pri Amended Section 55A provisions not applicable before 01.07.2012 Amended Section 55A provisions not applicable to documents registered before 01.07.2012

Case Law Details

Case Name : Jagrutiben V. Patel Vs ITO (ITAT Surat)
Appeal Number : ITA No.650 & 651/AHD/2017
Date of Judgement/Order : 27/11/2020
Related Assessment Year : 2012-13

Jagrutiben V. Patel Vs ITO (ITAT Surat)

Regarding the validity of reference to the DVO u/s.55A of the Act, first of all, it is to be noted that amendment in section 55A of the Act is effective from 01.07.2012, that is, applicable for assessment year 2013-14 and assessee`s case under consideration is for assessment year 2012-13, therefore, the amended provisions are not applicable to the assessee under consideration. We note that at the relevant time, i.e. A.Y. 2012-13, the Assessing Officer can make a reference to the DVO u/s.55A of the Act only if the value so adopted by the assessee u/s.48 is not supported by the Valuation Report of Govt. approved valuer or if the AO is of the opinion that the value of capital asset claimed by the assessee is “less than its fair market value” and not when “it is more than its fair market value”. We note that none of the condition got fulfilled, hence Ld. AO is not legally competent to make reference to the DVO. As explained above the amended provision of Sec. 55A is not applicable to all those documents which got registered before 01.07.2012, therefore, we note that the AO has (with its fair market value) misinterpreted the provision and erroneously applied it retrospectively. We note that with effect from July 1, 2012, the expression now used in clause (a) of Section 55A is ‘at variance’ the situation may, therefore, be different after July 1, 2012 which is applicable for assessment year 2013-14 whereas the assessee`s case under consideration relates to assessment year 2012-13 hence amended provisions are not applicable to the assessee.

FULL TEXT OF THE ITAT JUDGEMENT

These captioned two appeals filed by the different assessees, pertaining to Assessment Year 2012-13, are directed against the common order passed by the ld.. Commissioner of Income Tax (Appeals)-1, Surat [in short the “CIT(A)”] in Appeal No.CAS-1/147/2015-16 and CAS-1/146/2015-16 dated 26.12.2016, which in turn arise out of separate assessment orders passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as the “Act”].

Since, the issues involved in these two appeals are common and identical, therefore these appeals have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. The facts as well as grounds narrated in ITA No.650/AHD/2017 for the AY.2012-13 is taken as the lead case.

3. The grounds of appeal raised by the assessee in its lead case read as follows:-

“(1) That on facts and in law, the learned CIT (A) has grievously erred in holding that the reference made to DVO u/s.55A of the Act to determine the fair market value of land as on 01/04/1981 is valid.

(2) That on facts, and in law the learned CIT (A) has grievously erred in confirming the addition of Rs.49,07,585/- made towards long term capital gains by rejecting the fair market value as on 01/04/1981 adopted by assessee.

(3) The assessee craves leave to add, alter, amend any ground of appeal.”

4. Facts of the case which can be stated quite shortly are as follows: The assessee is small agriculturist and has filed return of income on 04-12-2013 declaring total income of Rs 1,51,800/-. She has also income from long term capital gain and shown in computation of income filed by her. The assessees with other four co-owners have sold. one agriculture land situated at Block No 31, R S No 22+23, Village Karadva Tal Choryasi, Dist. Surat. Total area of agriculture land was 38579 square meters. The land was sold for total sales consideration value of Rs.3,46,76,100/-. The assessee’s share is 1/5th being 20% of total land. The valuation report of Registered Valuer was obtained and submitted to Assessing Officer who has given the fair market value of the agriculture land as on 01-04-1981 at Rs 100/- per Square Meter totaling to Rs.38,52,900/-. The index cost of agriculture land was worked out and capital gain had been shown in return of income accordingly. The capital gain shown in return of income by assessee is as follows:

Total Sales Consideration Received 3,46,76,100
Share of assessee in total sales consideration (20%) 69,35,220
Less: Cost of Acquisition.
Fair Market Value as per Registered / Approved Valuer’s Report as on 01-04-1981 (Rs 100/sq mtr) 38,57,900
Assessee’s Share of Cost as on 01-04-1981 7,71,580
(20%)
Index cost of Acquisition as on 01-04-1981 (771580/100*785) 60,56,903
Long Term Capital Gain 8,78,317
Less: Investment eligible u/s 54EC 7,50,000
Net Long Term Capital Gain 1,28,317

During the scrutiny proceedings, the assessee has submitted various justifications for Fair market value adopted by Government Approved Valuer. However, the Assessing Officer rejected the contention of the assessee and held that Registered Valuer’s Valuation Report of land, submitted by assessee did not provide any comparable sale instances of the nearby area of land occurred on near to date of 01.04.1981. Therefore, Assessing Officer considered the value of said land at the rate of Rs.19 per sq. meter and calculated capital gain of Rs.50,35,902/- from the sale of said land, as follows:-

