TMI Blog2020 (1) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... In the instant case, the FMV is sought to be lowered by AO than what is claimed by the assessee. Therefore, Section 55A(b)(i) of the Act is not relevant in the facts of the case. We now advert to Section 55A(b)(ii) of the Act which enables the AO to take recourse to Section 55A of the Act only on fulfillment of prescribed parameter therein i.e. nature of asset and other relevant circumstances AO has not pointed out existence of any such valid circumstance which could empower him under s.55A of the Act. The AO has merely issued reference to DVO under s.142A of the Act without any background or reasons and the Valuation Officer, in turn, has acted in a perfunctory manner and travelled beyond the jurisdiction mandate conferred within the sweep of Section 142A of the Act and has passed an order under s.55A of the Act without any reference therein. It does not require to underscore that a DVO derives its authority in law which flows from the mandate as delegated by the AO. The Valuation Officer cannot exercise the power of valuation independent of such mandate. Where an express mandate was given under s.142A of the Act, the Valuation Officer could not have travelled in the arena o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the respective orders of the Commissioner of Income Tax (Appeals) ( CIT(A) ) against different assessment years as tabulated below: ITA Nos. Name of assessee AY CIT(A) s order dated AO s order dated AO s order under Section 629/Ahd/19 Dashrathbhai G. Patel 2013-14 18.03.2019 28.03.2016 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short the Act ) 2453/Ahd/17 Prehladbhai G. Patel 2013-14 01.09.2017 23.03.2016 143(3) of the Act 2452/Ahd/17 Mahendrabhai K. Patel 2013-14 01.09.2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be deleted. 7. That, Ld. CIT(A) has also erred on facts and / or law that, since no specific defect has been pointed out to the papers submitted before AO and therefore, reference to District Valuation Officer is arbitrarily action and not in consonance with the provision of sec. 142A / 55A and therefore, the whole proceeding is liable to be quashed. 8. That, even otherwise, CIT(A) has erred on merits in sustaining addition made of ₹ 4,09,82,163/- as made by AO in an order dated 28-03-2016 and therefore, the addition is required to be deleted. 5. The assessee filed return of income for the AY 2013-14 in question which was subjected to scrutiny assessment. In the course of the assessment, the AO noticed that during the FY 2012-13 relevant to AY 2013-14 in question, the assessee, alongwith other co-owners, had sold an immovable property being non-agricultural land situated at Survey Nos. 530 531 at Village Khoraj, District Gandhinagar on 28.03.2013 for a sale consideration of ₹ 28 Crores. It was claimed that the said property was an ancestral property devolved and jointly owned with other co-owners. The assessee decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act retaining the same estimation of FMV at ₹ 1,96,800/-. The assessee once again placed strong objection to the aforesaid corrigendum order under s.55A of the Act dated 09.03.2016 vide its reply dated 21.03.2016. The AO eventually adopted the FMV as on 01.04.1981 of the land at ₹ 1,96,800/- as determined by DVO. The indexed cost of acquisition was accordingly reduced in same proportion and assessed at ₹ 4,19,184/- as against ₹ 1,94,37,250/- adopted by the assessee. The capital gains and consequent assessed income was accordingly re computed in the light of the reduction in the FMV of cost of acquisition. 6. Aggrieved by the reduction in FMV of property as on 01.04.1981 by the AO resulting in enhanced capital gains on sale of land, the assessee preferred appeal before the CIT(A). 7. Before the CIT(A), the assessee reiterated the submissions made before the AO and inter alia questioned as to whether it was permissible for AO to replace the FMV determined by DVO with the RV report obtained by assessee in the facts and circumstances. A legal contention was also raised that in the absence of any reference made by AO under s.55A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re seems no force in the assesse's argument that the order u/s 55A of the I.T. Act is bad-in law and without jurisdiction. The assesse's argument that the land sold was a N.A. and is not comparable with agriculture land is also not found to be satisfactory and hence not acceptable for the reason that as on 01/04/1981, the said land was agricultural land. It was converted into N.A. much later in 2011. The fair market value has to be on the date of acquisition and not the date of conversion to N.A. In view of the above discussion, the reply of the assessee is not found to be satisfactory, convincing and hence the dame is not accepted. The appellant had relied on following case laws:- - Sampatmal Gadhiya V/s Income tax Officer ITAT Kolkata Tribunal 39 CCH 69. - Nitin Jayantilal Shah V/s ITO ITAT Ahmedabad Income Tax Act No 1988/AHD/2009 48 SOT 16 Devidayal Rolling and Refineries V/s ITO ITAT MUMBAI d Bench Income Tax Act No 3390/Mum/2013 - Shiv Dass Sawhney V/s. Valuation officer 109 taxman 349 (J K) Omprakash Bamba V/s. Valuation officer 122 taxman.com (J K) - ITO V/s Prem Hotel 109 taxman 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n question and secondly, the DVO could not have taken recourse to a wholly different provision i.e. Section 55A of the Act when the mandate given to him by the AO was for carrying out valuation in terms of s.142A of the Act. The learned AR contended that the DVO has no independent authority in the matter but derives its power on the basis of the delegations made by the AO in this regard. Therefore, the valuation report framed by DVO under s.55A of the Act without any reference obtained therein from AO is void ab initio and bad in law at the threshold. 