Sh. Ashwani Kumar Malik, Meerut V. ITO, New Delhi

CO 15/DEL/2014

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1187 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 10 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 13-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AND CROSS OBJECTION
• Assessee Lawyers: ARE DIRECTED A GAINST
• Keywords: Capital asset; Depreciation; Salary income; Retrospective amendment; Cost of acquisition; Fair market value; Valuation report
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH:A NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER & SMT. BEENA PILLAI, JUDICIAL MEMBER I.T.A .NO. 3871/DEL/2013 (ASSESSMENT YEAR-2009-10) & CROSS OBJECTION NO. 15/DEL/2014 (IN ITA NO. 3871/DEL/2013) (ASSESSMENT YEAR-2009-10) ORDER PER BEENA PILLAI, JUDICIAL MEMBER : THE APPEAL FILED BY THE REVENUE AND CROSS OBJECTI ON BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER PASSED BY T HE LD. CIT(A)-MEERUT DATED 25.03.2013 FOR A.Y. 2009-10. 2. GROUNDS RAISED BY THE REVENUE IN ITA NO. 3871/D /2013 ARE AS FOLLOWS: ITO, WARD 1(1), NEW DELHI. VS ASHWANI KUMAR MALIK, 4, VARDAN STREET NO. 4/5, THAPAR NAGAR, MEERUT. AAXPM8541R ASHWANI KUMAR MALIK, 4, VARDAN STREET NO. 4/5, THAPAR NAGAR, MEERUT. AAXPM8541R VS ITO, WARD 1(1), NEW DELHI. APPELLANT BY SH. K.K. JAISWAL, DR RESPONDENT BY SH. SANDEEP SAPRA, ADV. & SH. O.P. SAPRA, ADV. DATE OF HEARING 11.09.2015 DATE OF PRONOUNCEMENT 23.09.2015 ITA NO. 3871/D/2013 & CO NO. 15/D/2014 2 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN L AW AND IN FACTS IN HOLDING THAT REFERENCE TO DEPARTMENTAL VALUATION CELL CANNOT BE MADE UNDER CLAUSE (B) OF SEC. 55A OF THE IT ACT, 1961 IN THE CASE WHERE ASSESSEE HAS TAKEN COST OF A SSET ON THE BASIS OF REPORT OF A REGISTERED VALUER REGARDLE SS THE FACT THAT THE AO HAS GIVEN COGENT REASONS TO MAKE SUCH RE FERENCE POINTING OUT CERTAIN DEFICIENCIES IN SUCH REPORT. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS IN HOLDING THA T THE REASONS MENTIONED BY THE AO FOR MAKING REFERENCE TO VALUATION CELL WERE NOT SUFFICIENT WHEREAS, THERE I S NO SUCH PROVISION IN THE IT ACT, 1961 UNDER WHICH THE SUFFIC IENCY OF REASONS CAN BE EXAMINED. 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW AND IN FACTS IN HOLDING THE REPORT OF REGISTERED VALUER AS A VALID REPORT AND RELIABLE ON E HAVING UNABATED POWERS, IGNORING THE FACT THAT PART-III-DE CLARATION AND ANNEXURE TO FORM O-1 WERE NOT ENCLOSED WITH THE VALUATION REPORT PRESCRIBED IN RULE 8D OF WEALTH TA X RULES R/W SECTION 34AB OF WEALTH TAX ACT 1957. 4. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) HAS ERRED IN LAW AND IN FACTS IN HOLDI NG THE REPORT OF DVO UNACCEPTABLE INSPITE OF HAVING MADE T HE CORRECTION BY THE DVO AFTER TAKING INTO CONSIDERATI ON THE ARGUMENTS OF THE ASSESSEE DURING REMAND PROCEEDINGS . 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, MODIFY AND/ OR DELETE ANY GROUNDS OF APPEAL. 6. