Sri. PRADEEP G. VORA, MUMBAI V. TO Wd. 16(2)(1) (PRESENT ACIT - 16(2)), MUMBAI

ITA 2187/MUM/2006

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78936 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 10-04-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 07-04-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K SHUKLAO P SINGH; AJAY K SRIVASTAVA
• Assessee Lawyers: AARTI VISSANJI
• Keywords: Value adopted by valuation officer; Capital asset; Opportunity of being heard; Retrospective amendment; Additional evidence; Question of law; Cost of acquisition; Date of conversion; Fair market value; Valuation report; Competent authority; Reason to believe; Capital expenditure
• Section: 147; 246; 11; 45(2); 133(6)

Judgement Text

, ,, , , INCOME TAX APPELLATE TRIBUNAL,MUMBAI - I BENCH. , ! ! ! ! ' ' ' ' , ,, , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & VIVEK VAR MA,JUDICIAL MEMBER /. ITA NO.2187/MUM/2006, # # # # $ $ $ $ / ASSESSMENT YEAR-2001-02 PRADEEP G. VORA, RUNGTA HOUSE, 68, NEPEANSEA ROAD, MUMBAI-400006 VS ITO 16(2)(1) (PRESENT ACIT-16(2), MATRU MANDIR, OPP. BHATIA HOSPITAL, TARDEO, MUMBAI-400034 PAN: AAAPV3259J ( %& / APPELLANT) ( '(%& / RESPONDENT) #)* #)* #)* #)* + + + + / ASSESSEE BY : AARTI VISSANJI , + / REVENUE BY : SHRI P.K.SHUKLA/O.P.SINGH & AJAY K. SRIVASTAVA # # # # , ,, , *- *- *- *- / DATE OF HEARING : 10-04-2014 ./$ , *- / DATE OF PRONOUNCEMENT : 30-05-2014 # # # # , 1961 , ,, , 254 )1( *0* *0* *0* *0* 1 1 1 1 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM # # # # : CHALLENGING THE ORDER DT.31.01.2006 OF THE CIT(A)-X VI,MUMBAI,ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1)VALUATION OF LAND AT BOAT CLUB ROAD, PUNE : A)VALUE AS ON THE DATE OF CONVERSION OF LAND INTO S TOCK-IN-TRADE ON 12.06.1995 : I)THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE V ALUATION OF THE LAND AT BOAT CLUB ROAD, PUNE AS ON THE DATE OF CONVERSION INTO STOCK-IN-TRADE ON 12.06.1995 AT RS.12,82,41.000/-AS PER DVOS REPORT. B)VALUATION OF PART OF THE LAND CONVERTED INTO STOC K-IN-TRADE IN JANUARY 2001 : I)THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE VA LUATION OF PART OF THE LAND CONVERTED INTO STOCK-IN-TRADE IN JANUARY2001 AT RS. 94,79,000/-(AS PER VALUATION REPORT OBTAINED BY THE APPELLANT FROM THE APPROVED VALUER) INSTEAD OF DIRECTING THE ASSESSING OFFICER TO ADOPT VALUATION AT RS. 2,04,11,552/- I.E. IN PROPORTION OF THE AREA WHICH BEARS TO THE VALUATION OF LAND ON 12.06. 1995 AT RS.12,82,41,000/-. 