Sale consideration of your share of land Rs.69,35,220/-
Less: Indexed value of your share of land for FY 2011-12 Rs. 11,49,318/-
Long term capital gain Rs. 57,85,902/-
Less: Exemption claimed u/s. 54EC Rs. 7,50,000/-
Long term capital gain for taxation purpose Rs. 50,35,902/-
Less: LTCG offered for taxation in return of income Rs. 1,28,317/-
Balance LTCG for taxation purpose Rs. 49,07,585/-

Since, the assessee has offered Long Term Capital Gain at Rs.1,28,317/-, therefore Assessing Officer made addition of Rs.49,07,585/- (Rs.50,35,902 – Rs.1,28,317).

5. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before ld. CIT(A), who has confirmed the addition made by the Assessing Officer. Aggrieved, the assessee is in appeal before us.

6. We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld. CIT(A) and other materials brought on record. We note that the impugned piece of land bearing Block No.31, R.S. No.22+23 situated at Village: Karadva, Tal. Choryasi, Dist. Surat, was sold, which was jointly held by her with other co-owners and assessee is holding 1/5th share therein which works out to Rs.69,35,220/- as her share in sale consideration. In the return of income filed by the assessee after claiming deduction for Indexed Cost of Acquisition and deduction u/s.54EC of the Act, the assessee has shown chargeable long term capital gain (LTCG) at Rs.1,28,317/-. The only dispute which has survived between the assessee and the Department is relating to determination of Fair market Value (FMV) as on 01.04.1981 of the impugned land admeasuring 38579 sq. meter, which the assessee has valued at Rs.100/- per sq. meter as against value estimated by the DVO @Rs.19/- per sq. meter. We note that the valuation adopted by the assessee is supported by report from Govt. Approved Valuer, whereas the Ld. AO has based his estimation on value determined by the DVO. The assessee has adopted the FMV as on 01.04.1981 at Rs.38,57,900/-@Rs.100/-per sq. meter as against Rs.7,32,050/- estimated by the DVO @Rs.l9/- per sq. meter for entire land. This is the precise issue of dispute between the assessee and the Department, as noted by ld. CIT(A).

7. Regarding the validity of reference to the DVO u/s.55A of the Act, first of all, it is to be noted that amendment in section 55A of the Act is effective from 01.07.2012, that is, applicable for assessment year 2013-14 and assessee`s case under consideration is for assessment year 2012-13, therefore, the amended provisions are not applicable to the assessee under consideration. We note that at the relevant time, i.e. A.Y. 2012-13, the Assessing Officer can make a reference to the DVO u/s.55A of the Act only if the value so adopted by the assessee u/s.48 is not supported by the Valuation Report of Govt. approved valuer or if the AO is of the opinion that the value of capital asset claimed by the assessee is “less than its fair market value” and not when “it is more than its fair market value”. We note that none of the condition got fulfilled, hence Ld. AO is not legally competent to make reference to the DVO. As explained above the amended provision of Sec. 55A is not applicable to all those documents which got registered before 01.07.2012, therefore, we note that the AO has (with its fair market value) misinterpreted the provision and erroneously applied it retrospectively. We note that with effect from July 1, 2012, the expression now used in clause (a) of Section 55A is ‘at variance’ the situation may, therefore, be different after July 1, 2012 which is applicable for assessment year 2013-14 whereas the assessee`s case under consideration relates to assessment year 2012-13 hence amended provisions are not applicable to the assessee. Taking into account, the facts narrated above we note that the issue under consideration is fully covered in favour of the assessee by the judgement of the Divisional Bench of ITAT, Surat in the case of Shri Mahdevbhai Mohanbhai Naik in ITA No.820/AHD/2016 for AY.2010-11 dated 11.07.2018 wherein it was held. as follows:-

“9. Thus reference to DVO can be made in two situations; first, the value is adopted based on report of resisted valuer and second, in any other case. In assessee’s case, fair market value adopted as on 01.04.1981 is based on valuation report of registered Valuer. Therefore, Assessing Officer should. have applied the provisions of 55A(a) and according to said provision, fair market value claimed by assessee can be rejected only if fair market value is less than fair market value as per Assessing Officer. As fair market value claimed by assessee as on 1st April, 1981 is higher than that estimated by Assessing Officer provisions of 55A should. not be invoked. The provisions of Section 55A(b)(ii) as resorted by Assessing Officer for referring the matter to DVO can be invoiced only in case the valuation report is not submitted by assessee. Thus, reference made by Assessing Officer u/s.55A(b)(ii) was not correct. We find that Hon’ble Bombay High Court in case of CIT vs. Daulal Mohta (HUF) [2014] 3601TR 680 (Bom.) the Hon’ble Bombay High Court wherein respondent had adopted fair market value of property as on 01.04.1981 at Rs.2,13,31,000/- based on the valuation report of Government approved Valuer and Assessing Officer determined the fair market value as on 1st April 1981 at Rs.1,35,40,000/- based on Valuation report of DVO. Hon’ble Bombay High Court upheld. the order of Tribunal by observing as under:

“3. We hove perused .the judgment of the Tribunal. It is explicitly-dear 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, 2008 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 assesses 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 Tribunal, the case of Krishnabahai 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.55A 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 in bad in law. Thus, on the sole grounds of appeal of the assessee has to be allowed.