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORD ER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) MAY BE SET ASI DE AND THAT OF THE AO RESTORED. GROUNDS RAISED BY THE ASSESSEE IN CROSS OBJECTION N O. 15/D/14 ARE AS FOLLOWS: 1. THAT ON THE FACTS OF THE CASE, THE LD. CIT(A) IS J USTIFIED IN HOLDING THAT THE REFERENCE TO THE VALUATION CELL AS MADE BY THE AO U/S 55A FOR ESTIMATING THE FAIR MARKET VALUE O F IMPUGNED PROPERTY WAS UNTENABLE/UNSUSTAINABLE IN LA W. 2. THAT THE GROUNDS NO. 2, 3 & 4 AS TAKEN BY THE AO IN THE DEPARTMENTAL APPEAL ARE MISCONCEIVED AND UNTENABLE UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THAT THERE IS NO ERROR, IN THE DECISION OF LD. CIT( A) WHICH IS BASED ON THE MERITS OF THE CASE AND FINDINGS THAT I N THE VALUATION REPORT OF THE DEPARTMENTAL VALUATION OFFI CER THERE ITA NO. 3871/D/2013 & CO NO. 15/D/2014 3 WERE SEVERAL SUBSTANTIAL DEFICIENCIES AND HENCE WAS NOT RELIABLE COMPARED WITH THAT OF THE APPROVED VALUER S REPORT IN WHICH THERE WERE NO ERROR OR DEFICIENCIES OF SUBSTA NCE. 3. BRIEF FACTS OF THE CASE ARE THAT THE RESPONDENT ASSESSEE IS AN INDIVIDUAL AND RECEIVED INCOME FROM SALARY AND HOUS E PROPERTY DURING THE RELEVANT ASSESSMENT YEAR. THE RETURN OF INCOME FOR A.Y. 2009-10 WAS FILED BY THE RESPONDENT ASSESSEE ON 08/03/2010 DECLARING A TOTAL INCOME OF RS. 3,80,148/-. THE CASE WAS PICKED UP F OR SCRUTINY AND NOTICE U/S 143(2) WAS ISSUED. DURING THE ASSESSMEN T PROCEEDINGS, THE AO OBSERVED THAT RESPONDENT ASSESSEE HAS SOLD COMME RCIAL PREMISES ON 31/07/2008 FOR RS. 30,20,000/- AND A RESIDENTIAL PO RTION ON 25/03/09 FOR RS. 29,80,000/- OF A PROPERTY BEARING NO. 180, KHAIR NAGAR, MEERUT TO SHRI VED PRAKASH GUPTA FOR AN AGGREGATE AMOUNT O F RS. 60 LACS, VIDE TWO SEPARATE SALE DEEDS THE RESPONDENT ASSESSEE DEC LARED A LONG TERM CAPITAL LOSS OF RS. 8,89,903/- ON THE SALE OF RESID ENTIAL PORTION OF THE BUILDING AND LONG TERM CAPITAL GAIN OF RS. 14,56,17 8/- IN RESPECT OF SALE OF COMMERCIAL PORTION OF THE BUILDING. THE AO OBSE RVED THAT THE RESPONDENT ASSESSEE HAD ADOPTED THE FAIR MARKET VAL UE AS ON 01/04/1981 ON THE BASIS OF THE REPORT OBTAINED FROM THE VALUATION OFFICER. AS PER THE VALUATION REPORTS THE RESPONDE NT ASSESSEE HAD TAKEN THE FAIR MARKET VALUE AS ON 01/04/1981, ADOPTING LA ND RATE @ RS. 1200 PER SQ. YD. AND 1500 PER SQ. YD. FOR RESIDENTIAL AN D COMMERCIAL PROPERTIES RESPECTIVELY. BESIDES THE FAIR MARKET V ALUE OF THE CONSTRUCTION WAS TAKEN AT THE RATES OF CONSTRUCTION PREVAILING IN THE YEAR 1981. 4. THE ASSESSEE COMPUTED THE CAPITAL GAIN AS BELOW : RESIDENTIAL BUILDING SALE CONSIDERATION 3432000 LESS: INDEXED COST OF ACQUISITION VALUE AS ON 01.04.1981 AS PER VALUATION REPORT = 742595 ITA NO. 3871/D/2013 & CO NO. 15/D/2014 4 742595 X 582/100 4321903 LONG TERM CAPITAL GAIN (-) 889903 COMMERCIAL BUILDING SALE CONSIDERATION 3020000 LESS: INDEXED COST OF ACQUISITION VALUE AS ON 01.04.1981 AS PER VALUATION REPORT = 268698 268698X582/100 1563822 LONG TERM CAPITAL GAIN 1456178 NET LONG TERM CAPITAL GAIN 566275 LESS: DEDUCTION U/S 54EC FOR CAPITAL GAIN BONDS NHAI RS. 5,00,000/- & REC RS. 5,00,000/- PURCHASES ON 29.01.09 1000000 NIL 5. DISAGREE WITH THE VALUATION SOUGHT BY THE RESPO NDENT ASSESSEE THE LD.AO RECORDED THAT THE FAIR MARKET VALUE SHOUL D HAVE BEEN CONSIDERED AS PER THE RATES PREVAILING IN THE YEAR OF CONSTRUCTION I.E. 1960 & 1967 RESPECTIVELY. THEREAFTER, DEPRECIATION ON THE BUILDING SHOULD HAVE BEEN APPLIED TO ARRIVE AT THE FAIR MARK ET VALUE AS ON 01/04/1981. DISAGREEING WITH THE VALUATION THE AO REFERRED TO THE DEPARTMENTAL VALUATION CELL U/S 55A, FOR DETERMININ G THE FAIR MARKET VALUE AS ON 01/04/1981. THE DEPARTMENTAL VALUATION O FFICER(DVO) ASCERTAINING THE VALUES AND THE RESIDENTIAL BEING R S. 2,51,900/- AND