The ITO, Ward-7(1), Ahmedabad V. Shri Nitin Jayantilal Shah, Ahmedabad

ITA 1988/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6751 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 31-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 18-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Assessee Lawyers: S N DIVETIA
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Capital asset; Cost of acquisition; Fair market value; Valuation report
• Section: 45(2); 50C; 37; 12

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI D.K. TYAGI, JM AND D.C.AGRAWAL, AM INCOME-TAX OFFICER, WD- 7(1), AHMEDABAD. VS. NITIN JAYANTILAL SHAH, 1004, PRESTIGE TOWER, NEAR JUDGES BUNGALOWS, BODAKDEV, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI SHELLEY JINDAL, CIT, DR RESPONDENT BY:- SHRI S. N. DIVETIA, AR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE RAISING FOL LOWING GROUNDS:- (1) THE LD. CIT(A) XI, AHMEDABAD HAS ERRED IN LAW AND O N FACTS IN DELETING THE ADDITION OF RS.154,26,467/- ON ACCOUNT OF LONG TERM CAPITAL GAIN. (2) THE LD. CIT(A) XI, AHMEDABAD HAS ERRED IN LAW AND O N FACTS IN DIRECTING TO ALLOW THE ENCUMBRANCE CLAIM OF RS.75,0 00/- IN CALCULATION OF LTCG. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) XI, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 2. THE ASSESSEE HUF IS DERIVING INCOME FROM INTERES T AND HAD DECLARED LONG TERM CAPITAL GAINS ON SALE OF JOINT R ESIDENTIAL PROPERTY. SHRI JAYANTILAL V. SHAH HAD EXPIRED ON 17.4.2003. HE WAS THE OWNER OF THE BUNGALOW PANKAJ AT PLOT NO.320/7 OF TPS NO.3, BEH IND PALLAVI ITA NO.1988/AHD/2009 ASST. YEAR 2006-07 ITA NO.1988/AHD/2009 ASST. YEAR 2006-07 2 APARTMENTS OPP. MUNICIPAL MKT. NAVRANGPURA, AHMEDAB AD. THE ASSESSEE SHRI NITIN J. SHAH INHERITED THE PROPERTY AND AS KARTA OF HUF HE SOLD IT FOR RS.1,30,41,000/- VIDE SALE DEED DATE D 14.11.2005. THIS WAS ALSO THE VALUATION DONE BY STAMP VALUATION AUTHORIT IES. FOR THE PURPOSE OF WORKING OUT CAPITAL GAINS ASSESSEE OBTAINED THE REP ORT FROM APPROVED VALUER ON 31.4.2004 WHO DETERMINED THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 AS RS.26,24,269/-. THE INDEXED COST OF ACQUISITION OF RS.26,24,269/- FOR ASST. YEAR 2005-06 WAS SHOWN AT RS.1,30,42,617/- RESULTING INTO A LONG TERM CAPITAL LOSS. THE AO WAS NOT SATISFIED . HE OBSERVED THAT THE PROPERTY IN QUESTION IS IN JOINT NAME OF FOUR PERSONS. IT IS SITUATED IN ONE OF THE POSH LOCALITY OF AHMEDABA D ON C.G. ROAD. HE BELIEVED THAT ASSESSEE HAD UNDER-ESTIMATED THE VALU E OF SALE CONSIDERATION BY ADOPTING LOWER RATES THUS CLAIMED CAPITAL LOSS. HE REFERRED THE PROPERTY TO THE DISTRICT VALUATION OFFICER (DVO) (VALUATION CELL OF THE DEPARTMENT) WHO VALUED THE SALE VALUE AS ON 14.11.2 005 AT RS.3,05,66,700/- AS AGAINST DECLARED SALE VALUE OF RS.1,30,41,000/- BY THE ASSESSEE. SIMILARLY, THE AO REQUIRED THE DVO TO VAL UE THE PROPERTY AS ON 1.4.1981 WHICH WAS DETERMINED BY HIM AT RS.15,78,00 0/- AS AGAINST RS.26,24,269/- SHOWN BY THE ASSESSEE. BEFORE ACTUAL LY ADOPTING THIS VALUATION THE AO HAD ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE. IT SEEMS THAT NO EXPLANATION WAS FURNISHED ON THE POINT RAIS ED BY THE AO. ACCORDINGLY THE AO ADOPTED THE SALE VALUE AT RS.3,0 5,66,700/- AND COST OF ACQUISITION AS ON 1.4.1981 AT RS.15,78,000/-. ON THIS BASIS AO WORKED