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ANAND BANWARILAL ADHUKIA Versus DEPUTY COMMISSIONER OF INCOME TAX CIRCLE - 14 AND 1

2016 (11) TMI 294 - GUJARAT HIGH COURT

Legality and validity of making a reference to the Valuation Officer - Estimation of value of assets by Valuation Officer - Held that:- From the bare reading of aforesaid statutory provisions, it appears that Section 50C of the Act which has been introduced is applied to a seller and not to the purchaser and therefore, ascertaining an amount of capital gain, it will be the tax in the hands of seller on the basis of jantri price and making a reference and inquiring from the petitioner is of no av .....

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no cogent material available nor to satisfy himself about the requirement of Section 69 of the Act and therefore, in the absence of it, the reference could not have been made under Section 142A of the Act. Simply because prior to 2 days the reference order came to be made, it cannot be said that the action of making reference during the period of assessment is justified. In fact, no purpose would be served to make such reference especially when the contingencies reflected hereinabove are not sa .....

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ion, has challenged the legality and validity of the impugned action of respondent authority in making a reference to the Valuation Officer and consequently, he has also challenged the communications dated 10.3.2011 and 26.4.2011 respectively. 2. Brief facts are as under : 2.1 The petitioner is a purchaser of a property situated at Satyagrah Chhavani, Satellite, Ahmedabad. The petitioner purchased the same from one Ms.Ranjanben Dhirajlal Patel for an amount of ₹ 60 lacs through a registere .....

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lacs from ICICI Bank and incidentally, the amount of interest component to the extent of ₹ 3,97,334/- came to be disallowed on the aforesaid loan obtained by the petitioner. Of course the appeal proceedings were initiated by the petitioner but, since the same are not related to the controversy involved in the petition, no reference is made on that. 2.2 The petitioner says that regular scrutiny assessment came to be passed on 31.12.2010 under Section 148(3) of the Act wherein, the reference .....

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grah Chhavani. On 8.3.2011, the valuation proceedings came to be dropped with respect to the property situated at Ashawari Tower as the same was not in the name of petitioner. Pursuant to the said reference, the petitioner was asked by the Valuation Officer under a communication dated 10.3.2011 requiring certain particulars from the petitioner so as to enable him to determine the cost of construction and also asked the particulars relating to expenditure on material used in the same. Subsequentl .....

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sition of law, the petitioner has invoked the jurisdiction of this Court by way of present petition for challenging the same. 3. Before dealing with the controversy involved in the petition, the reference which has been made by the Assessing Officer to the Valuation Officer is required to be referred which reads, thus; To The Valuation Officer, Valuation Cell, Income-tax Department, Ahmedabad Sub. : Estimating the cost of investment in the property belonging to Shri Anand Adukiya - Reg. Sir, Shr .....

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h Fun Republic, Satellite, Ahmedabad - 380 001. 3. Name & complete address & Telephone No. of the CA/Lawyer or Assessee s Authorized Representative dealing with the case, if any. Amal Datt & Association, C.A.s. Vatsalya , 3, Brahman Mitra Mandal Society, Mangaldas Road, Ellisbridge, Ahmedabad - 380 006. 4. Amount declared by the assessee as filed in the return of income for the assessment year or as admitted during survey / search. (1) ₹ 37 lacs (2) ₹ 60 lacs 5. Estimated .....

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which the opinion of the assessing officer is based. Cost of property shown by the Assessee is very law apparent to Market value. In the cases of my own assessee, cost of property in the same locality is shown as under : The assessment is likely to get time barred on 31.12.2010 for assessment year 2008-09. You are requested to submit the report at the earliest. In order to elucidate the correctness of the cost of investment, I require and authorize you u/s 142(A) of the Income-tax Act,1961 to in .....

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ioner has challenged said action of the authority to make a reference by contending that the petitioner is a purchaser and cannot be made or subjected to such proceedings. While contending this, learned counsel for the petitioner has drawn attention to the statutory provisions contained in Section 50C which came to be introduced w.e.f. 1.4.2003 and by referring to the same, learned counsel submitted that this provision is meant to capital gain which will be taxed in the hands of seller on the ba .....