FOR COMMERCIAL BEING RS. 1,24,800/-. THE VALUATION REP ORT OBTAINED BY THE DVO WAS PROVIDED TO THE RESPONDENT ASSESSEE. THE RES PONDENT ASSESSEE RAISED OBJECTION ON THE VALUE SO PROPOSED. WHILE D EALING WITH THE OBJECTIONS RAISED BY THE RESPONDENT ASSESSEE, THE L D. AO ASSUMED THE POWER U/S 55A ON THE OPINION THAT THE VALUE DECLARE D BY THE ASSESSEE IS MORE THAN ITS FAIR MARKET VALUE. ACCORDINGLY, THE AO CALCULATED THE CAPITAL GAINS AS UNDER: RESIDENTIAL BUILDING SALE CONSIDERATION 3432000 LESS: INDEXED COST OF ACQUISITION VALUE AS ON 01.04.1981 AS PER ITA NO. 3871/D/2013 & CO NO. 15/D/2014 5 VALUATION REPORT = 251900 251900 X 582/100 1466058 LONG TERM CAPITAL GAIN 1965942 (AGAINST 742595 TAKEN BY ASSESSEE) (AGAINST LO SS OF RS.889903) COMMERCIAL BUILDING SALE CONSIDERATION 3020000 LESS: INDEXED COST OF ACQUISITION VALUE AS ON 01.04.1981 AS PER VALUATION REPORT = 124800 124800X582/100 726336 ( AGAINST 268698 TAKEN BY ASSESSEE) LONG TERM CAPITAL GAIN 2293664 (AGAINST RS. 1456178) LESS: DEDUCTION U/S 54EC 1000000 NET LONG TERM CAPITAL GAIN 12,93,664 6. AGGRIEVED BY THE ORDER OF THE LD. AO THE ASSESS EE WENT INTO APPEAL BEFORE THE LD. CIT(A). 7. BEFORE THE APPELLATE PROCEEDINGS, IT WAS SUBMIT TED BY THE RESPONDENT ASSESSEE THAT A REFERENCE TO THE VALUATI ON CELL HAD BEEN MADE WITHOUT ACCORDING ANY OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE. IT WAS ARGUED THAT A REFERENCE TO THE VALUATION CELL WOULD BE MADE UNDER CLAUSE (A) OF SECTION 55A, IN ACCORDANCE WITH THE LAW PREVAILING FOR THE YEAR UNDER CONSIDERATION. THE REFERENCE COULD BE MADE ONLY WHERE THE AO WAS OF THE OPINION THAT THE VALUE CLAIMED BY THE RESPONDENT ASSESSEE WAS LESS THAN ITS FAIR MARKET VALUE. THE RESPONDENT ASSESSEE SUBMITTED THAT IN THE FACTS OF THE PRESENT CASE THE VALUE CLAIMED WAS MORE THAN ITS FAIR MARKET VALUE AND FOR INVOKING TH E PROVISIONS OF SECTION 55A, IT WAS MANDATORY FOR AO TO DEMONSTRATE THAT SUCH A REFERENCE WAS WARRANTED ON THE FACTS OF THE CASE. IT WAS SUBMITTED BY THE RESPONDENT ASSESSEE THAT THE LD. AO DID NOT HAV E THE CIRCLE RATES AVAILABLE WITH HIM AT THE TIME OF MAKING REFERENCE TO THE VALUATION CELL, AND AS SUCH THERE WAS NO BASIS FOR FORMING ANY OPIN ION ADVERSE TO THE VALUATION DECLARED BY THE RESPONDENT ASSESSEE. THE LD. CIT(A) REFERRED THE ISSUE TO THE LD.AO AND CALLED FOR THE REMAND RE PORT. ITA NO. 3871/D/2013 & CO NO. 15/D/2014 6 THE REMAND REPORT OF THE LD.AO DATED 17/10/2012, RE ITERATED THE ARGUMENTS MADE BY THE LD.AO IN THE ASSESSMENT ORDER . THE LD. AO ALSO RAISED A FRESH ISSUE THAT THE VALUATION REPORT FURN ISHED BY THE REGISTERED VALUER WERE NOT VALID AS PER LAW BECAUSE THE SAME W AS NOT CERTIFIED TO BE GIVEN TO THE BEST OF THE KNOWLEDGE AND BELIEF OF TH E FAILURE AND THAT THE VALUER HAD NO DIRECT OR INDIRECT INTEREST IN THE PR OPERTY VALUE AND THAT HE HAD PERSONALLY INSPECTED THE PROPERTY ON A SPECI FY DATE IS AN ESSENTIAL AND INTEGRAL PART OF THE VALUATION REPORT . THE LD.AO ON THIS BASIS CONCLUDED THAT THE CLAIM OF THE COST OF THE A CQUISITION CANNOT BE SAID TO BE ACCORDING TO THE ESTIMATE OF A REGISTERE D VALUE. THE LD. CIT(A) DEALT WITH THE SUBMISSIONS OF THE AP PELLANT AS WELL AS THE OBJECTIONS RAISED BY THE LD. AO VIDE HIS REMAND REP ORT DATED 17/10/2012 IN THE FOLLOWING MANNER: 2.5 THE ISSUE UNDER CONSIDERATION IS WHETHER THE AO, IN THE FACTS OF THE