TMI Blog2020 (12) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... luer report is considered, it would reveal that the same was in fact even higher than the value subsequently determined by the valuation officer and therefore, the AO was not empowered to refer the matter to the valuation officer even as per erstwhile provisions of section 55A(a) prior to amendment by the Finance Act, 2012. Without going into the merits of the basis of valuation so adopted by the registered valuer and subsequently by the department s valuation officer, in absence of a valid reference to the valuation officer, the addition so made under the head long term capital gains so far as it relates to cost of acquisition as substituted by fair market value as on 1.4.1981 is directed to be deleted. In the result, the appeal of the assessee is allowed Considering the decision of co-ordinate bench of Tribunal on almost similar set of fact while considering the similar contention of assessee in the said held that when the transaction of sale of land was taken during the financial year 2011-12 relevant to the assessment year 2012 -13, the amended provision of section 55A(a) would not be applicable and one shall be guided by the wrest while provision of un-amended section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iming cost of indexation by taking cost of acquisition at ₹ 70,72,075/-. The assessee also claimed deduction under section 54EC of ₹ 50 lakhs. As per the working of capital gain furnished by assessee, the assessee adopted value of land as on 1st April 1981 at the rate of ₹ 500/- per square metre. On the basis of value adopted by assessee, the assessee worked out the cost of acquisition of ₹ 9,94,667 /- (1/3 Cost). According to assessing officer the rate adopted by assessee was on higher side. The assessing officer made reference to the district valuation officer (DVO). The DVO furnished his report and estimated the fair market value at ₹ 350 per square metre and suggested the values of land at ₹ 20,88,880/- as on 1st April 1981. On the basis of value adopted by DVO, the assessing officer issued show cause notice to the assessee as to why the rate adopted by district valuation officer be not taken for computing long-term capital gain. The assessee objected by filing detailed reply, which has been recorded by assessing officer in para 5.3 5.5 of the assessment order. 3. The assessee in its objection stated that the provision of section 55A is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost of acquisition was shown at ₹ 70,72,075/- The objection raised by assessee was not accepted by assessing officer. The assessing officer adopted the rate suggested by district valuation officer and accordingly reworked the amount of long term capital gain. The assessing officer after granting deduction under section 54EC of ₹ 50 lakhs treated the remaining capital gain of ₹ 3,93,208/- as taxable Long-term capital gain. 5. On appeal before learned Commissioner (Appeals) , the assessee made further submission that Hon ble Bombay High Court in Commissioner of Income tax Versus Pooja Prints (360 ITR 697 Bom) held that the amendment made in section 55A w.e.f. 01.072012 is not having retrospective effect. The assessee also relied on the decision of the jurisdictional High Court in case of Hiaben Jayantilal Shah Versus Income tax Officer (227 CTR 666 Gujarat) , wherein it was held that under clause (a) of section 55A of the Act, the assessing officer is entitled to make the reference to the valuation officer in case where the value of asset as claimed by assessee is not in accordance with the estimate made by registered valuer, if the assessing officer is of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Mohanbhai Naik Vs ITO ( ITA No.82/Ahd/2016) 7. The learned AR for the assessee submits that in view of the decision of jurisdictional High Court in CIT Versus Gauranginiben S Shodhan (supra), the issue of validity of reference under section 55A(a) may kindly be addressed first as not in accordance with the law and in case it is held that reference to the DVO is not in accordance with law the additions based on such reference be deleted in such even the other contention raised before the lower authorities would become academic. 8. On the other hand the learned senior department representative for the revenue strongly supported the order of lower authorities. The learned Senior DR submits that the lower authorities have passed a reasoned order. 9. We have considered the rival contention of the parties and have gone through the orders of authorities below. We have noted that on similar set of fact, the coordinate bench of Tribunal in Jignesh Kumar S Modi (HUF) Vs ITO in ITA No.544 /SRT/2018 dated 26 June 2019, while relying on the decision of jurisdictional High Court in CIT Versus Gauranginiben S Shodhan (supra) and the decision of Bombay High Court in Commissioner of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 2012-13 and the Assessing officer was not having the jurisdiction to refer the matter to the valuation officer. 