OUT THE LONG TERM CAPITAL GAINS AT RS.2,15,33,600/- AND ASSESSEES SHARE AT RS.54,26,467/- AS UNDER :- SALE VALUE AS PER VALUATION REPORT RS.3,05,66,700/ - LESS: 1. ENCUMBERANCES OUT OF THE SALE VALUE AS DISCUSSED ABOVE IN PARA 5 (12,30,000-75000) 2. LEGAL CHARGES- RS.11,55,000/- RS.35,440/- RS.11,90,440/- ITA NO.1988/AHD/2009 ASST. YEAR 2006-07 3 RS.2,83,78,260/- LESS: COST OF HOUSE PROPERTY AS ON 1.4.81 AS PER DVOS REPORT RS.15,78,000/- AND INDEX VALUE AT MULTIPLIER OF 497 RS.78,42,660/- LONG TERM CAPITAL GAIN ON SALE OF HOUSE PROPERTY RS.2,15,33,600/- SHARE OF THE ASSESSEE HUF IN JOINT PROPERTY @ 25.20% RS.54,26,467/- WHEN THE MATTER CAME UP BEFORE LD. CIT(A) HE REPROD UCED THE STATEMENT OF FACTS AND WRITTEN SUBMISSIONS GIVEN BY THE ASSES SEE. HE CALLED FOR A REMAND REPORT FROM THE AO AND FINALLY DELETED THE A DDITION BY ACCEPTING CAPITAL LOSS AS DECLARED BY THE ASSESSEE AS UNDER : - 2.2.1 HAVING VERIFIED THE OBSERVATIONS OF THE A O AND ALSO THE ARS SUBMISSIONS, I FIND THAT THE SALE CONSIDERATION ADM ITTED BY THE APPELLANT IS AS PER THE STAMP VALUATION AUTHORITY AND THE FMV OF THE PROPERTY AS ON 1.3.1981 IS AT RS.26,24,269/- AS PER APPROVED VA LUERS REPORT. THE DVO HOWEVER, HAS SUBSTITUTED THE SALE VALUE OF THE PROPERTY AT RS.3,05,66,700/- TO WHAT APPELLANT HAS ADMITTED AND FMV OF THE PROPERTY AS ON 1.4.1981 AT RS.15,78,000/- AND INDEX COST AT RS.1,27,01,461/-. 2.2.2 HOWEVER, I FIND THAT THE APPELLANT CANNOT BE ATTRIBUTED TO HAVE RECEIVED THE SALE CONSIDERATION OF RS.3,05,66,700/- IN ABSENCE OF ANY EVIDENCE. SIMILARLY THE FMV OF THE PROPERTY AS ADMI TTED BY THE APPELLANT WHICH IS SUPPORTED BY APPROVED VALUERS REPORT CANN OT BE IGNORED IN ABSENCE OF ANY SUPPORTING REASONS AND EVIDENCES. 2.2.3 THEREFORE, CONSIDERING ALL THE FACTS OF TH E CASE, I FIND THAT THE APPELLANTS CLAIM WITH REGARD TO CAPITAL GAIN HAS T O BE ALLOWED. HENCE, THE AO IS DIRECTED ALLOW THE APPELLANTS CLAIM IN R ESPECT OF PAYMENT OF ENCUMBRANCES OF RS.75,000/- AND ALLOW CAPITAL GAINS CLAIM AS ADMITTED. 3. THE LD. DR SUBMITTED THAT THE ORDER OF THE LD. C IT(A) IS CRYPTIC AND DOES NOT GIVE THE REASONS FOR DELETING THE ADDITION . HE HAS SIMPLY REPRODUCED THE SUBMISSIONS OF ASSESSEE. THERE IS NO EVIDENCE THAT HE HAS APPLIED HIS MIND OVER THE FACTS FOUND BY THE AO OR SUBMISSIONS BY THE ASSESSEE EXCEPT ACCEPTING WHATEVER ASSESSEE HAS SAI D. HE SUBMITTED THAT ITA NO.1988/AHD/2009 ASST. YEAR 2006-07 4 IN ADDITION TO APPLICATION OF SECTION 50C, AO HAS P OWER TO REFER THE PROPERTY FOR VALUATION U/S 55A FOR DETERMINING NOT ONLY THE COST OF ACQUISITION AS ON 1.4.81 BUT ALSO FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF SALE AND IN CASE SALE CONSIDERATION IS LESS THAN FAIR MARKET VALUE OF THE PROPERTY THEN FAIR MARKET VALUE CAN BE SUBSTITUTED IN PLACE OF DECLARED SALE CONSIDERATION. FURTHER ONCE AO HAS MA DE UP HIS MIND THAT FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.81 AS D ETERMINED BY THE APPROVED VALUER IS NOT CORRECT THEN HE CAN REFER TH E SAME U/S 55(2). IT IS NOT NECESSARY THAT FOR FINDING THE COST OF ACQUISIT ION AS ON 1.4.81, THE VALUE DECLARED BY THE ASSESSEE SHOULD BE AT LOWER S IDE AS COMPARED TO FAIR MARKET VALUE. 