CASE, HAD THE POWER TO MAKE A REFERENC E TO THE DVO. THIS BEING THE CASE OF COMPUTATION OF CAPITAL GAINS, REFERENCE, IF ANY, HAS NECESSARY TO BE MADE U/S 55A OF THE ACT. A PERUSAL OF THE SAID SECTION REVEALS THAT A CASE HA S TO FALL WITHIN EITHER CLAUSE (A) OR CLAUSE (B) OF THE SAID SECTION TO ENABLE THE AO TO MAKE A REFERENCE. IN CLAUSE (A), AS IT IS STOOD IN THE RELEVANT YEAR, IT HAS BEEN STATED THAT THE AO CAN REFER THE VALUATION OF CAPITAL ASSET TO OUR VALUATION OFF ICER IN A CASE WHERE THE VALUE OF THE ASSET AS CLAIMED BY THE ASSE SSEE IS IN ACCORDANCE WITH THE ESTIMATE MADE BY REGISTERED VAL UER, IF THE AO IS OF OPINION THAT THE VALUE SO CLAIMED IS LESS T HAN ITS FAIR MARKET VALUE. CLAUSE (B) STATES THAT IN ANY OTHE R CASE, THE REFERENCE CAN BE MADE BY THE AO SUBJECT TO FULFILLM ENT OF CERTAIN CONDITIONS. A PLAIN READING OF THE AFORESAI D CLAUSES REVEALS THAT A REFERENCE CAN BE MADE IN A CASE, WHE RE A REPORT OF A REGISTERED VALUER IS AVAILABLE, ONLY UNDER CLA USE (A) AND NOT UNDER CLAUSE (B). IN THE DECISION IN THE CASE OF HIABEN JAYANTILAL (SUPRA), IT HAS BEEN HELD THAT CLAUSE (B ) CAN ONLY BE INVOKED IN A CASE WHERE THE VALUATION IS NOT SUPPOR TED BY A REPORT OF THE REGISTERED VALUER. FURTHER, CLAUSE ( A) CAN ONLY BE INVOKED, TILL THE 01.07.2012 WHEN THE SAID PROVISIO N WAS AMENDED, IF THE AO IS OF THE OPINION THAT THE VALUE SO CLAIMED WAS LESS THAN ITS FAIR MARKET VALUE. AS HELD IN TH E CASE OF ITA NO. 3871/D/2013 & CO NO. 15/D/2014 7 BHOLA NATH MAZUMDAR (221 ITR 608) BY THE GAUHATI HI GH COURT, THE PURPOSE OF SECTION 55A IS NOT EMPOWER TH E AO TO MAKE A ROVING AND FISHING ENQUIRIES. REFERENCE IS A LSO INVITED TO THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF DEV KUMAR JAIN (309 ITR 240) WHICH HELD THAT IN CASE THERE WA S NOTHING ON RECORD TO SHOW THAT AN ASSESSEE HAD RECEIVED A CONSIDERATION FOR THE SALE OF PROPERTY IN EXCESS OF WHAT HAD BEEN SHOWN IN THE AGREEMENT TO SELL, THE ACTUAL SAL E CONSIDERATION RECORDED IN THE AGREEMENT TO SELL COU LD NOT BE SUBSTITUTED BY THE VALUE OF PROPERTY ARRIVED AT BY THE DVO U/S 55A. THE RATIONALE OF THE ABOVE DECISIONS IS THAT O NCE THE STATUTE RECOGNIZES THE INSTITUTION OF APPROVED/REGI STERED VALUER, THE REPORT FURNISHED BY SUCH VALUER IS TO BE TREATE D AS CORRECT UNLESS THE AO IS OF THE OPINION THAT THE VALUE SO CL AIMED IS LESS THAN THE FAIR MARKET VALUE. IT WAS ON AN ANALOGOUS LOGIC THAT THE HONBLE SUPREME COURT IN THE CASE OF SARGAM CIN EMA (328 ITR 513) HELD THAT THE AO HAD NO AUTHORITY TO REFER A MATTER TO THE DVO WITHOUT THE BOOKS OF ACCOUNTS BEING REJECTE D, ALBEIT IN THE CONTEXT OF SECTION 142A. IT IS NOTED THAT THE STIPULATION THAT ONLY WHEN, IN THE OPINION OF THE AO, THE VALUE SO C LAIMED WAS LESS THAN THE FAIR MARKET VALUE, PROVISION OF SECTI ON 55A COULD BE INVOKED, WAS A LACUNA IN THE STATUTE WHICH HAS B EEN REMEDIED BY THE AMENDMENT BROUGHT IN BY THE FINANCE ACT, 2012. AS IN THE PRESENT CASE, THE CONTENTION OF THE AO IS THAT THE VALUE OF THE COST OF ACQUISITION DETERMINED THE BY THE REGISTERED VALUER WAS ON THE HIGHER SIDE OF THE ACT UAL FAIR MARKET VALUE, THE CONDITION LAID DOWN IN CLAUSE (A) CANNOT BE SAID TO HAVE BEEN SATISFIED. AN ARGUMENT CAN BE MAD E THAT CLAUSE (A) HAS TOW LIMBS WHICH WERE THE VALUE OF TH E ASSET IS IN ACCORDANCE WITH AN ESTIMATE MADE BY REGISTERED VALU ER AND SECONDLY THAT THE