Case Law Details
CA Sandeep Kanoi
issue before us is whether Assessing Officer was justified in applying the provisions of Section55A(b)(ii) of the Act at relevant point of time. As stated above, during the year assessee shown land situated at Rajkot, Gujarat for Rs. 1,27,00,000/- and derived long term capital gain, which was invested in new residential house of exemption u/s.54F of the Act. The land sold during the year was purchased prior to 1st April, 1981. Therefore, long term capital gain was calculated by adopting fair market value of land as on 1st April, 1981 as per the provisions of section 55(2)(b)(i) of the Act. Assessee adopted fair market value at Rs. 22,46,250/- based on valuation report dated 24th September, 2007 of M/s. Star Architects, Government approved registered valuer. Assessing Officer after not accepting the claim of assessee referred the matter to DVO u/s.55A(b)(ii) for ascertaining fair market value of land as on 01.04.1981. After obtaining DVO report, Assessing Officer rejected the fair market value adopted by assessee and completed assessment u/s. 143(3) of the Act estimating the fair market value as on 01.04.1981 at Rs. 12,70,000/- (being 10%) of total income at Rs.55, 13,900/- which was subsequently rectified to Rs.38,18,296/-. Assessing Officer has referred the valuation to the DVO u/s.55A(b)(ii), for the sake of convenience the provision of Section 55A of the Act reds as under:
“55A. 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 –
(a) In a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the Assessing Officer is of opinion ;that the value so claimed is less than its fair market value;
(b) in any other case, if the Assessing Officer is of opinion =
(i) that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such per-centage of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf; or
(ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do”
Thus reference to DVO can be made in two situations; first, the value is adopted based on report of registered 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 invoked 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) in ITA No. 1031 of 2008 (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 1 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 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, 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 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.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 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.
Similar view has been taken by Mumbai Tribunal in case of Sajjankumar M. Harlalka vs. Jt.CIT (2006) 102 TTJ 974 (Mumbai Tribunal) and ITAT, Mumbai in case of ITO vs. Smt. Lalitaben Kapadia (Mum) (2008) 115 TTJ 938. In view of above legal discussion, Assessing Officer was not justified in rejecting the valuation report of assessee as on 01.04.1981 obtained by him from registerd Valuer and referred the same to DVO. Accordingly, the order of CIT(A) was set aside and Assessing Officer is directed to allow the claim of assessee as prayed.
