TMI Blog2022 (6) TMI 1199X X X X Extracts X X X X X X X X Extracts X X X X ..... is allowed. - ITA No. 394/Kol/2020 - - - Dated:- 23-6-2022 - SHRI RAJESH KUMAR, HON BLE ACCOUNTANT MEMBER AND SHRI SONJOY SARMA, HON BLE JUDICIAL MEMBER Appellant by : Shri S. Kalyansundaram, AR Respondent by : Shri G. Hukunga Sema, ACIT ORDER PER SONJOY SARMA , JM : This appeal is filed by the assessee against the order of Ld. CIT (International Taxation Transfer Pricing), Kolkata dated 06.03.2020. The assessee in this appeal has taken the following grounds of appeal: 1. The Learned Commissioner of Income-tax (IT TP)-Kolkata ('Ld. CIT ) has erred in law as well as on facts while initiating proceedings u/s 263 and, further, in concluding that Long Term Capital Gain offered to tax by the assessee should have been higher by INR 49,94,662/- (Tax Effect: INR 11,31,790/- (including surcharge and E-Cess). 2. In the facts and circumstances of the case, the assumption of Jurisdiction by the Ld. CIT violates the settled principle that where the Assessing Office (AO ) has adopted one of courses permissible in law, or where he has adopted one of two possible views, then the order of the AO cannot be treated as erroneous even if the Ld. CIT disag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ACIT (IT), Circle-1(1), Kolkata as the case was belonging to Non-Resident. Pursuant to that notice u/s 142(1) of the Act dated 21.09.2016 03.11.2017 were issued to the assessee. In response to that the AR of the assessee appeared and produced / filed details and documents in support of the return of income filed by the assessee. During the assessment year in question, the assessee had sold a property. The proceeds from sale of residential property has been shown at Rs. 3,55,72,600/- for which capital gain has been calculated by the assessee. The assessee has submitted one third of the property belonging to him and since market value of the property is Rs. 9,37,50,000/- and the sale consideration is more than one third of the market value of one third property, same is being taken as full value of consideration. The assessee has shown calculation in respect of Long Term Capital Gain as under: Sl. No. Particulars Amount 1 Full value of consideration Less Brokerage Rs. 3,55,72,600 (-) 9,37,500 Rs. 3,46,35,100 2 Less Indexe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue. The aforesaid order of the AO was reversed and set aside by Ld. CIT (International Taxation) finding for which in his own words read as under: 4. The assessee was the owner of one third portion of the same land which was referred to the valuation cell by the DCIT(IT) Circle 1(2), Kolkata The valuation of the whole property as on 01 04. 1981 was determined by the DVO at Rs 27,36,720/- but the assessee calculated indexed cost on the basis of valuation at Rs. 42,00,000/-. Due to this, there comes a difference in Indexed Cost of Acquisition resulting in difference in the amount of taxable Capital Gains. Calculation of difference in the cost of acquisition is given as under: Computation of indexed cost of the property on the basis of valuation given by DVO: Total value of the property as on 01.04.1981 Rs. 27,36,720/- Proportional Cost (1/3) as on 01.04.1981 Rs. 9,12,240/- Cost of inflation index Rs. 1024 Indexed cost of acquisition Rs. 93,41,338/- Indexed cost of acq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the computation of long-term capital gains Based upon such inquiries, the Ld. A0 had disallowed assessee's claim towards part of the brokerage expenses and then passed the assessment order that is now the subject of this Revision. 2. Whist passing the assessment order, the Ld. AO has specifically recorded his acceptance of the Valuation Report submitted by the assessee wherein the fair market value of the property as at 01.04.1981 has been worked out at INR 42 Lakhs. 3. Your learned self is now proposing to increase the amount of capital gains by adopting the valuation conducted by the DVO in respect of another assessee. 4. It is respectfully submitted that in the facts and circumstances of the case interference u/s 263 is uncalled for due to the following reasons: a. Jurisdiction u/s 263 can be assumed only if the twin conditions of the order of assessment being erroneous as well as prejudicial to the interest of revenue are satisfied. An incorrect assumption of facts can also lead to the order being erroneous but a difference of opinion cannot lead to proceedings u/s 263. The law on this is settled and this position has not changed even afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailable with him cannot be treated as erroneous calling for interference u/s 263. 