4. ON THE OTHER HAND, LD. AR FOR THE ASSESSEE SUBMI TTED THAT ONCE PROVISIONS OF SECTION 50C ARE APPLICABLE THEN PROVI SIONS OF SECTION 55A CANNOT BE INVOKED FOR THE PURPOSES OF DETERMINING F AIR MARKET VALUE OF THE PROPERTY ON THE DATE OF SALE. SECTION 55A CAN B E INVOKED FOR DETERMINING FAIR MARKET VALUE OF A CAPITAL ASSET FO R COMPUTING CAPITAL GAINS AS PER SECTION 45(1A), 45(2) & 45(4). IN THES E SECTIONS HE SUBMITTED THE CONCEPT OF FAIR MARKET VALUE HAS BEEN ENVISAGED AND, THEREFORE, THE AO HAS POWER TO DETERMINE FAIR MARKET VALUE BY INVO KING SECTION 55A. BUT HE SUBMITTED THAT FOR THE PURPOSE OF SECTION 45 (1) THE CONCEPT OF FAIR MARKET VALUE HAS NOT BEEN PROVIDED. IT IS PROVIDED IN SUB-SECTION (1) OF SECTION 45THAT THE PROFITS AND GAINS ARISING FROM T HE TRANSFER OF CAPITAL GAINS WOULD BE CHARGEABLE TO CAPITAL GAINS. THE CAP ITAL GAINS IS COMPUTED U/S 48 WHICH PROVIDES THE DEDUCTION OF COST OF ACQU ISITION AND EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH TRANSFER OF CAPITAL ASSET FROM THE FULL VALUE OF CONSIDERATI ON. HE DREW DISTINCTION BETWEEN SUB-SECTION (1) AND SUB-SECTION (1A) OF SEC TION 45. HE SUBMITTED THAT IN SUB-SECTION (1A) A DEEMING PROVISION HAS BE EN CREATED WHEREBY ITA NO.1988/AHD/2009 ASST. YEAR 2006-07 5 FAIR MARKET VALUE OF THE ASSET ON THE DATE SHALL BE DEEMED TO BE FULL VALUE OF THE CONSIDERATION. IN OTHER WORDS, FULL VALUE OF CONSIDERATION AND FAIR MARKET VALUE ARE TWO DIFFERENT CONCEPTS. SECTION 55 A CANNOT BE INVOKED TO DETERMINE FULL VALUE CONSIDERATION BUT IT CAN ON LY BE INVOKED TO DETERMINE FAIR MARKET VALUE OF A CAPITAL ASSET. HE SUBMITTED THAT FULL VALUE OF CONSIDERATION IS WHAT THE ASSESSEE HAS RECEIVED AND NOT THE MARKET VALUE. THERE IS NO SCOPE OF ANY ESTIMATION OF FULL VALUE OF CONSIDERATION. IT HAS TO BE ACTUAL. THEREFORE, THE AO WAS INCORREC T TO INVOKE SECTION 55A AND SUBSTITUTING THE FAIR MARKET VALUE AS DETERMINE D BY THE DVO IN PLACE OF FULL VALUE OF CONSIDERATION SHOWN BY THE ASSESSE E. HE REFERRED TO THE FOLLOWING JUDGMENTS IN SUPPORT OF HIS ARGUMENTS :- (1) M. V. SHAH, OFFICIAL LIQUIDATOR, ANANT MILLS L TD. VS. U. J. MATAIN & ANR.(1994) 209 ITR 568 (GUJ), (2) K.P. VERGHESE VS. ITO 131 ITR 597 (SC), (3) CIT VS. GILLANDERS ARBUTHNOT AND CO. 87 ITR 407 (4) BRITANIA INDUSTRIES LTD. VS. CIT 238 ITR 57 (5) ASHOK SONI VS. ITO 102 TTJ (DEL) 964 (6) TEJ PRATAP SINGH VS. ACIT (2008) 22 SOT 156 (DE L) 964 (7) RUPEE FINANCE & MANAGEMENT (P) LTD. VS. ACIT (2 008) 22 SOT 174 (MUM) (8) CIT VS. S. K. CONSTRUCTION CO. (2008) 167 TAXMA N 171 (DEL) (9) CIT VS. RAJIV MEHTA (2008) 171 TAXMAN 198 (DEL) (10) CIT VS. LAKE PALACE HOTELS & MOTORS (2008) 219 CTR (RAJ) 578. IN RESPECT OF VALUATION AS ON 1.4.81 LD. AR SUBMITT ED THAT ONCE THE VALUATION HAS BEEN DETERMINED BY APPROVED VALUER TH EN PROVISIONS OF SECTION 55A WOULD NOT BE APPLICABLE. A REFERENCE TO DVO CAN BE MADE ONLY WHEN IN THE OPINION OF THE AO FAIR MARKET VALU E IS LESS THAN THE VALUATION DONE BY APPROVED VALUER/REGISTERED VALUER . SINCE IN THE PRESENT CASE VALUATION DONE BY THE REGISTERED VALUER IS MOR E THAN FAIR MARKET VALUE AS ESTIMATED BY DVO THE AO COULD NOT HAVE MAD E THE REFERENCE BY INVOKING OF CLAUSE (A) OF SECTION 55A. CLAUSE (B) C AN BE INVOKED ONLY WHEN A CASE IS NOT COVERED BY CLAUSE (A) OF SECTION 55A. ITA NO.1988/AHD/2009 ASST. YEAR 2006-07 6 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE ASSESSEE DESE RVES TO SUCCEED EVEN THOUGH ORDER OF LD. CIT(A) IS CRYPTIC