High Court Of Bombay
CIT-13 Vs. Puja Prints
Assessment Year : 2006-07
Section : 55A
Mohit S. Shah, CJ. And M.S. Sanklecha, J.
IT Appeal No. 248 Of 2012
January  15, 2014
ORDER
1. This appeal under Section 260A of the Income Tax Act 1961 (the Act) challenges the order dated 18 February 2011 passed by the Income Tax Appellate Tribunal (the Tribunal). This appeal relates to Assessment Year 2006-07.
2. The following questions of law have been formulated by the revenue for consideration by this Court:—
(a) Whether on the facts and in the circumstances of the case and in law, the ITAT was right in holding that the reference made by the AO to the valuation officer per se is bad in law? Further, whether the ITAT was justified in observing that the reference to the DVO u/s. 55A of the IT Act 1961 is to be made when the value of the property disclosed by the assessee is less than the fair value and not vice versa thereby ignoring the provisions of section 55A(b)(ii) of the Act 1961 and paragraph 26 to 28 of circular No.96 dated 25.11.1972 of the CBDT?
(b) Whether on the facts and in the circumstances of the case and in law, the ITAT was right in directing the AO to accept the valuation given by the respondent as the Fair Market Value on the basis of the registered valuer’s report and workout capital gain?
(c) Whether on the facts and in the circumstances of the case and in law, the ITAT was right in holding that the ownership of the property is required to be examined vis-a-vis the various partnership deeds entered into by the firm and to that limited extent restoring the issue to the file of the AO for determining the date of acquisition by the firm for the purpose of indexation, particularly when this issue was not raised either before the AO or the CIT(A) and hence did not arise from the order of the CIT(A)?
3. Briefly, the facts leading to this appeal are:—
(a) In its return of income, the appellant had claimed long term capital gains of Rs.11.20 lakhs in respect of sale of its land and building (property) at village Marol, Andheri (East), Mumbai for a consideration of Rs.2 Crores. The respondent-assessee claimed a deduction on account of brokerage of Rs.5 lakhs and the costs of indexation was claimed at Rs.1.78 Crores, on the basis of the value of the property being Rs.35.99 lakhs as on 1 April 1981. This valuation of Rs.35.99 lakhs as a fair market value as on 1 April 1981 of the property was on the basis of a valuation report;
(b) The Assessing Officer was of the view that the value of property at Rs.35.99 lakhs as adopted by the respondent-assessee was high considering the fact that it was purchased at a consideration of Rs.1.45 lakhs only 15 months earlier. Therefore, the Assessing Officer referred the issue of valuation to the Departmental Valuation Officer who valued the property at Rs.6.68 lakhs as on 1 April 1981 and the indexed cost at Rs.33.20 lakhs. Consequently, the Assessing Officer by his Assessment Order enhanced the capital gain of the appellant from Rs.11.20 lakhs to Rs.1.61 Crores;
(c) Being aggrieved, the respondent-assessee filed an appeal before the Commissioner of Income Tax (Appeal). By an order dated 29 October 2009, the Commissioner of Income Tax (Appeal) dismissed the appeal of the respondent-assessee;
(d) Being aggrieved, the respondent-assessee preferred a Second Appeal before the Tribunal. The Tribunal by the impugned order held that in view of Section 55A(a) of the Act, it was not permissable for the Assessing Officer to make a reference to the Departmental Valuation Officer for the purpose of valuation, as the value of the property declared by the Assessee is not less than its fair market value. The Tribunal by the impugned order also held that the date from which the respondent-assessee became owner of the property needs to be examined vis-a-vis the various partnership deeds entered into by the partners of respondent-assessee firm. For the above purpose i.e. to determine the issue of the date of first acquisition of the property by the firm, the issue was restored to the Assessing Officer. The impugned order clarifies that in case the Assessing Officer concludes that the respondent-assessee is holding the property w.e.f. 1 April 1981 then the Assessing Officer to accept the valuation as given by the respondent-assessee and work out its capital gain;
(e) Being aggrieved, the revenue is in appeal from the impugned order dated 18 February 2011.
4. Mr. Charanjeet Chanderpal, learned Counsel appearing for the appellant submits that :—
(a) The impugned order of the Tribunal failed to appreciate the fact that the Finance Act 2012 has amended Section 55A(a) of the Act by substituting the words “is less then its fair market value” by the words “is at variance with its fair market value”. Though this amendment was admittedly bought into force only in 2012, yet being clarificatory it would even apply to the case of the appellant for the Assessment Year 2006-07;
(b) Alternatively in terms of Section 55A (b)(ii) of the Act, the Assessing Officer was justified in making the reference to the Departmental Valuation Officer for redetermining the cost of acquisition of the property. In support, reliance was placed upon the CBDT circular No.96 dated 25 November 1972 ; and
(c) In any event, an Assessing Officer is entitled to call for a report from the Departmental Valuation Officer to determine the fair market value of a property in exercise of its power under Sections 131, 133(6) and 142(2) of the Act while completing the assessment. This power is de-hors Section 55A of the Act. In support reliance was placed upon the decision of the Gauhati High Court in ITO v. Smt. Gita Rani Banik [2001] 251 ITR 712/115 Taxman 507 wherein the Gauhati High Court follows its earlier decision in Smt. Amiya Bala Paul v. CIT [1999] 240 ITR 378.