2)APPORTIONMENT OF PRELIMINARY COSTS (RS. 36,87,001-) & COMMON AMENITIES (RS.76,96, 000/-) : A)THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THAT THE AFORESAID COSTS SHOULD BE APPORTIONED / ALLOCATED PROPORTIONATELY TO BUILDING A IN THE RATI O OF BLDG. A I.E. 25,671 SQ. FT. TO TOTAL SALEABLE AREA I.E.1,15,000 SQ.FT. INSTEAD OF ATTRIBUTING THE ENTIRE ABOVE EXPENDITURE TO BUILDING A. 3)APPORTIONMENT OF INTEREST COST RS. 69,69,203/- : A)THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THAT THE AFORESAID INTEREST COST SHOULD BE APPORTIO NED / ALLOCATED PROPORTIONATELY TO BUILDING A IN THE RATIO OF BLDG. A I.E. 25,671 SQ. FT.TO TOTAL SA LEABLE AREA I.E. 1,15,000 SQ. FT. INSTEAD OF ATTRIB UTING THE ENTIRE ABOVE EXPENDITURE TO BUILDING A. B)ALTERNATIVELY AND WITHOUT PREJUDICE TO THE ABOVE THE LEARNED CIT (A) OUGHT TO HAVE ACCEPTED THE ALTERNATIVE ARGUMENT OF THE APPELLANT FOR ALLOWING THE INTEREST COST OF RS. 46,08543/- INCURRED UP TO ASSESSMENT YEAR 2000-01 AGAINST BLDG. A AND INTE REST COST FOR THE YEAR UNDER APPEAL OF RS. 23, 60,660/-TO BE APPORTIONED BETWEEN BLDG. A & B EQUAL LY SUCH THAT INTEREST COST ATTRIBUTABLE TO AND ALLOWABLE AGAINST BLDG.A AMOUNTS TO RS. 57,88,873/- {RS. 46,08,543 + RS. 11,80,330(50% OF RS.23,60,660)]. 4)COST OF SETTLEMENT WITH TENANT RS. 40,00,000/- : A)THE LEARNED ASSESSING OFFICER HAS ERRED IN IGNORI NG THE SUBMISSIONS OF THE APPELLANT, IN 2 ITA NO. 2187/MUM/2006 PRADEEP G. VORA CONFIRMING THE DISALLOWANCE OF THE COST OF SETTLEME NT WITH TENANT OF RS. 40,00,000/- TREATING THE SAME AS CAPITAL EXPENDITURE. THE ASSESSEE HAD ALSO RAISED FOLLOWING ADDITIONAL G ROUNDS: 5.THE LEARNED ASSESSING OFFICER ERRED IN MAKING A R EFERENCE TO THE VALUATION OFFICER U/S 55A OF THE INCOME TAX ACT,1961 FOR THE PURPOSE OF DETERMINING FAIR MARKET VALUE OF THE PROPERTY BEARI NG FP NO.202,CTS NO.13/1 AND 13/2,BOAT CLUB ROAD,SANGA MWADI TOWN PLANNING SCHEME, PUNE AS ON 15.05.1995 FOR THE PURPOSE OF COMPUTING CAPITAL GAIN U/S 45(2) OF THE INCOME TAX ACT, 1961. DURING THE COURSE OF HEARING BEFORE US,GROUND NO.4 WAS NOT PRESSED BY THE ASSESSEE,HENCE,SAME STANDS DISMISSED AS NOT PRESSED. BRIEF HISTORY AND FACTS OF THE CASE: 2. ASSESSEE,AN INDIVIDUAL,FILED HIS RETURN OF INCOME O N 23.10.2001SHOWING INCOME OF (-)RS.2,34, 47,199/-.HE HAD DISCLOSED BUSINESS LOSSES FROM HIS PROPRIETARY CONCERNS(M/S.VORA ENTERPRISES)AT RS.(-)7,58,09,273/-AND(M/S.VORA ASSOCIATES),AT RS.( -)2,87,742/-.IN THE RETURN HE ALSO ADMITTED LONG TERM CAPITAL GAIN AT RS.5,25,80,036/-.AO FINAL ISED THE ASSESSMENT U/S.143(3)OF THE ACT,ON 30.03.2004,DETERMINING HIS INCOME AT RS. 3,35,38,16 4/-. 2.1. DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE OWNED A PLOT OF LAND AT BOAT CLUB ROAD,PUNE ADMEASURING 9,926.77 SQ. MTRS.,THAT OUT OF THAT PLOT 650 SQ. MTS.OF LAND WAS RETAINED BY HIM AND BALANCE 9276 SQ. MTS.PLOT WAS CONVERTED INTO STOCK-IN-TRADE ON 12.06.1995 AT FAIR MARKET VALUE(FMV)AT RS.31,35,03,800/-AS PER VA LUATION REPORT OF A APPROVED VALUER- M/S.PUNDLIK & PUNDLIK,THAT AS PER THE VALUATION RE PORT THE PLOT WAS HELD BY THE ASSESSEE AS HIS CAPITAL ASSET,THAT HE DECIDED TO DEVELOP THE SAID PROPERTY COMMERCIALLY AND FOR THAT PURPOSE HE ENTERED INTO THREE AGREEMENTS(DTD.7.09.1995,30.11.1 998 AND 25.01.2001)WITH A PROJECT MANAGER, NAMELY,THE GREAT EASTERN SHIPPING CO.LTD.