AND, APPARENT LY IT IS CLEAR THAT LD. CIT(A) HAS NOT APPLIED HIS MIND AND GAVE HIS REASON S. BUT SINCE HE HAS RELIED UPON THE SUBMISSIONS OF THE ASSESSEE WHICH C ONTAINS DETAILED ARGUMENTS AS TO WHY AO CANNOT REFER THE PROPERTY FO R VALUATION U/S 55A WE DO NOT CONSIDER IT NECESSARY TO RESTORE THE MATT ER BACK TO THE FILE OF LD. CIT(A) AS ARGUED BY THE LD. DR. 6. SO FAR AS CONFLICT BETWEEN SECTION 50C & 55A IS CONCERNED WE ARE OF THE VIEW THAT ONCE TRANSFER OF IMMOVABLE PROPERT Y IS INVOLVED THEN PROVISIONS OF SECTION 50C ALONE CAN BE INVOKED. SIN CE SECTION 50C PRECEDES SECTION 55A AND WHEREVER IT IS APPLICABLE, THEN ONE NEED NOT GO TO SECTION 55A. IN ANY CASE REFERENCE TO DVO IS ALR EADY PROVIDED IN SECTION 50C WHEN CERTAIN CONDITIONS ARE FULFILLED. SECTION 50C PROVIDES THAT WHEN TRANSFER OF A CAPITAL ASSET BEING LAND OR BUILDING OR BOTH IS INVOLVED AND CONSIDERATION RECEIVED BY THE ASSESSEE AS A RESULT OF SUCH TRANSFER IS LESS THAN THE VALUE ADOPTED/ASSESSED/AS SESSABLE BY STAMP VALUATION AUTHORITIES (SVA) THEN THE VALUATION ADOP TED BY SVA FOR THE PURPOSE OF LEVY OF STAMP DUTY WOULD BE SUBSTITUTED/ ADOPTED/WILL BE DEEMED TO BE THE FULL VALUE OF CONSIDERATION RECEIV ED OR ACCRUING TO THE ASSESSEE AS A RESULT OF SUCH TRANSFER. SECTION 50C (2) PROVIDES THAT WHERE ASSESSEE CONSIDERS THAT VALUE ADOPTED/ASSESSED/ASSE SSABLE BY THE SVA IS MORE THAN THE FAIR MARKET VALUE AND SUCH VALUATION MADE BY SVA IS NOT CHALLENGED IN APPEAL UNDER STAMP ACT OR OTHER WISE THEN THE AO ON REQUEST MADE BY THE ASSESSEE WILL REFER THE VALUE O F THE CAPITAL ASSET I.E. LAND OR BUILDING TO VALUATION OFFICER AND VALUATION SO MADE BY THE DVO WILL BE SUBSTITUTED FOR VALUATION DONE BY STAMP VAL UATION AUTHORITIES, IF ITA NO.1988/AHD/2009 ASST. YEAR 2006-07 7 IT IS LESS THAN SUCH VALUATION DONE BY SVA. IN CASE WHERE VALUATION DONE BY DVO IS MORE THAN THE VALUATION DONE BY SVA THEN VALUATION DONE BY SVA WILL BE DEEMED AS FULL VALUE OF THE CONSIDERATI ON AS PER SUB-SECTION (1) OF SECTION 50C. THEREFORE, WE ARE OF THE CONSID ERED VIEW THAT SECTION 55A AS SUCH CANNOT BE INVOKED WHEN TRANSFER OF IMMO VABLE PROPERTY BEING LAND OR BUILDING OR BOTH ARE INVOLVED. IN THE PRESENT CASE WE NOTICE THAT FULL VALUE OF CONSIDERATION IS EQUAL TO THE VA LUATION DONE BY STAMP VALUATION AUTHORITIES AND, THEREFORE, THERE HAS NOT BEEN ANY DISPUTE BETWEEN THE FAIR MARKET VALUE AND VALUATION DONE BY SVA. THE ASSESSEE HAS NOT SOUGHT TO INVOKE THE PROVISIONS OF SUB-SECT ION (2) OF SECTION 50C AND, THEREFORE, AO HAS NO POWER TO REFER THE SAME T O THE DVO U/S 50C. THE LD. DR HAS BEEN FAIR ENOUGH IN ADMITTING THAT T HERE IS NO DISPUTE ON THE APPLICABILITY OF SECTION 50C. THE ONLY ISSUE IS WHETHER THE AO CAN OTHER THAN APPLICABILITY OF SECTION 50C REFER THE V ALUATION FOR DETERMINING FMV BY INVOKING SECTION 55A. WE HAVE ALREADY HELD A BOVE THAT IN CASE OF IMMOVABLE PROPERTY REFERENCE TO DVO CAN BE MADE ONLY U/S 50C UNDER SUB-SECTION (2) THEREON AND NOT UNDER SECTION 55A WHICH CAN BE INVOKED IN RESPECT OF TRANSFER OF CAPITAL ASSET AS PROVIDED UNDER SUB- SECTION (1) OF SECTION 45-A, SUB-SECTION (2) OF SEC TION 45 OR SUB-SECTION (4) OF SECTION 45 WHERE THERE IS NO CONCEPT OF FULL VALUE CONSIDERATION. WHERE CAPITAL GAINS IS DETERMINED BY ADOPTING FAIR MARKET VALUE AND LAW PROVIDES TO DETERMINE CAPITAL GAINS BY ADOPTING FAI R MARKET VALUE OF THE ASSET AS SALE CONSIDERATION THEN AO CAN INVOKE SECT ION 55A SUBJECT TO THE CONDITION LAID DOWN IN THAT SECTION. 