5. The assessee relies on the following judicial precedents in support of its submissions: a. ACIT v Dhariya Construction Co 328 1TR 515(SC) in which it was held that the DVO report is merely an opinion and cannot lead to reopening of assessment. b. Jitendar Singh Chaddha v Pr. CIT-18 1TA 2732/Del/2018 (1TAT) in which on almost identical facts, it was held when AO has concluded assessment based on Valuation Report of Government Registered Valuer, he has taken a possible view and the CIT cannot interfere based only on a valuation report of DV0. 7. Further, the assessee filed another written submission, the relevant portion of which is as given below: Without prejudice to our earlier written submission and verbal arguments placed before you, we submit herewith our submission on the Valuation Report dated 11.04.2018 made by the DCIT(IT), Circle-1(2). Kolkata Is seen from the said valuation report that transactions recorded in the jurisdictional registry that have been considered by the Ld. DVO have been executed in 1985/86 in this regard, your kind attention is drawn t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O u/s.143(3) vide order dated 27/12/2017 with due application of mind. As the reference to DVO was not made by the AO, he could not get the correct value of the property to determine the cost of acquisition of the sold property and hence, he ended up in passing of assessment order taking a high value of the cost of acquisition, resulting into assessing short amount of Long Term Capital Gain on the property sold as discussed in para 4.1 of this order. Therefore, the assessment order passed by the AO u/s.143(3) vide order dated 27/12/2017 is erroneous in so far as prejudicial to the interest of revenue. 6. Here, the ld. CIT (International Taxation) was of the view that AO has acted upon assessee s calculation indexed cost on the basis of valuation at Rs. 42,00,000/- filed by the assessee and one third thereof comes to Rs. 14,00,000/- but as per DVO, the valuation of whole property as on 01.04.1981 determined at Rs. 27,35,720/-, the assessee calculated indexed cost on the basis of valuation at Rs. 42,00,000/- and due to this difference in valuation it has resulted in difference in the amount of taxable capital gain. It is to be noted that even though the assessee contested the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Valuation Report and has specifically recorded his acceptance of the same It is evident that he has applied his mind to the entire matter of computation of capital gains because he has, in fact specifically disallowed part of the claim for brokerage expenses made by the assessee. f. In summary, it is respectfully submitted that based merely on an opinion of DVO without there being anything more to substantiate its conclusions an acceptance of Valuation Report submitted by the assessee that has been accepted by the Ld. AO under the discretionary powers available with him cannot be treated as erroneous calling for interference u/s 263. 5. The assessee relies on the following judicial precedents in support of its submissions: a. ACIT v Dhanya Construction Co. 328 ITR 515 (SC) in which it was held that the DVO report is merely an opinion and cannot lead to reopening of assessment. b. Jitendar Singh Chaddha v Pr. CIT-18 ITA 2732/Del/2018 (1TAT) in which on almost identical facts, it was held when AO has concluded assessment based on Valuation Report of Government Registered Valuer, he has taken a possible view and the CIT cannot interfere based oily on a val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT, Delhi) iii. Pr. CIT-2 vs J. Upendra Construction Pvt. Ltd. (HC, Guj) iv. Narayan Tatu Ranne vs ITO, Ward-27(1) (Mumbai ITAT) 8. Per contra, the ld. CIT, DR submitted that in the facts of this case, the AO ought to have referred report of DVO and he shall take decision as per law to determine the actual cost of acquisition of the property sold and to determine the correct amount of long term capital gain earned by the assessee on sale of property. 9. We after going through the submission made by the parties and material available on record. The case of the assessee is squarely covered by the decision of the coordinate bench of the Tribunal in the case of Monoj Kumar Biswas vs Pr. CIT-9, Kolkata held as under: 10. We have heard rival submissions and carefully perused the material available on record. We note that the assessee has raised the legal issue of jurisdiction of the Ld. Pr. CIT to interfere in the order of the AO. Before we advert to the facts and law involved in this lis before us, let us revisit the law governing the legal issue before us. The assessee has challenged in the first place, the very usurpation of jurisdiction by Ld. Principal CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law . 