹ 6,09,025 and total business profit was arrived at ₹ 7,45,045. The AO also determined the long-term capital gain of ₹ 18,79,866. Thus the AO completed the assessment at a total income of ₹ 26,24,910. 3.1 The assessee is a trading company. On 15th Sept., 1977, it purchased an old rice mill known as Binapani Rice Mill, with land appurtenant thereto at Garbeta in Midnapore District of West Bengal at a consideration of ₹ 2,35,000. As the assessee company could not run the rice mill, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al gain at ₹ 18,79,866. Being aggrieved the assessee filed appeal before the first appellate authority. 3.6 The learned CIT(A) has held that the AO had no power under the law to refer the valuation of the capital asset to the DVO when the valuation made by the registered valuer is higher than the fair market value of the asset. The learned CIT(A) has held that reference to the DVO under s. 55A was unlawfully made and consequently the AO could not have acted legally in substituting the valuation made by the registered valuer with that made by the DVO and recasting the trading cum P L a/c accordingly. The learned CIT(A) has held that the net profit by recasting the trading cum P L a/c at ₹ 6,09,025 cannot be substituted by the loss disclosed at ₹ 9,92,600 in the trading results arrived at in the audited accounts furnished by the assessee. The learned CIT(A) has also deleted the addition made for long-term gain of ₹ 18,79,866 by the AO on the basis of the DVO s report. Hence the Department is in further appeal before the Tribunal. 4. The learned Departmental Representative submitted that the AO made a reference under s. 55A of the IT Act to the DVO to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he valuation report from the registered valuer on 18th April, 2002, to determine the fair market value of the property as on 1st April, 1981. It was valued at ₹ 71,91,850. The assessee worked out the indexed cost of the said land as on 1st April, 2002 at ₹ 3,06,37,289. It was taken as the opening stock of the land. In the assessment year under consideration the assessee sold a portion of the said land, measuring 0.93 acres at a consideration of ₹ 27,75,897 and the remaining portion of the land was shown as its closing stock. Since the AO was of the view that the valuation report filed by the assessee was on the higher side, he made a reference to the DVO under s. 55A of the Act to determine the fair market value of the land as on 1st April, 1981. The DVO determined the market value of the land as on 1st April, 1981 at ₹ 18,73,800. The AO considering the cost index (as per second proviso to s. 48 of the Act) and valued the opening stock of the land as on 1st April, 2002 at ₹ 79,82,388. Now the issue before us is as to whether the reference made by the AO on the facts and in the circumstances of the case, under s. 55A of the Act is a valid reference. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) of s. 55A could not be made applicable for making a reference to the DVO. It was further held that cl. (b) of s. 55A of the IT Act can be invoked only in any other case, namely when the value of the asset claimed by the assessee was not supported by evaluation report of a registered valuer. Therefore, cl. (b) of s. 55A of the Act also cannot be invoked in the facts of the case. On a similar issue of the Hon ble Tribunal, Delhi Bench in the case of Ms. Urmila Bawa (supra) has held that when the fair market value declared by the assessee being supported by the estimate of the registered valuer and the value so claimed being more than the fair market value according to the AO, reference to DVO under s. 55A was invalid because the primary condition in the application of cl. (a) was not satisfied. The Tribunal, Mumbai Bench in the case of Sajjankumar M. Harlalka (supra) has also held that reference under s. 55A of the IT Act can be made by the AO to the valuation cell only if he is of the opinion that the fair market value as estimated by the registered valuer is less than the fair market value. In view of the above, we hold that the AO in the instant case before us, could not invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A of the Act can be invoked only when the value of the asset claimed by the assessee is not supported by the valuation report of the registered valuer. The Tribunal, Delhi Bench in the case of Ms. Urmila Bawa (supra) has held that cl. (b) of s. 55A of the IT Act will not apply to a case where the value of the asset as claimed by the assessee is on the basis of an estimate made by registered valuer and the AO is of the opinion that the value so claimed is less than its fair market value. This is an import of the words in any other case appearing in the opening part of the clause. Accordingly, we hold that the AO while making reference to DVO cannot be said to have been made under sub-cl. (ii) of cl. (b) of s. 55A of the Act. 6.5 In view of the above, and in the facts of the case before us, we hold that the reference made by the AO to the DVO is neither covered by cl. (a) nor cl. (b) of the s. 55A of the Act. 6.6 In respect of the case relied on by the learned Departmental Representative in the case of C.T. Laxmandas v. Asstt. CIT Anr. (supra) the Hon ble Madras High Court has considered the scope of s. 55A and has held that the AO has power to find out the market value of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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