7. IN CIT VS. HOTEL JOSHI 242 ITR 478 (RAJ) HON. RA JASTHAN HIGH COURT HELD AS UNDER :- A PLAIN READING OF THE PROVISION SHOWS THAT AN AO WITH A VIEW TO ASCERTAIN THE FAIR MARKET VALUE OF A CAPITAL ASSET, HAS A DISCRETION TO REFER TO THE VALUATION OFFICER, ONLY IN THE EVENTUALITIES PROVIDED IN THE SAID ITA NO.1988/AHD/2009 ASST. YEAR 2006-07 8 PROVISION. ONE OF THE EVENTUALITIES IS WHERE THE VA LUE OF THE ASSET AS CLAIMED BY THE ASSESSEE IS IN ACCORDANCE WITH THE A SSESSMENT MADE BY THE REGISTERED VALUER AND IN THE OPINION OF THE ASSESSI NG OFFICER, THE VALUE SO CLAIMED IS LESS THAN ITS MARKET VALUE. THUS, IN A C ASE WHERE THE VALUE OF THE ASSET IS CLAIMED BY THE ASSESSEE ON THE BASIS O F REGULAR BOOKS OF ACCOUNT MAINTAINED FOR THE PURPOSE OF CONSTRUCTION OF THE ASSET AND NOT ON THE BASIS OF THE VALUATION OF THE REGISTERED VAL UER, IT WILL NOT BE OPEN FOR THE ASSESSING OFFICER TO MAKE A REFERENCE TO TH E DISTRICT VALUATION OFFICER UNLESS THE ASSESSING OFFICER FORMS AN OPINI ON THAT HAVING REGARD TO THE NATURE OF THE ASSET AND OTHER RELEVANT CIRCU MSTANCES, IT IS NECESSARY TO DO SO. THUS, THE POWERS UNDER SECTION 55A CANNOT BE EXERCISED IN A ROUTINE MANNER. FOR INVOKING SUB-CLAUSE (II) OF CLA USE (B) OF SECTION 55A, THE ASSESSING OFFICER IS REQUIRED TO FORM AN OPINIO N ON THE BASIS OF THE MATERIAL ON RECORD THAT REFERENCE TO THE DISTRICT V ALUATION OFFICER FOR ASCERTAINING THE FAIR MARKET VALUE OF THE ASSET IS NECESSARY HAVING REGARD TO THE NATURE OF THE ASSET AND OTHER RELEVANT CIRCU MSTANCES. IT IS ALSO NECESSARY TO RECORD AS TO WHY IT IS NECESSARY TO AD OPT SUCH A COURSE.' (ON PAGE 482) 8. HON. DELHI HIGH COURT IN CIT VS. SMT. NILOFFER I . SINGH (2009) 309 ITR 233 HELD REFERENCE TO DVO FOR ASCERTAINING FMV CAN BE DONE IF IT IS SO REQUIRED U/S 45(4) OR 45(1A) ON PAGE 239 P ARA 2 OF THE REPORT. HON. HIGH COURT HELD AS UNDER : 'BUT, THE FACTS OF THE PRESENT CASE ARE ENTIRELY DI FFERENT. THE PRESENT CASE INVOLVES SALES SIMPLICITER WHERE THAT FULL VALUE OF THE CONSIDERATIONS ARE THE SALE PRICES OF THE TWO PROPERTIES INDICATED ABO VE. FOR THE PURPOSE OF COMPUTING CAPITAL GAINS IN SUCH A CASE AS THE ONE B EFORE US, THERE IS NO NECESSITY FOR COMPUTING THE FAIR MARKET VALUE AND, THEREFORE, THE ASSESSING OFFICER COULD NOT HAVE REFERRED THE MATTE R TO THE VALUATION OFFICERS.' THIS DECISION WAS FOLLOWED BY THE HON. DELHI HIGH C OURT IN THE CASE OF DEVKUMAR JAIN VS. ITO 309 ITR 240 (DEL) WHEREIN THE HON. HIGH COURT OBSERVED AS UNDER :- 'WE ARE NOT IN AGREEMENT WITH THE SUBMISSION MADE B Y THE LEARNED COUNSEL FOR THE REVENUE FOR THE REASONS THAT THERE IS NOTHING ON RECORD TO ITA NO.1988/AHD/2009 ASST. YEAR 2006-07 9 SHOW THAT THE ASSESSEE RECEIVED A CONSIDERATION FOR I THE SALE OF THE SAID PROPERTY IN EXCESS OF THAT WHICH WAS SHOWN IN THE A GREEMENT TO SELL. THAT BEING THE CASE THE DECISION IN THE CASE OF SMT. NIL OFFER I. SINGH [2009] 309 ITR 233 (DELHI) WOULD BIND THE REVENUE. THE TR IBUNAL, IN OUR VIEW ERRED IN ACCEPTING THE STAND OF THE REVENUE THAT AC TUAL SALE CONSIDERATION RECORDED IN THE AGREEMENT TO SELL WOULD BE SUBSTITU TED BY THE VALE ARRIVED AT BY THE DVO UNDER SECTION 55A OF THE ACT. THE QUE STION OF LAW AS FRAMED IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AG AINST THE REVENUE.'