11. In the light of the binding judicial precedent and well established principles, while we examine the legal issue as to whether the Ld. PCIT had made out a case as to invoke the revisional jurisdiction u/s 263 of the Act, we have to examine as to whether the Ld. PCIT s allegation against the AO s action/omission can be termed as erroeneous as well as prejudicial to the Revenue. For examining that we have to see the merit of the faults/omission on the part of the AO which according to Ld. PCIT makes the order of AO (order of AO) erroneous. The main fault raised by the Ld. PCIT is the omission on the part of AO not to refer the valuation of asset/flats to Departmental Valuation Officer (DVO) when there was difference in valuation of flats as claimed by the assessee at actual value of Rs. 60 Lakhs and his registered value estimating it at Rs. 67,57,600/- whereas the circle rate of flats as per the Stamp Valuation Authority was to the tune of Rs. 80,82,150/-. For that, first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the opinion of the AO is at variance with its fair market value. So, it can be discerned that in order to ascertain the fair market value (hereinafter the FMV) of a capital asset, the AO may refer the valuation of capital asset to a valuation officer (hereinafter the DVO) when he is of the opinion that the value of the asset as claimed by the assessee as estimated by a registered valuer is at variance with its FMV. In other words, if the AO after perusal of the report/estimate of the registered valuer in respect of the asset is of the opinion that the value of the capital asset is not in variance with the market value of the asset, then the AO need not refer the valuation of capital asset to a DVO. Here in this case, we note that even though the assessee paid to the vendor only Rs 60 lakhs for the flats as per agreement dated 06 Feb 2013, and since at the time of registration of the flats took place after two years i.e. on 17.02.2015, the valuation of the flats on which stamp duty was paid was at Rs 80,82,150/-. So when called upon by the AO during scrutiny assessment, the assessee contested the adoption of Circle Rate fixed by Stamp Valuation Authority at Rs 80,82,150/- and bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum; [(b) any immovable property,- (i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; It is pertinent to note that Sub-clause (ii) (infra) was inserted to Clause (vii)(b) to Sub-section (2) of section 56 by the Finance Act, 2013 w.e.f. 01.04.2014 which reads as under: (ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration: 13. According to the Ld. AR, sub-clause (ii) supra is not applicable in this case. For that his main contention is that the agreement for sale was made on 06.02.2013 (AY 2013-14) wherein the consideration of Rs.60,00,000/- was finalized for the flats. According to the Ld. AR, by registration dated 17.02.2015, the assessee has only completed the agreement made on 06.02.2013. According to the Ld. AR, the character of the sale transaction has not changed, therefore, the date of sale agreement dated 06.02.2013 should be taken and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y completed the contractual obligation imposed upon it by virtue of the sale agreement. Further, we note that by Finance Act 2013, w.e.f. AY 01.04.2014, the Parliament has accepted the above principle for the purpose of computing deemed income on acquisition of immovable property u/s. 56(2)(vii) by inserting 1st proviso to section 56(2)(vii) which reads as under: Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty valuer on the date of the agreement may be taken for the purposes of this sub-clause. 14. From the aforesaid, it is apparently clear that the transfer of the property took place in the year 2013 when the provision of sub-clause (ii) in Section 56(2)(vii)(b) of the Act was not in existence. According to us, the Ld. PCIT was not justified in finding fault with the AO for not referring the valuation of the flats to the DVO by taking the aid of proviso to Section 56(2)(vii) which refers to case when it falls in sub-clause (b) of clause (vii) of sub-section (2) of Section 56 of the Act. Because, in this case when the assessee had agree ..... X X X X Extracts X X X X X X X X Extracts X X X X
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