10.2 The learned AR next adverted to the valuation report prepared by the DVO and submitted that determination of FMV of property in question as on 01.04.1981 has been made allegedly on comparable sale instance method for land. However, as pointed out vide letter dated 19.06.2017, the DVO has neither given any opportunity to the assessee while adopting so called comparable method nor the comparables adopted by the DVO are comparable at all. Making reference to letter dated 19th June, 2017, it was pointed out that all comparable cases adopted by the DVO are not of old tenure agriculture tilling land at all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee has declared incorrect FMV to enable him to invoke Section 55A of the Act. It was thus submitted that in the absence of any material in this regard a reference could not have been made under s.55A of the Act either. To this extent, the AO was right in not taking shelter of Section 55A of the Act. The learned AR further relied upon the decision of the Tribunal in Vivek Bose vs. ITO (2015) 152 ITD 745(Kolkata-Trib.) wherein same view has been echoed. The learned AR further referred to the decision in the case of Prem Hotel vs. ITO (1997) 93 taxman 237 (J K) for the plea that reference to Valuation Officer under s.55A of the Act is not permissible without giving the assessee an opportunity of being heard and without disclosing reason for such reference. The learned AR accordingly submitted that while the AO has, rightly, not made any reference under s.55A of the Act, he could not have done so either. The learned AR reiterated that reference has been made under s.142A of the Act which is clearly without jurisdiction. 10.5 The learned AR accordingly submitted that the CIT(A) has misdirected himself in law and on facts in endorsing the action of the AO with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attributable to assessee based on the RV report was computed at ₹ 48,59,313/- in proportion to its co-ownership right. The assessee claimed indexed cost acquisition at ₹ 4,14,01,347/- in terms of Section 48 r.w.s. 55 of the Act. The assessee accordingly offered surplus towards taxation under capital gains having regard to the index cost of acquisition of land with reference to the valuation made by the RV as on 01.04.1981. 12.3 The AO has disputed the FMV of cost of acquisition adopted by the assessee as on 01.04.1981 i.e. ₹ 48,59,313/- and consequential indexed cost of ₹ 4,14,01,347/- determined on the basis of FMV as per RV report. The AO elected to invoke provisions of s.142A of the Act and proceeded to make reference to the DVO. The ground for reference under s.142A of the Act appears to be that the matter was referred to determine correct valuation of the land having regard to the fact that the property is an ancestral property acquired prior to 01.04.1981 by the previous owner as no purchase documents are available and the assessee has adopted the cost of land to be FMV as on 01.04.1981 with reference to the valuation report of the RV. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. As a corollary, the alleged overvaluation, in the value of investment could not be verified under the ambit of Section 142A of the Act where the subject matter of examination under s. 69, 69A or 69B of the Act is understatement in value of investments acquired during the year. Notably, the AO herein seeks to impugn the over valuation (in contrast to undervaluation) in the cost of property acquired. Such act of challenging alleged overvaluation is apparently outside the confines of Section 69, 69A or 69B of the Act. Thus, the reference under s.142A of the Act could not have been made for finding out the extent of alleged overstatement in the value of investment. The reference under s.142A of the Act to the DVO requires to be quashed on this ground alone. We however also simultaneously take note of the fact that Section 69 of the Act etc. would govern the investment made in the relevant financial year in question alone. A property acquired or investment made in the earlier financial years are outside the scope of additions under s.69 of the Act etc. for the purposes of assessment of the undisclosed income of a given assessment year. In the present case, Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the absence of any compelling reasons. As noted earlier, the AO while making reference to DVO has not provided any reasons for doing so except to obtain elucidation on correct value. Such reasons cited for issuance of reference under s.142A of the Act for investment made in earlier year is clearly nondescript and unspecific. The provision of Section 142A of the Act cannot be invoked without assigning some tangible basis giving rise to doubt on the FMV adopted by the assessee. The Section does not confer any unfettered discretion on the AO to make such a reference for the sole reason that FMV has been substituted for the actual cost which act was done as per the statutory mandate of Section 55 of the Act. It is a fundamental principle of law that merely because there exists certain enabling provision in the statute, a quasi judicial authority cannot exercise the power in all cases and in all circumstances without application of mind. Objectivity and fairness in reaching any such decision for exercise of power is pre condition even where the law does not explicitly provide for such stipulation. At this juncture, we are also required to take note of the allegation m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts applicability for reference to Valuation Officer in circumstances as spelt out in sub section (a) (b) thereto. Section 55A(a) is not applicable on facts as the AO did not demonstrate any cogent reason to enable him to form an opinion towards variance/over valuation in the FMV of land in question. Section 55A(b)(i) of the Act concerns a situation where the FMV of the assets exceeds the value of asset claimed by the assessee. In the instant case, the FMV is sought to be lowered by AO than what is claimed by the assessee. Therefore, Section 55A(b)(i) of the Act is not relevant in the facts of the case. We now advert to Section 55A(b)(ii) of the Act which enables the AO to take recourse to Section 55A of the Act only on fulfillment of prescribed parameter therein i.e. nature of asset and other relevant circumstances. The AO has not pointed out existence of any such valid circumstance which could empower him under s.55A of the Act. The AO has merely issued reference to DVO under s.142A of the Act without any background or reasons and the Valuation Officer, in turn, has acted in a perfunctory manner and travelled beyond the jurisdiction mandate conferred within the sw ..... X X X X Extracts X X X X X X X X Extracts X X X X
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