AO IS OF THE OPINION THAT SUCH VAL UE IS LESS THAN ITS FAIR MARKET VALUE. IT CAN BE ARGUED THAT BOTH THE LIMBS NEED TO BE SATISFIED FOR A CASE TO FALL WITHIN CLAU SE (A). IN THE CASE UNDER CONSIDERATION, SINCE THE VALUE CLAIMED B Y THE ASSESSEE WAS MORE THAN THE VALUE ACCORDING TO THE AO , THE SECOND LIMB OF CLAUSE (A) IS NOT SATISFIED. THEREF ORE, REFERENCE HAS BEEN MADE UNDER CLAUSE (B). SUCH ARGUMENT CAN ONLY BE TREATED AS FALLACIOUS. IN THE CASE OF RAM NARAIN V S. STATE OF UP (AIR 1957 SC 18), IT WAS OBSERVED THAT THE MEANING O F WORDS AND EXPRESSIONS USED IN AN ACT MUST TAKE THEIR COLO UR FROM THE CONTEXT IN WHICH THEY APPEAR. CLAUSE (A) COMMENCES WITH THE WORDS IN A CASE WHERE AND CLAUSE (B) COMMENCES W ITH THE WORDS IN ANY OTHER CASE. OBVIOUSLY, CLAUSE (B) C AN BE APPLIED IN THE ONLY SUCH CASES WHERE THE REPORT OF THE ITA NO. 3871/D/2013 & CO NO. 15/D/2014 8 REGISTERED VALUER DOES NOT FORM THE BASIS OF THE VA LUATION ADOPTED BY THE ASSESSEE. THEREFORE, THE AO COULD NO T HAVE MADE A REFERENCE FOR THE YEAR UNDER CONSIDERATION T O THE DVO FOR THE VALUATION OF THE PROPERTY. EVEN IF THE AME NDED PROVISION IS CONSIDERED, WHICH LAYS DOWN THAT SUCH A REFERENCE COULD BE MADE IF THE AO WAS OF THE OPINION THAT THE VALUE DECLARED BY THE ASSESSEE WAS AT VARIANCE WITH ITS FAIR MARKET VALUE, IT IS NOTED THAT BEFORE INVOKING THE PROVIS ION, FORMATION OF AN OPINION WAS A PREREQUISITE AND THERE OUGHT TO HAVE BEEN SOME COGENT MATERIAL ON THE BASIS OF WHICH IT COULD BE SAID THAT A REASONABLE PERSON WOULD ARRIVE AT THE OPINION. I N THE CASE UNDER CONSIDERATION, THE REASON GIVEN BY THE AO, TH AT THE PROPERTY HAD BEEN CONSTRUCTED IN 1960 OR 1967 AND, THEREFORE, THE FAIR MARKET VALUE OF THE PROPERTY SHOULD HAVE B EEN TAKEN WITH REFERENCE TO THOSE YEARS AND NOT AS ON 01.04.1 981, IS CLEARLY NOT TENABLE IN VIEW OF CLAUSE (III) OF THE EXPLANATION TO SECTION 48. AS REGARDS THE REASON GIVEN THAT THE VA LUE OF PROPERTY WAS INFLATED AS THE CIRCLE RATE IN 1981 IN MEERUT WAS RS. 500 PER SQUARE YARD, NO SUCH OBSERVATION WAS MAD E IN THE REFERENCE MADE TO THE DVO. IN THE REFERENCE, IT HA D BEEN ONLY MENTIONED THAT THE CIRCLE RATE ADOPTED BY THE REGIS TERED VALUER WAS ON THE HIGHER SIDE. IT IS ONLY IN THE ASSESSME NT ORDER THAT THE AO HAS MENTIONED THE SPECIFIC RATE OF RS. 500 PE R SQUARE YARD WHICH APPEARS TO BE IN THE NATURE OF EX FACIE JUSTIFICATION AFTER THE RECEIPT OF THE REPORT OF THE VALUATION CE LL. MOREOVER, EVEN THIS IS A BLAND STATEMENT, WHICH IS NOT SUPPOR TED BY ANY MATERIAL WHICH THE AO HAS REFERRED TO IN THE ASSESS MENT ORDER. IN VIEW OF THE ABOVE, EVEN IF IT IS ASSUMED THAT TH E AO HAD THE POWER TO INVOKE SECTION 55A, SUCH REFERENCE HAS NOT BEEN MADE ON THE BASIS OF A VALIDLY HELD OPINION BUT IS IN TH E NATURE OF FISHING AND ROVING ENQUIRIES. AS IN THE CASE OF IN VOKING THE PROVISIONS OF SECTION 142A WHERE THE REJECTION OF B OOKS OF ACCOUNTS HAS TO BE ON SOUND REASONS, THE PROVISIONS OF SECTION 55A CANNOT BE INVOKED UNLESS THE OPINION THAT THE VA LUATION REPORT WAS DEFICIENT IN ANY MANNER IS BASED ON VLAI D GROUNDS. THE ONUS ON THE AO IS PARTICULARLY HEAVY WHERE A VAL UATION HAS TO BE MADE FOR THE YEAR 30 YEARS PRIOR TO THE D ATE ON WHICH THE VALUATION IS BEING MADE. THE AO IS STATUTORILY BOUND TO DEMONSTRATE THE VALIDITY OF NON-ACCEPTANCE OF THE V ALUATION REPORT BEFORE INVOKING PROVISIONS