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ust prior to two days from the date of passing an assessment order and as such would be of no avail and Section 142A of the Act can be resorted to, no doubt by the Assessing Officer but, not for the purpose for just making an inquiry with respect to cost of investment. Learned counsel while drawing the attention to the reference order has submitted that under a mistaken belief this reference appears to have been made in a hurried manner by assuming that the petitioner has invested the amount in .....

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to the extent of ₹ 90 lacs and the particulars which are mentioned in clause (9) of the said reference in abstract form relied upon and certain properties without any details have been narrated which would not give an exact idea about what material is based upon by Assessing Officer for resorting to Section 142A of the Act. It was also contended by learned counsel that the reference has been made on 29.12.2010 when the assessment was likely to get time barred after few days i.e. on 31.12. .....

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submitted that no such material even primarily available with the authority and therefore, the action referring the matter to the Valuation Officer is without authority of law. Learned counsel further submitted that later on, the Valuation Officer has made a communication to the petitioner and granted date on 10.5.2011, by that time the scrutiny assessment under Section 143(3) of the Act has already been done on 31.12.2010 and therefore, no useful purpose will be achieved by undertaking such exe .....

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loan from ICICI Bank and upon such inquiry, under a communication dated 24.12.2010, the investment to that query has already been explained and for that purpose, even the copy of purchase deed also submitted along with the detailed particulars with respect to payment of tax have been furnished. Learned counsel has therefore submitted that Section 142A of the Act cannot be resorted to just to inquire about the cost of investment before arriving at a satisfaction with respect to the doubt of valu .....

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he valuation reference with respect to property in question. Learned counsel for the petitioner has further drawn the attention to the affidavit-in-reply filed by the revenue department in which also the same is in the line of the intention of Assessing Officer and the averments have been made with no other cogent particulars. Therefore, under this set of circumstance, learned counsel submitted that no such reference allowed to be proceeded with and therefore, requested the Court as prayed for i .....

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eference was made by the Assessing Officer for determining the fair market value on the property and more so because the additional amount on stamp duty was required to be paid at ₹ 1,34,256/- and therefore, the Assessing Officer was justified in making reference so as to ascertain unaccounted investment in the purchase of property made by the petitioner. He further submitted that such value of the property has been shown undervalued by both the purchasers as well as the seller and therefo .....

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undervalue is shown by both purchaser and seller, it is just and proper on the part of Assessing Officer to ascertain the correct market value of the property. 6. Learned counsel for the revenue has further drawn the attention of the Court that even during the passage of time, a valuation report has also come on record which indicates that the higher value as compared to what has been reflected by the petitioner and therefore, the reference was rightly made by the Assessing Officer and in view o .....

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pital (Supra) is not applicable in the present background of the fact. In the said decision, it has also been considered by the Court that a reference can be made during the pendency of the assessment proceedings and even after that and this has been done on 29.12.2010 prior to the date of scrutiny assessment and therefore, the case which is tried to be relied upon is not helpful to the petitioner and therefore, by contending this, learned counsel submitted to dismiss the petition. 7. Having hea .....

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and explanation about the loan of ₹ 55 lacs from ICICI Bank which was taken with respect to very property under Section 142(1) of the Act and in compliance to this, a communication issued under Section 142(1) of the Act. On 24.12.2010 a clarification has been made with respect to this very controversy and the scrutiny assessment has taken note of this particular submitted by the petitioner and passed an assessment order on 31.12.2010. (3) It is also reflecting from the record that just be .....

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correct value of the property, in a casual manner, the reference is straightway made under Section 142A of the Act. (4) It is also emerging from the record that Valuation Officer while calling for certain information from the petitioner on 10.3.2011 as well as a later communication dated 26.4.2011, has assumed that certain expenditure has been incurred in making construction of the property and for that purpose, the particulars with respect to material being used is also inquired from. Whereas i .....

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hich are emerging from the record, we deem it proper to refer to certain relevant statutory provisions which are required to be considered which is reproduced hereinafter : '50C. [Special provision for full value of consideration in certain cases. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed [or assessable] by any authority of a State Government (herea .....

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ssessable] by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed [or assessable] by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is .....