10. Further, where the fair market value of properly is shown more than the Fair Market Value, the AO1 cannot refer the same to valuation relating to assessment year failing before the date of 01.07.2012. Since the assessment made is for the assessment year 2010-11, the AO cannot make reference to DVO for the valuation of property, where value of property is not less than the value of “fair market value. This view is supported with decision of Hon’ble Bombay High Court in the case of CIT vs. Puja Prints [2014] 360 ITR 697 (Bom.) wherein it was held. that Assessing Officer referred the issue of valuation to the Departmental Valuation Officer only as on 1981 as made by the assesses was higher than the fair market value. Therefore, invocation of section 55A (a) was not justified.

11. We find that the Hon’ble Jurisdictional High Court of Gujarat in the case of CIT v. Gauragiben S Shodhan [2014] 108 DTR 442 (Gujarat) wherein it was observed “Coming to the question of reference to DVO for ascertaining the fair market value as on 1st April, 1981 also, such reference was not competent. Prior to the amendment in section 55A with effect from 1st July, 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 AO was of the opinion that the value so claimed was less than its fair market value as on 1st April, 1981. It would. not be the case of the AO that the value of the asset shown as on 1st April, 1981 was less than the fair market value. Such clause, therefore, as it stood at the relevant time, had no application to the valuation as on 1st April, 1981. Therefore, respectfully following the same the reference made by the AO to DVO is not justified hence, findings recorded by the CIT(A) are not proper. Similarly, the Pune Tribunal in the case of ACIT V. Bhima Daca Kharate I.T.A.No. 1582/PUN/2015 dated 31.10.2017, observed in para 10 as follows: “10. Now, coming to the facts of the present case, the year under reference is assessment year 2009-10 and since the amendment was made effective from 01.07.2012 and the Hon’ble High Court has held. that law which is to be applied in such cases is as existing during assessment year 2009-tOf then the pre- amended provisions of section 55A(a) of the Ant are to 0e applied. In such scenario, there is no merit in the order of Assessing Officer in adopting the cost of acquisition as on 01.04.1981 at the value less than the value shown by the assesses which .in- turn, .is based on, the report of the approved Valuer.”, Therefore, The AO v/as not justified in referring to DVO for valuation as on 01,04,1981. Similarly, the Mumbai Tribunal in the case of Pradeep G. Vora 58 taxmann.com 110 (Mum-Trib) / [2015] 154 ITD 118 (Mum) has observed in para 4.2 as “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 than its 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 amendment was made effective only from July 1, 2012. Parliament has not given retrospective effect to the amendment. Therefore, the law to be applied in the-present case is section 55A(a) of the Act as existing during the period relevant to the assessment year 2006-07. At the relevant time, very dearly reference could. be made to Departmental DVO only if the value declared by the assesses is in the opinion of AO less than its fair market value.

12. Thus, the contention of the Learned Departmental Representative that reference was made after 01.07.2012 is not tenable in law as the amendment made in section is substantive in nature which is relevant to assessment year commencing after the date of amendment i.e. F.Y. 2012-13 relevant to A.Y. 2013-14, hence, it is not applicable for the assessment year 2010-11, as the assessment involved is prior to period of 01.07.2012, In view of these facts and circumstances, we are of the considered opinion that the law has been settled by the decision of Hon’ble Bombay High Court, Hon’ble Gujarat High Court, Mumbai Tribunal and Pune Tribunal. Therefore, the AO was not justified in referring to DVO or adopting valuation based on valuation report. The amendment in section 55A was qua prior period to 01.07.2012 and not qua proceeding prior to 01.07.2012. Hence, respectfully the following the ratio laid down in above judgments of Hon’ble High. Courts and Tribunal as referred above, hence, Ground No.1(1) to (5) of the appeal are allowed.”

8. As the issue is squarely covered in favour of the assessee by the decision of the Coordinate Bench, of ITAT Surat in the case of Shri Mahdevbhai Mohanbhai Naik (supra) and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings of the Coordinate Bench (supra). We find no reason to interfere in the said order of the Coordinate Bench, therefore, respectfully following the above binding precedent, we allow both the appeals of the assessees.

9. In the result, the appeals filed by the assessees (in ITA No.650/AHD/2017 & ITA No.651/AHD/2017 for AY.2012-13) are allowed.

Order is pronounced on 27/11/2020, as per Rule 34 of Income Tax Appellate Tribunal, Rule 1963.

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