RAMESHCHANDRA RAMDHAN AGRAWAL, AKOLA V. ITO, WARD- 1, Akola

ITA 151/NAG/2017

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9550 (ITAT-NAGPUR)
• Duration Of Justice: 5 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 26-10-2022
• Assessment Year: 2009-2010
• Appeal Filed On: 19-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retrospective amendment; Fair market value; Valuation report; Set aside
• Section: 55A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, NAGPUR VIRTUAL HEARING HELD AT ITAT PUNE BENCHES, PUNE BEFORE SHRI PARTHA SARATHI CHAUDHURY, JM ITA No. 151/NAG/2017 : A.Y. 2009-10 Rameshchandra Ramdhan Agrawal At & Post : Khedl Deshpande Tq. Telhara, Dist. Akola PAN: AMRPAO 0404B :Appellant Vs. The Income Tax Officer-1, Akola Respondent Appellant by : Shri K.P. Dewani (through virtual) Respondent by : Shri G.J. Ninawe (through virtual) Date of Hearing : 27-10-2022 Date of Pronouncement : 28-10-2022 ORDER This appeal preferred by the assessee emanates from the order of the ld. CIT(A)-1, Nagpur dated 30-01-2017 for assessment year 2009-10 as per the following grounds of appeal. 1. That the learned CIT(A)-1, Nagpur has erred in holding that FMV of the property as on 01/04/1981 was correctly adopted by AO at Rs. 4,05,900/- as against Rs. 8,22,420/- adopted by the appellant for computing Long Term Capital Gain. 2. That the learned CIT(A)-1, Nagpur ought to have considered the valuation report issued by registered valuer as submitted by the appellant. 3. That the learned CIT(A)-1, Nagpur has erred in holding that, reference u/s 55A made by AO to DVO to determine the FMV as on 01/04/1981 is legally correct. 4. That the ld. CIT(A)-1 Nagpur has erred in relyi9ng on the valuation made by DVO u/s 50A which is not at all applicable to the property under consideration. Without prejudice, the report issued by DVO carries various tactual & legal infirmities. 5. That the learned CIT(A)-1, Nagpur has erred in not appreciating the High Court & ITAT Judgments quoted by the appellant during the course of assessment proceedings. 6. That the learned CIT(A)-1, Nagpur ought to have hold that, DVO should have considered the sale instances of nearby locality quoted by the appellant. 7. That the Order is bad-in-law and against the facts of the case. 8. That the appellant craves for leave to raise any other grounds of appeal either before or at the time of hearing of the appeal.” 2 ITA 151/NAG/2017 Rameshchandra Agrawal A.Y. 2009-10 2. The brief facts in this case are that the ld. A.O had made an addition under the head “long term capital gain” by taking and estimating the fair market value (hereinafter referred to as “FMV”) as on 01-04-1981 on the basis of the report of D.V.O obtained u/s 55A of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) and rejecting the claim of the assessee as to the FMV of the property as on 01- 04-1981 based on the report of the Registered Valuer. The ld. A.O assessed the long term capital gain at Rs. 12,64,331/- as against declared value in the return at Rs. 52,258/-. In this case, there has been a reference by the ld. A.O to the D.V.O u/s 55A of the Act for determining the value of property concerned. It is the contention of the assessee that they had adopted the value which is higher than the FMV of the said property. Section 55A of the Act can be invoked by the ld. A.O referring for the valuation of a particular property to the D.V.O if the assessee in a particular case has adopted the value of the property lesser than the FMV but in this case, the assessee has already valued the property which is more than the FMV and in such scenario, the A.O did not have jurisdiction to refer the matter to the D.V.O for valuation of the property u/s 55A of the Act. On the contrary, it is the contention of the department as appearing in the assessment order that as per section 55A(b)(ii) of the Act, the ld. A.O was empowered to refer the case to the D.V.O. Countering this position, the ld. Counsel submitted that the main provision is section 55A(a) of the Act where the ld. A.O can refer the matter to the D.V.O if he finds the value adopted by the assessee is less than the FMV. However, the ld. A.O had adopted the residuary clause in this case i.e. section 55A(b)(ii) of the Act and referred the matter to the D.V.O. 3. I find that in a leading case, the Hon’ble Bombay High Court in the case of CIT Vs. Puja Prints (2014) 224 taxman 022 (Bom) has adjudicated the issue which is exactly on similar and identical facts. The question framed before the Hon’ble High Court was as under: 3 ITA 151/NAG/2017 Rameshchandra Agrawal A.Y. 2009-10 “(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 and paragraph 26 to 28 of circular No. 96 dated 25-11-1972 of the CBDT?” 4. It was held by the Hon’ble jurisdictional High Court as follows: 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 than the fair market value. In the present 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 A.O 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 than 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 than the fair market value” is substituted by the words “ “is at variance with its fair market value” is clarificatory 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 existence during the period relevant to the A.Y. 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 substantiable 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 ii not binding upon the assessee and it is open to an assessee to contend to the contrary.” 5. It has been categorically held by the Hon’ble Jurisdictional High Court in the aforesaid decision that resort to section 55A(b) of the Act can only be made if a particular case is not covered by section 55A(a) of the Act. Therefore, it is an undisputable position that resort cannot be made to the residuary clause provided in section 55A(b)(ii) of the Act in this case as invoked by the ld. A.O since the case of the assessee is clearly covered by section 55A(a) of the Act. Admittedly, the value adopted by the assessee is more than the FMV and therefore, it does not give any jurisdiction for the ld. A.O u/s 55A(a) of the Act to refer the matter to the D.V.O. Once this is said, the ld. A.O cannot now invoke the residuary clause u/s 55A(b)(ii) of the 4 ITA 151/NAG/2017 Rameshchandra Agrawal A.Y. 2009-10 Act for referring the case of the assessee to the D.V.O for fresh valuation. In the light of the decision of the Hon’ble jurisdictional High Court (supra), I set aside the order of the ld. CIT(A) and direct the ld. A.O to delete the additions made from the hands of the assessee. The grounds of appeal are allowed. The assessee succeeds in this legal issue and the grounds on merits therefore, are rendered academic. 6. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 28 th October, 2022. Sd/- Sd/- Sd PARTHA SARATHI CHAUDHURY JUDICIAL MEMBER Pune; Dated : 28 th October, 2022 Ankam Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT (Appeals)-1, Nagpur 4. The Pr.CIT-1. Nagpur 5. DR, ITAT, “SMC” Bench, Nagpur 6. Guard File. //सत्यापित प्रतत// True Copy// BY ORDER, Sr. Private Secretary ITAT, Pune /// TRUE COPY /// 5 ITA 151/NAG/2017 Rameshchandra Agrawal A.Y. 2009-10 Date 1 Draft dictated on 27-10-2022 Sr.PS 2 Draft placed before author 28-10-2022 Sr.PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order