OF SECTION 55A. T HIS ALSO ANSWERS THE POINT RAISED BY THE AO THAT THE STATUTE COULD NOT HAVE CONTEMPLATED ACCEPTANCE OF THE REPORT OF THE R EGISTERED VALUER AS THE FINAL WORD IN VALUATION. IT IS ALSO NOTED THAT DURING THE APPEAL PROCEEDINGS, A DECISION OF THE IT AT MUMBAI ITA NO. 3871/D/2013 & CO NO. 15/D/2014 9 C BENCH IN THE CASE OF CHATURBHUJ VALLABHDAS IN ITA NO. 3439/MUM/2007 HAS BEEN BROUGHT TO MY NOTICE WHEREIN IT HAS BEEN HELD THAT A VALUATION REPORT OF A DVO IS A REL EVANT AND ADMISSIBLE EVIDENCE IRRESPECTIVE OF THE QUESTION OF LEGALITY OF A REFERENCE MADE BY THE AO. THUS, THE ISSUE OF VALID ITY OR ILLEGALITY OF A REFERENCE MADE BY THE AO UNDER SECTI ON 55A IS PURELY ACADEMIC IN NATURE. IN MY OPINION, THE SAID DECISION IS CONTRARY TO THE RATIO LAID DOWN BY VARIOUS CASE LAW S DISCUSSED ABVOE PARTICULARLY THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF SARGAM CINEMA. IN ANY CASE, EVEN IF SU CH PROPOSTION IS ACCEPTED, THE REPORT OF THE DVO IS ON LY EVIDENCE AS IS THE REPORT OF THE REGISTERED VALUER. THEREFO RE, THE AO HAS TO DEMONSTRATE WHY THE REPORT OF THE DVO IS CONSIDE RED ACCEPTABLE AND NOT THE REPORT OF THE REGISTERED VAL UER. AS REGARDS THE CONTENTION RAISED DURING THE APPEAL PRO CEEDINGS BY THE AO THAT THE VALUATION REPORT COULD NOT BE TREATE D AS VALID FOR THE ABSENCE OF VERIFICATION, IT IS NOT CLEAR WH Y THIS ISSUE HAS NOT BEEN RAISED IN THE ASSESSMENT ORDER. MOREOVER, THERE IS NO REASON GIVEN WHY SOME DEFICIENCY IN THE REPORT CAN BE TREATED AS FATAL PARTICULARLY WHEN THE CONTENTS OF THE REPO RT ITSELF CONFIRMED THE SUBSTANTIVE POINTS CRITICAL TO THE AC CEPTANCE OF THE REPORT. IT IS ALSO NOTED THAT THE AO, DURING TH E ASSESSMENT PROCEEDINGS, HAD RECORDED THE STATEMENT OF THE REGI STERED VALUER WHO HAD CONFIRMED THAT SHE HAD INSPECTED THE PROPERTY AND ALSO GIVEN OTHER RELEVANT DETAILS. THE AO HAS NOT TAKEN ANY ADVERSE VIEW OF THE MATTER IN THE ASSESSMENT OR DER MEANING THEREBY THAT THE DEFICIENCIES, NOTED BY THE AO, STOOD RECTIFIED IN THE STATEMENTS MADE ON OATH BY THE REG ISTERED VALUER. IT IS NOTED THAT EVEN IN AN IMPORTANT DOCU MENT SUCH AS RETURN OF INCOME, THERE IS A PROVISION AFFORDING OP PORTUNITY TO AN ASSESSEE TO RECTIFY ANY DEFICIENCY. WHY SUCH OP PORTUNITY CAN BE DENIED IN THE CASE OF A VALUATION REPORT CAN NOT BE UNDERSTOOD. AS REGARDS THE DOUBTS REGARDING THE DAT E OF THE VALUATION REPORT, IT IS NOT UNDERSTOOD WHY DESPITE THE CONSIDERABLE FORENSIC SKILLS WHICH THE AO SEEMS TO HAVE EXERCISED DURING THE ASSESSMENT PROCEEDINGS, THE RE SULTS THEREOF HAD NOT BEEN INCORPORATED IN THE ASSESSMENT ORDER BUT HAS ONLY BEEN BROUGHT TO LIGHT DURING THE REMAND PR OCEEDINGS. IT IS NOTED THAT THE DIFFERENCES IN THE VARIOUS COP IES OF THE VALUATION REPORT POINTED OUT BY THE AO RELATE TO TH E LOCATION OF THE SIGNATURE AND THE DATE ON THE SAID DOCUMENT AND THE MANNER IN WHICH THE DATE HAD BEEN RECORDED. THEREF ORE, SUCH DIFFERENCES WILL NOT, IN THE ABSENCE OF ANY OTHER M ATERIAL, BE SUFFICIENT TO NEGATE THE EXISTENCE OF THE VALUATION REPORT. ITA NO. 3871/D/2013 & CO NO. 15/D/2014 10 8. THE LD. CIT(A) IN VIEW OF THE ABOVE FINDINGS HE LD THAT THE REFERENCE MADE BY THE LD. AO U/S 55A WAS NOT VALID AND, THEREFORE, THE ADDITION MADE ON THE BASIS OF THE REPORT CANNOT BE SUSTAINED. 9. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 10. THE LD. DR SUPPORTS THE ORDER AND REMAND REPOR T OF THE LD. ASSESSING OFFICER. 