(ON PAGE 243 - PARA 2) THE JUDGMENTS REFERRED TO BY THE LD. AR ARE TO THE POINTS THAT PROVISIONS OF SECTION 55A CAN BE INVOKED ONLY WHEN THERE IS EV IDENCE OF SOME OF UNDER-HAND DEALING AND MORE THAN STATED CONSIDERATI ON HAS PASSED TO THE ASSESSEE. THESE ABOVE AUTHORITIES CLEARLY SUPPORT T HE VIEW THAT FOR THE PURPOSE OF DETERMINING CAPITAL GAINS U/S 45(1) IN R ESPECT OF IMMOVABLE PROPERTY REFERENCE U/S 55A CANNOT BE MADE EXCEPT AS PROVIDED U/S 50C. THUS SUCH REFERENCE CANNOT BE SAID TO BE U/S 55A BU T WILL BE UNDER SECTION 50C(2). 9. AS A RESULT, WE HOLD THAT REFERENCE TO DVO FOR D ETERMINING FMV AS ON THE DATE OF SALE WAS NOT VALID. ACCORDINGLY A DOPTION OF FAIR MARKET VALUE IN PLACE OF SALE CONSIDERATION DECLARED BY TH E ASSESSEE WAS NOT LEGALLY PROPER. 10. THE OTHER ISSUE IS AS TO WHAT SHOULD BE THE COS T OF ACQUISITION AS ON 1.4.1981 AND WHETHER CAN AO CAN MAKE A REFERENCE TO DVO FOR DETERMINING FMV AS ON 1.4.81. IN THIS REGARD WE REF ER TO SECTION 55A AS UNDER :- 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 - ITA NO.1988/AHD/2009 ASST. YEAR 2006-07 10 (A) IN A CASE WHERE THE VALUE OF THE ASSET AS CLAI MED BY THE ASSESSEE IS IN ACCORDANCE WITH THE ESTIMATE MADE BY A REGISTERE D VALUER, IF THE AO IS OF THE OPINION THAT THE VALUE SO CLAIMED IS L ESS THAN ITS FAIR MARKET VALUE; (B) IN ANY OTHER CASE, IF THE AO IS OF OPINION - (I) THAT THE FAIR MARKET VALUE OF THE ASSE T EXCEEDS THE VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE BY MORE THAN SUCH PERCENTAGE OF THE VALUE OF THE ASSET AS SO CLAIMED OR BY MORE THA N SUCH AMOUNT AS MAY BE PRESCRIBED IN THIS BEHALF; OR (II) THAT HAVING REGARD TO THE NATURE OF TH E ASSET AND OTHER RELEVANT CIRCUMSTANCES, IT IS NECESSARY SO TO DO, AND WHERE ANY SUCH REFERENCE IS MADE, THE PROVISIONS OF SUB-SECTION (2 ), (3), (4), (5) AND (6) OF SECTION 16A, CLAUSES (HA) AND (I) OF SUB SECTION (1) AND SUB-SECTION (3A) AND (4) OF SECTION 23, SUB-SECTION (5) OF SECTION 24, SECTION 34AA, SECTION 35 AND SECTION 37 OF THE WEALTH TAX ACT 1957 (27 OF 1957) SHALL WITH THE NECESSARY MODIFICA TION APPLY IN RELATION TO SUCH REFERENCE AS THEY APPLY IN RELATIO N TO A REFERENCE MADE BY THE AO UNDER SUB-SECTION (1) OF SECTION 16A OF THE ACT. 11. ABOVE SECTION CLEARLY HAS TWO LIMBS PROVIDED IN CLAUSE (A) AND CLAUSE (B). CLAUSE (A) CAN BE INVOKED WHEN FAIR MAR KET VALUE OF THE PROPERTY IS MORE THAN THE VALUATION DONE BY THE REG ISTERED VALUER. IN THE PRESENT CASE ASSESSEE HAS SUBMITTED A VALUATION REP ORT OF THE APPROVED VALUER WHO HAS DETERMINED THE FAIR MARKET VALUE AT RS.26,24,269/-. ACCORDING TO THE AO FAIR MARKET VALUE AS ON 1.4.81 IS LESS AND DVO HAS DETERMINED THE SAME AT RS.15,78,000/- AS ON 1.4.81. THUS CLEARLY ESTIMATE MADE BY REGISTERED VALUER IS NOT LESS THAN THE FAIR MARKET VALUE AS ADOPTED BY AO ON THE BASIS OF DVOS REPORT. UNDER THESE CIR CUMSTANCES, THE AO CANNOT MAKE ANY REFERENCE UNDER CLAUSE (A) OF SECTI ON 55A. 12. CLAUSE (B) CAN BE INVOKED ONLY WHEN VALUATION R EPORT FROM REGISTERED VALUER HAS NOT BEEN FILED. THE OPENING P HRASE IS CLAUSE (B) IS IN ANY OTHER CASE IF THE AO IS OF THE OPINION. IN OTHER WORDS, A CASE ITA NO.1988/AHD/2009 ASST. YEAR 2006-07 11 WHICH DOES NOT FALL IN CLAUSE (A) CAN ONLY BE