AJIT CHAGANLAL SHAH,MUMBAI V. THE INCOME TAX OFFICER, WARD -34(1)(1), MUMBAI CURRENT JURISDICTION WARD -42(2)(1) MUMBAI, MUMBAI

ITA 1255/MUM/2025

AI Insights

The case involves Ajit Chaganlal Shah, who, along with his brothers, sold an ancestral property and reported a capital gain. The Assessing Officer adopted a much lower valuation based on a DVO report, which was contested by the assessee. The primary legal issue was whether the AO was authorized to refer the matter to the DVO for valuation of the property as on 01.04.1981, given that the sale occurred before the amendment to section 55A(a) of the Income Tax Act, 1961, which came into effect on 01.07.2012. The Tribunal, referencing decisions from the Gujarat and Bombay High Courts, ruled that the AO's reference to the DVO was not valid under the pre-amendment provisions of the law.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312376 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Other Referred Cases: CIT Vs Gaurangiben S. Shodhan, CIT Vs Pooja Prints
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY KR. G. SUBRAMANYAM
• Assessee Lawyers: HIREN VEPARI
• Keywords: Fair market value; Cost of acquisition; Value adopted by valuation officer

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘SMC’ BENCH MUMBAI BEFORE: SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 1255/MUM/2025(AY: 2012–13) (Hybrid hearing) Ajit Chaganlal Shah 42, Sadhna Building, B Road, Opp, Sydenham College, Church gate, Mumbai-400020. PAN: BSIPS 0344 M Vs. The Income Tax Officer Ward-34(1)(1), Mumbai, Current Jurisdiction Ward-42(2)(1), Room no. 803, 8th Floor, Kautilya Bhavan, C-41 to C-43, G block, Bandra Kurla Complex, Bandra (East), Mumbai-400020. (Appellant) .. (Respondent) Assessee by Shri. Hiren Vepari CA Revenue by Shri. Vijay Kr. G. Subramanyam, Sr. DR Date of Hearing 22/04/2025 Date of Pronouncement 30/04/2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of Learned Commissioner of Income Tax (Ld. CIT(A)) dated 05.12.2024 for A.Y. 2012- 13. The assessee has raised the following grounds of appeal: “ l) Misconstruing facts: (1) The learned CIT(A) appears to have totally and grossly erred in misconstruing facts of the case. (2) The learned CIT(A) appears to have mixed the facts of some other case he was dealing, lying on his desk. (ll) Appellant's valuation on 01-04-1981 There is a legal bar for A.Y. 2012-13 to adopt DVO report as per the decision of Hon'ble Gujarat High Court in case of Gauranginiben Sodhan (108-DTR-442) r.w.s 55(2)(b)(i). (lll) Miscellaneous: ITA no. 1255/MUM/2025 Ajit Chaganlal Shah 2 (1) The above grounds are without prejudice to each other. (2) The appellant craves leave to add, alter or delete any grounds either before or in course of hearing of the appeal.” 2. Rival submission of both the parties have been heard and record perused. The ld. AR of the assessee submits that a very short submissions on legal issue, involved in the present appeal. The assessee along with his two brothers namely Manharlal Chaganlal Shah and Ranjit Chaganlal Shah sold their ancestor property on 26.04.2011 for a sold consideration of Rs. 81.00 lacs. The share of assessee being 1/3rd is of Rs. 27.00 Lacs. Such property was acquired on 24.12.1928 Since, the property was acquired prior to 01.04.1981, the assessee obtained valuation of property on 01.04.1981 from Government registered valuer. Government registered valuer estimated the value of property as of Rs. 10,11,132/-, thereby value of share of assessee is at Rs. 3,37,044/-. On the basis of indexation the indexed cost of acquisition the value of assessees share is arrived at Rs. 26,45,795/-, thus, the net capital gain arrived is Rs. 54,205/-. During assessment, the AO adopted the value of property as on 24.12.1928 at Rs. 6999/- on the basis of report of DVO in case of co-owner namely Ranjitlal Shah. Since, transaction of sale took place prior to 01.07.2012. Therefore, AO was not legally authorised to make a reference to DVO as there is statutory bar to the valuation as on 01.04.1981 prior to A.Y 2013-14. The amendment in section 55A(a) is applicable with effect from 01.07.2012 wherein the word “ is less than” its fair market value was substituted “is at variance”. To support his submission the ld. AR of the assessee relied upon the decision of Jurisdictional High court in Pooja Print 360 ITR 697 (Bom) and Gujarat High Court in Gaurangiben ITA no. 1255/MUM/2025 Ajit Chaganlal Shah 3 Sodhan 108 DTR 442(Gujarat) and Ranjit Chaganlal Shah (Co-owner) in ITA no. 480/Srt/2018 dated 15.07.2020. 3. On the other hand, ld. DR for the revenue supported the order of lower authorities. 4. I have considered the rival submission on both the parties and perused the orders of lower authorities carefully. I have also deliberated on various case law relied by Ld. AR of the assessee. There is no dispute that property which is the subject matter of sale was acquired prior to 1981. Thus, the AO has to consider the value of asset as on 01.04.1981. The assessee along with this co-owner sold the property 26.04.2011. The assessee and his two brothers have shown the sale consideration of Rs. 81.00 lacs. The assessee was having 1/3rd share in the property. During the assessment the matter was referred to DVO to assess to determine the cost of asset as on 01.04.1981. I find that Hon’ble Gujarat High Court in CIT Vs Gaurangiben S Shodhan (supra) and Hon’ble Bombay High Court in CIT Vs Pooja Prints (supra) held that when the transaction of the land taken place during the financial year 2011-12 relevant the assessment year 2012-13, the amended provisions of section 55A(a) would not be applicable and one shall be guided by the erstwhile provisions of section 55A(a) of the Act. It was also held that in order to refer the matter to the valuation officer as per under erstwhile provisions of section 55A(a) of the Act would be applicable. Further, the AO should form an opinion that value so claimed by assessee is less than its Fair Market Value (FMV). Only in such a scenario, the value so claimed by assessee is less than its Fair Market Value in the opinion of AO, matter can ITA no. 1255/MUM/2025 Ajit Chaganlal Shah 4 be referred to valuation officer. In a scenario, where the value so claimed by the assessee is more than its fair market value, the matter could not be referred to the valuation officer. It was ultimately held that the AO was not empowered to refer the matter to the valuation officer, even as per the erstwhile provisions of section 55A(a) prior to amendment by the Finance Act, 2012. Considering the decision of Hon'ble Gujarat High Court in CIT Vs. Gauranginiben S. Shodhan Ind.(supra) and Hon'ble Bombay High Court in CIT Vs. Puja Prints (supra) and respectfully following the same, I hold that reference made to the DVO by AO Officer for determination of Fair Market Value was not valid, so no reliance can be made on his report. Therefore, the addition based on such report of DVO, which is obtained in co-owners case, is not legally sustainable. Thus, the assessee succeeded on legal plea. No contrary facts or law is brought to my notice to take other view. In the result, the grounds of appeal raised by the assessee are allowed. 5. In the result, the appeal of the assessee is allowed. Order pronounced in open court on 30.04.2025. Sd/- (PAWAN SINGH) JUDICIAL MEMBER Mumbai; Dated 30/04/2025 Anandi Nambi, Steno Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. ITA no. 1255/MUM/2025 Ajit Chaganlal Shah 5 BY ORDER, (Asstt. Registrar) ITAT, Mumbai "