11. THE LD. AR SUBMITS THAT REFERENCE TO THE VALUAT ION CELL COULD NOT BE MADE UNDER CLAUSE (A) OF SECTION 55A, IN PURVIEW OF THE LAW AS IT STOOD PREVALENT FOR THE YEAR UNDER CONSIDERATION. IT WAS ONLY WHEN THE AO WAS OF THE OPINION THAT THE VALUE CLAIMED BY THE RESPONDENT ASSESSEE WAS LESS THAN ITS FAIR MARKET VALUE THE PR OVISIONS U/S 55A COULD BE APPLIED. THE RESPONDENT ASSESSEE SUBMITS THAT IN THE PRESENT CASE UNDER CONSIDERATION THE VALUE CLAIMED WAS MORE THAN ITS FAIR MARKET VALUE. THEREFORE, THE NECESSARY CONDITION F OR REFERRING TO THE VALUATION CELL WAS NOT SATISFIED. 12. WE HAVE PERUSED THE ORDER PASSED BY THE AUTHORI TIES BELOW THE PAPER BOOK PRODUCED BEFORE US AND THE RELEVANT JUDG MENTS RELIED UPON BY THE PARTIES. THE ISSUE THAT NEEDS TO BE ADDRESS ED IS WHETHER THE AO WAS CORRECT IN MAKING A REFERENCE TO THE DVO BY INVO KING THE PROVISIONS OF SECTION 55A. SECTION 55A AS IT STOOD FOR THE RE LEVANT ASSESSMENT YEAR IS EXERPTED HEREIN BELOW: 55A WITH A VIEW TO ASCERTAINING THE FAIR MARKET VALUE OF A CAPITAL ASSET FOR THE PURPOSES OF THIS CHAPTER, THE AO MAY REFER THE VALUATION OF CAPITAL ASSET TO A VALUATION OFFICER (A) IN A CASE WHERE THE VALUE OF THE ASSET AS CLAIMED B Y THE ASSESSEE IS IN ACCORDANCE WITH THE ESTIMATE MADE BY A REGISTERED VALUER, IF THE AO IS OF OPINION THAT THE VALUE SO CLAIMED IS LESS THAN ITS FAIR MARKET VALUE; (B) IN ANY OTHER CASE, IF THE AO 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 PERCENTAGE OF THE VALUE OF THE ASSET ITA NO. 3871/D/2013 & CO NO. 15/D/2014 11 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 O THER RELEVANT CIRCUMSTANCES, IT IS NECESSARY TO SO DO 13. A PERUSAL OF THE SAID RELEVANT SECTION REVEALS THAT A CASE HAS TO FALL WITHIN EITHER OF THE CLAUSE (A) OR CLAUSE (B) OF THE SAID SECTION FOR ENABLING THE AO TO MAKE A REFERENCE U/S 55A TO THE DISTRICT VALUATION CELL. IN CLAUSE (A) TO SEC. 55A AS IT STOOD IN THE RELEVANT YEAR, THE AO CAN REFER THE VALUATION OF THE CAPITAL ASSET IN A C ASE WHERE THE VALUE OF THE ASSET AS CLAIMED BY THE RESPONDENT ASSESSEE IS IN ACCORDANCE WITH THE ESTIMATE MADE BY THE REGISTERED VALUER AND IF T HE AO IS OF THE OPINION THAT THE VALUE SO CLAIMED IS LESS THAN ITS FAIR MARKET VALUE. CLAUSE (B) OF SECTION 55A STATES THAT ANY OTHER CAS E THE REFERENCE CAN BE MADE BY THE AO SUBJECT TO THE FULFILLMENT OF CERTAI N CONDITIONS MENTIONED THEREIN. A PLAIN READING OF THE AFORESAI D CLAUSE REVEALS THAT A REFERENCE CAN BE MADE IN A CASE WHERE REPORT OF A R EGISTERED VALUER IS AVAILABLE ONLY UNDER CLAUSE (A) AND NOT UNDER CLAUS E (B). IN THE PRESENT CASE, AS THERE IS A REPORT BY THE REGISTERED VALUER , THE ISSUE NEEDS TO BE ANALYZED UNDER CLAUSE (A) OF SECTION 55A. IT IS ALSO OBSERVED THAT THE LD. AO BEFORE REFERRIN G TO THE DVO IN TERMS OF SECTION 55A OF THE ACT HAS NOT GIVEN AN OPINION THA T THE VALUE DETERMINED BY THE REGISTERED VALUER AS THE FAIR MAR KET VALUE OF THE PROPERTY AS ON 01/04/1981 IS LESS THAN ITS FAIR MAR KET VALUE. ONLY HAVING FORMED THE ABOVE OPINION, THE LD. AO IS ENTI TLED TO CALL UPON THE DVO TO SUBMIT A REPORT WITH REGARD TO ITS FAIR MARKE T VALUE AS ON 01/04/1981. IT IS NECESSARY THAT LD. AO GIVES THE OPINION CONSEQUENT TO AN ENQUIRY BY HIM AND NOT BY THE DVO THAT THE VALUAT ION ADOPTED BY THE RESPONDENT ASSESSEE