TMI Blog2018 (3) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... ri, AR For The Respondent : Shri G. Mallikarjuna, CIT-DR ORDER PER Waseem Ahmed, Accountant Member:- The assessee has filed this appeal dispute the order of Pr. Commissioner of Income Tax-17, Kolkata passed u/s. 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) dated 29.03.2017 set aside the assessment order dated 25.03.2015 u/s 143(3) of the Act for assessment year 2012-13 with a direction to re-do the assessment in respect of issue therein. The assessee has raised following grounds:- 1. That the findings of Ld. Pr. ClT Kolkata-17 that Assessing Officer first recorded his decision of referring the matter to ova in the order sheet and then passing of order u/s 143(3) was recorded do not support the languages used in section 55A of IT Act, 1961 which speaks for actual reference to DVO but not decision to make reference. 2. That the Ld. Pr. CIT, Kolkata-17 having admitted that reference to DVO and passing of order u/s 143(3) had been done on the same day is wrong and unjustified in drawing conclusion that the decision for referring to DVO was taken before passing order u/s 143(3) without any other supporting evidence. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property for a consideration of ₹1.60 crores and assessee has shows its cost of acquisition after indexation at ₹89,76,971/- only. The details of cost of acquisition with indexation stands as under:- Cost of acquisition with indexation Year Particulars Cost Index of year Index of year Index value of purchase of sale i.e. FY 11-12 83-84 Land and land development 2,40,000 116 785 16,2,137.93 84-85 Ground floor 4,25,000 125 785 26,69,000.00 87-88 1st floor 8,95,000 150 785 46,83,833.33 Total cost of consideration 15,60,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,456/- (1.60 crores 16,82,535) only. However, assessee has shown capital gains of ₹70,56,967/- only. Thus, there was less income declared by the assessee on account of transfer of capital asset by ₹72,60,498/- only which has escaped assessment. In view of above, Ld. Pr.CIT was of the view that a mistake apparent in the order of AO has occurred. Accordingly, a notice u/s. 263 of the Act vide letter No. Pr.CIT-17/Tech/u/s263/2016-17/1000 dated 25.03.2015 was issued for seeking clarification from assessee on account of under reporting of income. The assessee in compliance thereto, submitted that the report obtained from DVO vide dated 22.02.2016 is not a valid report as the order was passed by the AO on 25.03.2015 and on the same date the matter was referred to DVO. Thus, the order was completed without finding out any defect in the valuation report furnished by assessee during the course of assessment with regard to declaration of profit under the head LTCG. 3.1 The valuation report was received on 22.02.2016 subsequent to the order of assessment therefore the same cannot be relied upon upholding the order as erroneous in so far as prejudicial to the interest of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for determining the cost of acquisition after completion his assessment order is concerned, from the assessment record, I find that the AO has first made reference to the DVO and thereafter, order u/s.143(3) has been passed. The reference to DVO and passing of the order u/s.143(3) has been done on same day i.e. on 25/03/2015 but the decision for referring the matter to DVO has been taken by the AO before the assessment order u/s.l43(3) is passed. Therefore, first he has recorded his decision of referring the matter to DVO in order sheet and then passing of order u/s.143(3) has been recorded. In view of the above fact, though the decision of referring the valuation of the property to DVO for determining the cost of acquisition and passing of order u/s.143(3) is done on the same day, it is not correct to say that the decision of referring the valuation to DVO is afterthought by the AO after completion of assessment proceeding. This decision has also been recorded by the AO in his note (not for the assessee) attached with the assessment order. This note as attached with the assessment order is reproduced under ;- Letter was issued to the Districe Valuation Officer, V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found to be inflated and the same is apparent looking to the valuation report of the DVO. Therefore, decision of the AO, referring the valuation of the property to OVO has been found to be correct, though the decision was delayed but the same was taken before passing the assessment order and hence, legally, there was no infirmity making reference to DVO as objected by the Ld. AR. 8. As per section 55A before 01/07/2012, reference to Valuation Officer could have been made in a case where the value of the asset as claimed by the assessee in accordance with the estimate made by the registered valuer, if the AO is of opinion that the value so claimed is less than its fair market value but now, as per the amendment made by the Finance Act, 2012, w.e.f. 01/07/2012, reference to OVO can be made, if the AO is of the opinion that the value so claimed is at variance with its fair market value. Considering the amended provision also, I find that the reference to DVO made by the AO through letter dated 25/03/2015 is also in accordance with law because there is wide variation between the value estimated by the registered valuer and the value determined by the DVO. As the reference to OVO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prejudicial to interest of revenue. The inflation in the cost of acquisition based on the value determined by the registered valuer is also clear from the fact that instead of taking actual cost of the land to be ₹ 34,663/-, the registered valuer has taken this value at ₹ 2,40,000/-. As far as the cost of building construction is concerned, the DVO has determined a very lower value as compared to that is determined by the registered valuer. However, such determination of the value of the cost of construction by DVO vis-a-vis registered valuer can be examined during the assessment proceeding after the assessee is provided an opportunity to examine the report of the ova and give the comments. In view of the above facts and circumstances, I am of the opinion that the assessment order dated 25/03/2015 is erroneous and also prejudicial to the interest of revenue due to income of the assessee being assessed at lower amount and hence, such order is required to be set aside and restored to the file of the AO so that the AO can provide an opportunity to the assessee to examine the report of the DVO and offer her comments and then, he shall take the decision as per law to determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isition for the property at a higher value than the value determined by the DVO. The first technical issue arose before us is whether the reference made by the AO to the DVO for the valuation of the property is valid for the year under consideration. In this regard we note there was an amendment u/s 55A of the Act which was effective from 01.07.2012. Prior to the amendment u/s 55A of the Act, the provision of said section reads as under:- [ Reference to Valuation Officer. 58 55A. With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter59, the 60[Assessing] Officer may refer the valuation of capital 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 60[Assessing] Officer is of opinion that the value so claimed is less than its fair market value From the above provision we note that the Assessing Officer can refer the valuation of capital asset to a Valuation Officer in a case where the value claimed by the assessee based on the registered valuation report is less than its fair market value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are being applicable from any date other than first April of assessment year would be applied from the next Assessment Year. For example, in the instant case, the amendment was brought with effect from 01.07.2012. Thus, the amendment would be applicable from the Assessment Year beginning from first April, 2013 i.e. Assessment Year 2013-14. Thus, it is clear that the amendment brought under the statutory provisions of Section 55A of the Act is not applicable in the year under consideration. As the value adopted by assessee is more than the fair market value then no reference to Valuation Officer would have been made as per the provision of Section 55A(a) of the Act as it is administered at the relevant time. Once, we have reached to the conclusion no reference can be made to the DVO for the year under consideration in the given facts and circumstances. Thus on the same basis, the assessment order cannot be held as erroneous in so far as prejudicial to the interest of revenue. Keeping in view all these discussion, as also bearing in mind entirety of the case, we deem it fit and proper to uphold the grievance of the assessee and quash the impugned revision order as devoid of jur ..... 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