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his section, "Valuation Officer" shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). [Explanation 2.-For the purposes of this section, the expression "assessable" means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty.] ( .....

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y 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 Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other .....

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in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year.' 142A.[Estimation of value of assets by Valuation Officer.(1) The Assessing Officer may, for the purposes of assessment or reassessment, make a reference to a Valuatio .....

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owers that he has under section 38A of the Wealth-tax Act, 1957 (27 of 1957). (4) The Valuation Officer shall, estimate the value of the asset, property or investment after taking into account such evidence as the assessee may produce and any other evidence in his possession gathered, after giving an opportunity of being heard to the assessee. (5) The Valuation Officer may estimate the value of the asset, property or investment to the best of his judgment, if the assessee does not co-operate or .....

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ing the assessment or reassessment. Explanation.-In this section, "Valuation Officer" has the same meaning as in clause (r) of section 2 of the Wealthtax Act, 1957 (27 of 1957).] 8. From the bare reading of aforesaid statutory provisions, it appears that Section 50C of the Act which has been introduced is applied to a seller and not to the purchaser and therefore, ascertaining an amount of capital gain, it will be the tax in the hands of seller on the basis of jantri price and making a .....

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ruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government for the purpose of stamp duty in respect of such transfer, such value shall for the purpose of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. 7. Clearly thus, section 50C of the Act by a deeming fiction substitutes the consideration re .....

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of the Act. Section 69 of the Act pertains to unexplained investment, whereas Section 69A pertains to unexplained money etc. and likewise, Section 69B pertains to amount of investment etc. not fully disclosed in books of accounts and therefore, these statutory provisions are related to a case where assessee had made certain investment or expenditure or is found to be the owner of any bullion, jewellery etc. and the same are not properly recorded in the books of account. This Court in a decision .....

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r expenditure in bullion, jewellery, etc. and can call for the report of the valuer and therefore, the Division Bench of this Court has observed that initial starting point for triggering a reference to the valuer, therefore, has to be invocation of Section 69 of the Act and therefore, unless and until such contingencies are reflecting on the record, reference under Section 142A of the Act cannot be resorted to. Relevant paragraphs of the said decision which have analyzed entire scheme of Sectio .....

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market value of any property referred to in sub-section (2) of section 56 is required to be made, such reference to make an estimate of such value can be made to the Valuation Officer. 16. The Valuer s report under section 142A of the Act is for the purpose of estimating value of such investment referred to in section 69 or section 69B or the value of any bullion, jewellery or other valuable article referred to in section 69A or section 69B of the Act. Unless, therefore, there is prima facie ap .....

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on of sections 69,69A or 69B of the Act. It is only when any of these provisions come into play that the Assessing Officer can resort to section 142A for estimating the value of such investment or expenditure. Sequence cannot be put in the reverse. In other words, the Assessing Officer would have no authority to call for the report of the Valuer under section 142A to judge whether there has been any unexplained investment or expenditure as referred to in sections 69, 69A and 69B of the Act. It w .....

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e Valuation Officer in terms of sub-section (1) of section 142A of the Act. In the present case, no such material emerges from the record. To the contrary, neither from the order of reference nor from any other material, the respondent could point out that the Assessing Officer had invoked the provisions of sections 69,69A or 69B of the Act and in the process desired to obtain the estimate of unexplained investment or expenditure and for which purpose DVO s report was called. He simply gave no r .....

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d proposition of law laid down by this Court, it appears that here also, the Assessing Officer had no cogent material available nor to satisfy himself about the requirement of Section 69 of the Act and therefore, in the absence of it, the reference could not have been made under Section 142A of the Act. Simply because prior to 2 days the reference order came to be made, it cannot be said that the action of making reference during the period of assessment is justified. In fact, no purpose would b .....

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ion (P) Ltd. (Supra) was altogether on a different set of circumstance from the present one. In that case, the Assessing Officer was of the view that despite several reminders, the assessee had not produced any material and just dragged on the time so as to see that the final assessment cannot be undertaken and therefore, in the background of that particular case, the issue was dealt with of Section 142A of the Act. Again, in the said decision, there was a civil construction work was also undert .....

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