DOES NOT AMOUNT TO A FAIR M ARKET VALUE. ITA NO. 3871/D/2013 & CO NO. 15/D/2014 12 14. IN THE CASE OF CIT VS. DULAL MOHTA (HUF) REPORT ED IN (2014) 360 ITR 680 THE HONBLE BOMBAY HIGH COURT HAS DISMISSED THE APPEAL FILED BY THE REVENUE AND HAS HELD THAT; THERE WAS NO DISPUTE THAT THE VALUE ADOPTED BY THE ASSESSEE OF THE PROPERTY AT RS. 35.99 LACS WAS MUCH MORE THAN THE FA IR MARKET VALUE OF RS. 6.68 LACS EVEN AS DETERMINED BY THE DVO. IN FA CT THE AO REFERRED THE ISSUE OF VALUATION TO THE DEPARTMENTAL VALUATION OF FICER ONLY BECAUSE IN HIS VIEW THE VALUATION OF THE PROPERTY AS ON 01/04/ 1981 AS MADE BY THE ASSESSEE WAS HIGHER THAN THE FAIR MARKET VALUE. TH EREFORE, THE INVOCATION OF SECTION 55A WAS NOT JUSTIFIED. 15. IN THE CASE OF CIT VS. PUJA PRINCE REPORTED IN (2014) 360 ITR 697 THE HONBLE BOMBAY HIGH COURT HAS HELD AS UNDER: THE AMENDMENTS TO SECTION 55A OF THE ACT IN (2012) BY WHICH THE WORDS IS LESS THAN ITS FAIR MARKET VALUE WERE REP LACED BY THE WORDS IS AT VARIANCE WITH ITS FAIR MARKET VALUE WAS MADE EFFECTIVE ONLY FROM JULY 1 ST 2012. PARLIAMENT HAS NOT GIVEN A RETROSPECTIVE EFFECT TO THE AMENDMENT. THEREFORE, THE LAW TO BE APPLIED IN THE ASSESSEES CASE WAS SECTION 55(A) AS EXISTING DURING THE PERIOD RELEVANT FOR THE ASSESSMENT YEAR 2006-07 . AT THE RELEVANT TIME IT IS CLEARLY REFERENCE COULD BE MADE TO THE DVO ONLY IF THE VALUE DECLARED BY THE ASSESSEE WAS IN THE OPINI ON OF AO LESS THAN ITS FAIR MARKET VALUE. 16. THE CONTENTION OF THE REVENUE THAT THE AMENDMEN T TO SECTION 55A(A) OF THE ACT IS CLARIFICATORY, CANNOT BE APPRE CIATED TO THE FACTS OF THE PRESENT CASE. FURTHER THE CONTENTION OF THE REVENU E THAT THE REFERENCE TO THE DVO BY THE LD. AO IS SUSTAINABLE IN VIEW OF T HE FAIR MARKET VALUE BEING HIGHER AS ON 01/04/1981 DOES NOT HOLD GOOD AS THE SUB CLAUSE (A) TO SECTION 55A IS VERY CLEAR IN RESPECT OF THE FAIR MARKET VALUE BEING LESS. 17. WE, THEREFORE, ON THE BASIS OF THE ABOVE REASON ING AND FINDINGS DO NOT FIND ANY INFIRMITY WITH THE ORDER OF THE LD. CIT(A). IN VIEW OF THE DECISIONS OF THE HONBLE BOMBAY HIGH COURT IN THE C ASE OF DULAL MOHTA ITA NO. 3871/D/2013 & CO NO. 15/D/2014 13 (SUPRA) AND PUJA PRINCE (SUPRA), WE HOLD THAT THE R EFERENCE U/S 55A(A) TO THE DVO BY THE LD. AO CANNOT BE SUSTAINED. 18. IN VIEW OF THE ABOVE, THE GROUNDS FILED BY THE REVENUE ARE DISMISSED. 19. IN RESPECT OF THE CROSS OBJECTION FILED BY THE ASSESSEE BEING CO NO. 15/D/2014, STANDS INFRUCTUOUS, AS NO RELIEF HAS BEEN SOUGHT FOR. THE CROSS OBJECTION FILED BY THE ASSESSEE MERELY SU PPORTS THE ORDER OF THE LD. CIT(A) 20. THE APPEAL FILED BY THE REVENUE IS THEREBY DISM ISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE ALSO STANDS D ISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 23.09. 2015 SD/- SD/- (S.V. MEHROTRA) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED: 23.09.2015 *KAVITA, P.S. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO. 3871/D/2013 & CO NO. 15/D/2014 14 DATE 1. DRAFT DICTATED ON 11.09.2015 2. DRAFT PLACED BEFORE AUTHOR 21.09.2015 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 21.09.2015 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 22.09.2015 5. APPROVED DRAFT COMES TO THE SR.PS/PS 23.09.2015 6. KEPT FOR PRONOUNCEMENT ON 23.09.2015 7. FILE SENT TO THE BENCH CLERK 23.09.2015 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.