CONSI DERED UNDER CLAUSE (B). WHERE A CASE FALLS UNDER CLAUSE (A) I.E. THE REGIST ERED VALUER HAS DETERMINED THE VALUE AS ON 1.4.81 AND WHICH IS NOT LESS THAN THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.81 THEN SUB- CLAUSE (B) CAN NOT BE INVOKED. IN ANY CASE CLAUSE (B)(I) CAN BE INVOKED O NLY IF FMV OF THE ASSET EXCEEDS THE VALUE AS CLAIMED BY THE ASSESSEE BY SUCH PERCENTAGE AS MAY BE PRESCRIBED; AND CLAUSE (B)(II) CAN BE INVOKE D IN RESIDUARY CASES AND THE AO CAN REFER THE PROPERTY TO THE DVO HAVING REGARD TO THE NATURE OF THE ASSET AND OTHER RELEVANT CIRCUMSTANCES. OUR VIEW IS SUPPORTED BY THE DECISION OF HON. GUJARAT HIGH COURT IN THE CASE OF HIABEN JAYANTILAL SHAH VS. ITO & ANR. (2009) 310 ITR 31 (GUJ). THE HE AD NOTES FROM THAT DECISION ARE AS UNDER :- CAPITAL GAINS COMPUTATION REFERENCE TO VALUATIO N OFFICER VALUE ESTIMATED BY VALUATION OFFICER LESS THAN FAIR MARKE T VALUE SHOWN BY ASSESSEE AS ON 1.4.81 ESTIMATE BY REGISTERED VALUE R REFERENCE UNDER SECTION 55A NOT VALID REFERENCE TO VALUATION OFFIC ER CAN BE MADE ONLY AFTER AO RECORDS OPINION THAT VALUE HAD BEEN UNDERE STIMATED BY ASSESSEE- REFERENCE BEFORE FILING OF RETURN BY ASSE SSEE- NOT VALID INCOME-TAX ACT, 1961 S.55A. SIMILAR VIEW WAS ADOPTED BY ITAT MUMBAI BENCH IN SA JJANKUMAR M. HARLALK VS. JT. CIT (2006) 284 ITR (AT) 156. IN THE CASE OF MS. RUBAB M. KAZERANI V. JT. CIT [2 004] 91 ITD 429 (MUM.)(TM) IT IS HELD THAT THE REFERENCE TO DVO CAN NOT BE DONE FOR DETERMINING VALUE AS ON 1.4.81 IF APPROVED VALUERS VALUE WAS ON HIGHER SIDE. IN SMT. SARLA N. SAKRANEY VS. ITO (2010) 10 TAXMANN .COM 99 (MUM - ITAT) SIMILAR VIEW WAS HELD. THE HEAD NOTES FROM TH IS DECISION ARE AS UNDER:- ITA NO.1988/AHD/2009 ASST. YEAR 2006-07 12 SECTION 55A OF THE INCOME-TAX ACT, 1961 - CAPITAL GAINS - REFERENCE TO VALUATION OFFICER - ASSESSMENT YEAR 2006-07 - ASSESSEE WERE C O-OWNERS OF A PROPERTY - THEY SOLD SAID PROPERTY FOR A SALE CONSIDERATION OF RS. 4.05 CRORES - IN SUPPORT OF COMPUTATION OF CAPITAL GAIN, ASSESSEE HAD FILED REP ORT OF GOVERNMENT REGISTERED VALUER VALUING PROPERTY AS ON 1-4-1981 AT RS. 27,29 ,600 - ASSESSING OFFICER, HOWEVER, WAS OF VIEW THAT FMV OF PROPERTY AS ON 1-4 -1981 ADOPTED BY ASSESSEE BASED ON ESTIMATE BY GOVERNMENT REGISTERED VALUER W AS HIGH AND HE, THEREFORE, REFERRED MATTER TO VALUATION OFFICER OF DEPARTMENT (DVO) FOR DETERMINATION OF FMV AS ON 1-4-1981 - DVO ESTIMATE FMU OF PROPERTY A S ON 1-4-1981 AT RS. 18.41 LAKHS - ASSESSEE HAD RAISED OBJECTION TO VALUATION OF FMV AS ON 1-4-1981 AS ADOPTED BY DVO - ASSESSING OFFICER WAS OF OPINION T HAT VALUATION AS GIVEN BY DVO HAD TO BE ACCEPTED SINCE IT MET WITH ALL OBJECTIONS RAISED BY ASSESSEE WITH REGARD TO VALUATION AS DONE BY DVO - WHETHER REFERENCE BY ASS ESSING OFFICER TO DVO UNDER SECTION 55A FOR VALUATION OF FMV OF PROPERTY AS ON 1-4-1981 WAS NOT VALID FOR REASONS THAT FMV DECLARED BY ASSESSEE AS PER GOVERN MENT REGISTERED VALUERS REPORT WAS MORE THAN FMV AS ESTIMATED BY DVO - HELD , YES - WHETHER, THEREFORE, ESTIMATION OF FMV OF PROPERTY AS ON 1-4-1981 AS MAD E BY ASSESSEE WAS TO BE ACCEPTED - HELD, YES 13. IN OUR CONSIDERED VIEW, THE QUESTION OF APPLICA BILITY OF CLAUSE (B) TO SECTION 55A DOES NOT ARISE HERE. EVEN FOR THE SA KE OF ARGUMENT, WE CONSIDER APPLICABILITY OF CLAUSE (B), THE AO HAS NO T SHOWN AS