15. In order to resolve the controversy, let s examine the provisions of section 55A(a). First and foremost, it provides that 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 a Valuation Officer. In the instant case, for the purposes of this chapter means for the purposes of determining the liability towards the capital gains tax on the sale of the land. There is no dispute that the liability towards the capital gains has arisen during the year as the transfer of the land has happened during the year. The second condition is that where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer. In the instant case, there is no dispute that cost of acquisition as substituted by the assessee with the fair market value as on 1.4.1981 is based on and in accordance with the estimate made by the registered valuer. The third condition is that the Assessing Officer should form an opinion that the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pending before the Assessing officer on or after 1.07.2012, given that the Assessing officer has to form an opinion during the course of assessment proceedings, the amended provisions will apply. In this regard, it would be useful to refer to the Memorandum explaining the Finance Bill, 2012 which reads as under: Under the provisions of section 55A, where in the opinion of the Assessing Officer value of asset as claimed by the assessee is less than its market value, he may refer the valuation of a capital asset to a Valuation Officer. Under section 55 in a case where the capital asset became the property of the assessee before 1st April, 1981, the assessee has the option of substituting the fair market value of the asset as on 1st April, 1981 as the cost of the asset. In such a case the adoption of a higher value for the cost of the asset as the fair market value as on 1st April, 1981, would lead to a lower amount of capital gains being offered for tax. Accordingly, it is proposed to amend the provisions of section 55A of the Income-tax Act to enable the Assessing Officer to make a reference to the Valuation Officer where in his opinion the value declared by the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined 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 then the fair market value. In the present case, it is an undisputed position that the value adopted by the respondent assessee of the property at ₹ 35.99 lakhs was much more than the fair market value of ₹ 6.68 lakhs even as determined by the Departmental Valuation Officer. In fact, the Assessing Officer referred the issue of valuation to the Departmental Valuation Officer only because in his view the valuation of the property as on 1981 as made by the respondentassessee was higher then the fair market value. In the aforesaid circumstances, the invocation of Section 55A(a) of the Act is not 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 then 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 amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar provisions of law as existing during the period relevant to Assessment Year 2006-07, we are of the view that questions (a) and (b) do not raise any substantial question of law. 18. We now refer to the Hon ble Gujarat High Court decision in case of CIT vs. Gauranginiben S. Shodhan Indl. [2014] 224 Taxman 253 (Gujarat) wherein it was held section 55A as it stood at the relevant time, has to be seen and emphasis was laid on the period of the transaction and where the transaction was for the period prior to 1.7.2012, amended provisions were held not applicable. The findings of the Hon ble High Court are as under: 15. Coming to the question of reference to DVO for ascertaining the fair market value as on 1.4.1981 also, we find that such reference was not competent. We have noticed that prior to the amendment in section 55A with effect from 1.7.2012 in a case, the value of the asset claimed by the assessee is in accordance with the estimate made by the Registered Valuer, if the Assessing Officer was of the opinion that the value so claimed was less than its fair market value as on 1.4.1981. It would not be the case of the Assessing Officer that the value of the asset shown a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arket value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage or by more than such an amount as may be prescribed; or (ii) having regard to the nature of the asset and other relevant circumstances, it is necessary to make such a reference. 19.xxxxxxxxxx 20 xxxxxxxxxx 21 xxxxxxxxxx 22 xxxxxxxxxx 23. As we have noted above, the Hon ble Bombay High Court in case of CIT vs. Puja Prints (supra) has held that the Parliament has not given retrospective effect to the amendment and the law to be applied is as existing during the period relevant to the Assessment Year 2006-07. Similarly, the Hon ble Gujarat High Court in case of CIT vs. Gauranginiben S. Shodhan Indl. (supra) has held that section 55A as it stood at the relevant time, has to be seen and emphasis was laid on the period of the transaction and where the transaction was for the period prior to 1.7.2012, amended provisions were held not applicable. Similarly, in case of Late Shantaben P Patel, Ahmedabad (supra), the Hon ble Gujarat High Court has reiterated the legal position that for the transaction falling in financial year 2010-11 relevant to AY 2011-12, the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than its fair market value. Therefore, only in a scenario, the value so claimed by the assessee is less than its fair market value in the opinion of the Assessing officer, the matter can be referred to the valuation officer. In a scenario, where the value so claimed by the assessee is more than its fair market value, the matter couldn t be referred to the valuation officer. In the instant case, the value of the land shown by the assessee as on 1.4.1981 based on the registered valuer report is considered, it would reveal that the same was in fact even higher than the value subsequently determined by the valuation officer and therefore, the Assessing Officer was not empowered to refer the matter to the valuation officer even as per erstwhile provisions of section 55A(a) prior to amendment by the Finance Act, 2012. 27. Therefore, without going into the merits of the basis of valuation so adopted by the registered valuer and subsequently by the department s valuation officer, in absence of a valid reference to the valuation officer, the addition so made under the head long term capital gains so far as it relates to cost of acquisition as substituted by fair market value as on 1.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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