5. As against the above, Mr. Hiro, learned Counsel appearing for the respondent-assessee in support of the impugned order submits as under:—
(a) The impugned order of the Tribunal cannot be faulted with as it merely records and follows the decision of jurisdictional High Court in the CIT v. Daulal Mohta HUF IT Appeal No.1031 of 2008, dated 22-9-2008 on an identical issue;
(b) In the face of Section 55A of the Act, it is not permissable to refer the issue of valuation to the Departmental Valuation Officer in terms of Sections 133, 133(6) and 142(2) of the Act. Moreover, the decision of the Guwahati High Court in Smt. Amiya Bala Paul (supra), has been reversed by the Apex Court in Smt. Amiya Bala Paul v. CIT [2003] 262 ITR 407/130 Taxman 511. Consequently, decision cited by the revenue is no longer good law;
(c) Section 55A(b)(ii) of the Act would have no application when Section 55A(a) of the Act covers the field. The Circular No.96 dated 25 November 1972 relied upon by the revenue is neither binding upon assessee nor on the Tribunal. In any view, it is contrary to the plain meaning of Section 55A of the Act.
In view of the above, it was submitted that the appeal be dismissed as no substantial question of law arises.
Regarding Questions (a) and (b)
6. We have considered the rival submissions. We find that the impugned order dated 18 February, 2011 allowing the respondent-assessee’s appeal holding that no reference to the Departmental Valuation Officer can be made under Section 55A of the Act, only follows the decision of this Court in the matter of Daulal Mohta HUF (supra). The revenue has not been able to point out how the aforesaid decision is inapplicable to the present facts nor has the revenue pointed out that the decision in Daulal Mohta HUF (supra) has not been accepted by the revenue. On the aforesaid ground alone, this appeal need not be entertained. However, as submissions were made on merits, we have independently examined 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 Rs.35.99 lakhs was much more than the fair market value of Rs.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 respondent-assessee 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 amendment was made effective only from 1 July 2012. The 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 clearly reference could be made to Departmental Valuation Officer only if the value declared by the assessee is in the opinion of Assessing Officer less than its fair market value.
9. The contention of the revenue that the reference to the Departmental Valuation Officer by the Assessing Officer is sustainable in view of Section 55A(a) (ii) of the Act is not acceptable. This is for the reason that Section 55A(b)of the Act very clearly states that it would apply in any other case i.e. a case not covered by Section 55A(a) of the Act. In this case, it is an undisputable position that the issue is covered by Section 55A(a) of the Act. Therefore, resort cannot be had to the residuary clause provided in Section 55A(b)(ii) of the Act. In view of the above, the CBDT Circular dated 25 November 1972 can have no application in the face of the clear position in law. This is so as the understanding of the statutory provisions by the revenue as found in Circular issued by the CBDT is not binding upon the assessee and it is open to an assessee to contend to the contrary.
10. The contention of the revenue that the Assessing Officer is entitled to refer the issue of valuation of the property to the Departmental Valuation Officer in exercise of its power under Sections 131, 133(6) and 142(2) of the Act is entirely based upon the decision of the Guwahati High Court in Smt. Amiya Bala Paul (supra). However, the Apex Court in Smt. Amiya Bala Paul (supra) has reversed the decision of the Guwahati High Court and held that if the power to refer any dispute with regard to the valuation of the property was already available under Sections 131(1), 136(6) and 142(2) of the Act, there was no need to specifically empower the Assessing Officer to do so in circumstances specified under Section 55A of the Act. It further held that when a specific provision under which the reference can be made to the Departmental Valuation Officer is available, there is no occasion for the Assessing Officer to invoke the general powers of enquiry.
In view of the above and particularly in view of clear 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.
Regarding Question (c)
11. The Tribunal by its impugned order has merely remanded the issue to the Assessing Officer to determine the date on which the respondent-assessee acquired the property for the purpose of working out the cost of acquisition. No specific submissions in regard to this issue was made by the revenue during the oral submissions. In any event, an order of remand in these facts does not give rise to any substantial question of law.
12. Accordingly, we see no reason to entertain questions (a), (b) and (c) as formulated by the revenue as they do not raise any substantial questions of law. Accordingly, appeal is dismissed with no order as to costs.
[Citation : 360 ITR 697]