WHAT IS THE PERCENTAGE PRESCRIBED AND HOW FMV OF THE PROPERTY E XCEEDS THE VALUE CLAIMED BY THE ASSESSEE. ON THE OTHER HAND FMV ESTI MATED BY THE AO IS LOWER THAN THE VALUE CLAIMED BY THE ASSESSEE. CLAUS E (B)(I), THEREFORE, CANNOT BE INVOKED. IN INVOKING CLAUSE (B)(II) AO HA S TO SHOW THE NATURE OF THE ASSET AND OTHER RELEVANT CIRCUMSTANCES. WHAT WE FIND FROM THE REFERENCE MADE BY THE AO AS PER AOS LETTER DATED 5 .11.00 ANNEXED ON PAGES 1 & 2 OF ASSESSEES PAPER BOOK THAT AO HAS ON LY EXPRESSED OPINION ABOUT THE DETERMINING OF FMV AS ON THE DATE OF SALE AND NOT AS ON 1.4.81. FOR THE SAKE OF CONVENIENCE WE REPRODUCE PARA 6 & 12 FROM THAT REFERENCE LETTER AS UNDER :- ITA NO.1988/AHD/2009 ASST. YEAR 2006-07 13 6. FAIR MARKET VALUE OF THE ASSET VALUE RETURNED BY THE ASSESSEE RS.1,30,41,000/- (SALE CONSIDERATION VALUE AS ON 1981 RS.26,24,269/- 12. GROUND ON WHICH THE OPINION OF ASSESSING OFFICER IS BASED THE AREA OF MUNICIPAL MARKET BEING A POSH AREA, THE RATE ADOPTED BY THE ASSESSEE SEEMS TO BE AT A LOWER RATE. MOREOVER, THE ASSESSEE IS ALSO CLAIMING CAPITAL LOSS ON SALE OF THIS PROPERTY, HENCE THE SAME IS REQUIRED TO BE VERIFIED BEFORE FINALIZING THE ASSESSMENT. THUS THE CONDITION LAID DOWN IN CLAUSE (B)(II) IS N OT FULFILLED. THE AO HAS NOT EXPRESSED ANY OPINION ABOUT THE NATURE OF THE A SSET AND OTHER RELEVANT CIRCUMSTANCES AS TO WHY IT IS NECESSARY TO REFER TH E PROPERTY TO THE DVO. IN OUR VIEW CLAUSE (B)(II) IS NOT MERELY FORMALITY BUT IT LAYS DOWN A DEFINITE CONDITION FOR THE AO TO SATISFY THEM AND S HOW AS TO WHY SUCH REFERENCE TO THE DVO IS NECESSARY. WHEN THERE IS NO SUCH OPINION FORMED, REFERENCE WOULD NOT BE VALID. THEREFORE, WE DO NOT UPHOLD THE REFERENCE EITHER FOR DETERMINING FMV AS ON DATE OF SALE OR AS ON 1.4.81. BOTH ARE NOT LEGALLY SUSTAINABLE. WE ACCORDINGLY, U PHOLD THE ORDER OF LD. CIT(A) AND DISMISS THIS GROUND OF APPEAL FILED BY T HE REVENUE. 14. THE SECOND GROUND IN REVENUES APPEAL IS ALLOWI NG INCUMBRANCE. THE ASSESSEE CLAIMED TO HAVE MADE PAYMENT AS PER TE RMS IN THE WILL OF LATE SHRI JAYANTIBHAI SHAH THESE PAYMENTS WERE MADE TO VARIOUS PERSONS AND WERE REQUIRED TO BE MADE WITHIN 24 MONTHS OF TH E DEATH OF SHRI JAYANTIBHAI SHAH. THE AO HAD DISALLOWED THE CLAIM O NLY FOR THE REASONS THAT SUCH CLAIM WAS LATE AND WAS NOT MADE WITHIN 24 MONTHS OF THE DEATH. 15. WE HAVE HEARD THE PARTIES. IN OUR VIEW THE CLAI M CANNOT BE DISALLOWED IF IT IS OTHERWISE LEGALLY PERMISSIBLE. EVEN THOUGH WILL REQUIRED THE LEGAL HEIRS TO MAKE THE PAYMENTS ON SA LE OF THE PROPERTY WITHIN 24 MONTHS BUT IN REALITY SALE MAY TAKE TIME BUT FOR THAT MATTER LIABILITY CREATED BY THE CHARGE ON THE PROPERTY WIL L NOT CEASE TO EXIST. THE AO HAS NOT CHALLENGED THE CHARGE ON THE PROPERTY. I N OUR VIEW THE LATCHES ITA NO.1988/AHD/2009 ASST. YEAR 2006-07 14 BEING NOT UNREASONABLE CANNOT DO AWAY WITH THE CHAR GE ALREADY CREATED BY THE DECEASED. WE DO NOT ACCORDINGLY FIND FORCE I N THE CASE OF AO AND THE LD. DR. THIS GROUND OF REVENUE IS ALSO REJECTED . 16. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 6/5/11. SD/- SD/- (D. K. TYAGI) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 6/5/11. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 4/4/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 13/4/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..