Case Law Details
CIT Vs Daulal Mohta HUF (Bombay High Court)
Revenue Appeal Fails Because Property Valuation Dispute Was Purely a Question of Fact; Section 55A Reference Cannot Be Made When Assessee’s Declared Value Is Higher Than FMV; DVO Valuation Rejected Because Reference Under Section 55A Was Found Bad in Law.
The Bombay High Court dismissed the Revenue’s appeal and held that no question of law arose from the issues raised before it. The appeal concerned the valuation of the “Laxmi Niwas” property and the validity of a reference made by the Assessing Officer (AO) to the Departmental Valuation Officer (DVO) under Section 55A of the Income Tax Act.
The Revenue sought to challenge the Income Tax Appellate Tribunal’s (ITAT) decision on two grounds. First, it questioned whether the Tribunal was justified in reversing the Commissioner of Income Tax (Appeals)’ decision that had accepted the DVO’s valuation of the property at ₹1,35,40,000 as against the valuation of ₹2,13,31,000 determined by a Government-approved valuer. Second, it challenged the Tribunal’s finding that the AO was not justified in making a reference to the DVO under Section 55A for determining the fair market value (FMV) of the property.
The High Court examined the Tribunal’s order and observed that the issues raised by the Revenue related only to the quantum of valuation, which constituted findings of fact. The Court held that no question of law was involved in the appeal.
The Tribunal had earlier considered whether the reference made by the AO to the DVO under Section 55A was valid. It relied on earlier decisions, including Rubab M. Kazerani and the Third Member decision in Krishnabhai Tingore v. ITO, which held that a reference to the DVO under Section 55A could be made only where the value of the capital asset shown by the assessee was less than its fair market value. In the present case, the value of the land as on 1 April 1981 shown by the assessee on the basis of a Government-approved valuer’s report was higher than the fair market value. Accordingly, the Tribunal held that the reference made by the AO to the DVO under Section 55A was invalid and bad in law.
Having decided the issue in favour of the assessee on the legal question itself, the Tribunal declined to examine the matter on merits and described such an exercise as academic.
Agreeing with the Tribunal’s approach, the Bombay High Court found no merit in the Revenue’s appeal and dismissed it. The Court held that the dispute related to factual valuation issues and did not give rise to any question of law.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Heard the learned Counsel for the appellant and the learned Counsel for the respondent.
2. In the above appeal two questions are sought to be raised.
a. Whether on the facts and in the circumstances of the case, the Hon’ble ITAT was right in law in reversing the decision of the CIT(A) on valuation of Laxmi Niwas property at Rs.1,35,40,000/- made by the DVO as against the valuation done by the Government approved valuer which was at Rs.2,13,31,000/-?
b. Whether on the facts and in the circumstances of the case the Hon’ble Tribunal was right in law to observe that the A.O. was not justified in making a reference under sec.55A of the Act to the DVO for determination of the fair market value of the property?
3. We have perused the judgment of the Tribunal. It is explicitly clear that the questions sought to be raised are with regard to the quantum of valuation which is only a finding of fact and there is absolutely no question of law involved in the above appeal.
4. The Tribunal in its order dated 23rd July, 2004 has categorically observed thus:
“5.The first issue that arises for our consideration is whether the reference made by the Assessing Officer to the DVO u/s 55A is bad in law under the facts and circumstances of the case. This issue, in our considered opinion, is covered in favour of the assessee and against the Revenue by the judgment in the case of Rubab M.Kazerani reported in 91 ITD 429 (Mum(TM). Further the assessee also covered by the Third Member decision of the Pune Bench of the Tribunal, the case of Krishnabhai Tingore Vs.ITO reported in 101 ITD 317 (Pune) (TM) wherein it has been held that reference to DVO can only be made in cases where the value of capital asset shown by the assessee is less than its fair market value of land as on 1st April, 1981 shown by the assessee on the basis of approved valuer’s report being more than its fair market value, reference under S.35A was not valid. Respectfully following the propositions laid down these two cases by the coordinate benches we uphold the contention of the assessee and hold that the reference made by the Assessing Officer to the DVO u/s 55A in the peculiar facts and circumstances of the case is bad in law. Thus, on the sole grounds of appeal of the assessee has to be allowed.
6. Before passing, we have to mention that the assessee has submitted the arguments. As on the basis of the legal aspects itself we have decided the issue in favour of the assessee, we refrain from undertaking this academic exercise of disposing this case on merits.”
5. In view thereof there is no merit in the appeal. Appeal stands dismissed.
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