(GESCO).HE FURTHER FOUND THAT THE ASSESSEE WAS FOLLOWING PART PROJECT COMPLETION METHOD AND WAS OF FERING INCOME ON THE YEAR OF COMPLETION OF BUILDING,THAT DURING THE YEAR UNDER APPEAL,BUILDING A WAS COMPLETED AS PER COMPLETION CERTIFICA - TE DT.11.10.2000 OF THE PUNE MUNICIPAL CORPORATION. IT WAS CLAIMED BEFORE THE AO THAT THE ENTIRE PROJECT WAS TO BE FINANCED BY THE PROJECT MANAGER O N WHICH IT WAS TO BE PAID INTEREST,THAT THE ASSESSEE WAS REQUIRED TO PAY THE PROJECT MANAGEMENT FEES BASED ON THE SALE PRICE REALISED ON SALE OF FLATS. AS PER THE AO,THE ASSESSEE HAD OFFERED INCOME BY WA Y OF CAPITAL GAIN U/S.45(2) OF THE ACT.FOR THE PURPOSE OF CALCULATING CAPITAL GAIN,IT HAD ADOPTED INDEXED COST AT RS.51,99,000/-WITH REFERENCE TO FMV AS ON 01.04.1981.INDEXED COST WAS BASED ON THE REPORT OF A REGISTERED VALUER.AO OBSERVED THAT THE ASSESSEE HAD DISCLOSED THE TOTAL SALEABLE AREA OF THE ENTIRE PROJECT AT 1,15,000 SQ.FT,WHERESAS SALEABLE AREA OF BUILDING A WAS DISC LOSED AT 25,671 SQ. FT.,THAT HE HAD APPORTIONED THE EXPENSES IN CERTAIN RATIO. AFTER CONSIDERING THE FACTS OF THE CASE AND ARGUMEN TS OF THE ASSESSEE,THE AO ESTIMATED THE VALUE OF THE PROPERTY ON 12.06.1995 AT RS.29,51,916/- AND AT RS.5,88,875/-AS ON 01.04.1981.HE WAS OF THE OPINION THAT THE VALUE OF THE PROPERTY,CONVERTE D INTO STOCK-IN-TRADE,DURING THE YEAR WAS TO BE TAKEN AT RS.4, 69,843/-.THE AO FURTHER CONSIDERED T HE TOTAL PROJECT AREA AT 1,67,000 SQ.FT.(1,15, 000+52,000 OUT OF TDR)AND APPORTIONED VARIOUS EXPEN SES IN PROPORTION OF 25,671:1, 67,000.THE AO ALSO CONSIDERED CERTAIN EXPENSES, AMOUNTING TO R S 1,60,03,000/- AND INTEREST OF RS 69,69, 203/-FOR THE ENTIRE PROJECT AS AGAINST ASSESSEES C LAIM OF CHARGING THE SAME ENTIRELY TO BUILDING A.ACCORDINGLY,THE AO MADE NECESSARY ADJUSTMENT.HE A LSO REDUCED AN AMOUNT OF RS.71,80,000/- FROM THE TOTAL CONSTRUCTION COST BEING CREDIT RECEI VED ON SETTLEMENT WITH THE PROJECT MANAGER IN A.Y.2003-04.AO MADE A REFERENCE TO THE DEPARTMENTAL VALUATION OFFICER (DVO) ON 19.03.2004 TO FIND OUT THE FAIR MARKET VALUE(FVM) OF THE PLOT OF LAND AS ON 12.06.1995 AS WELL AS ON 01. 04. 1981 FOR COMPUTING CAPITAL GAINS. 3 ITA NO. 2187/MUM/2006 PRADEEP G. VORA 2.2. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM A COPY OF THE VALUATION R EPORT,DT.11.03.2005, PREPARED BY THE DVO AND HIS OBJECTIONS ON THE SAME WERE FILED.ASSESSEE ALSO POINTED OUT SOME ERRORS AND OMISSIONS IN THE ASSESSMENT ORDER.FAA DIRECTED THE AO TO SUBMIT A REPORT ON ASSESSEES OBJECTIONS VIDE THIS OFFICE LETTER DT.20. 09.2005 AND REMINDER DT.25.10. 2005.AS THERE WAS NO RESPONSE FROM THE OFFICE OF THE AO,FAA CONTACTED THE DVO TO EXAMINE ASSESSEE S OBJECTIONS AND SUBMIT HIS COMMENTS. THE DVO PERSONALLY APPEARED BEFORE THE FAA FOR HEAR ING ON 29.12.2005 AND SUBMITTED REPLY. A COPY OF DVOS COMMENTS, CONTAINED IN HIS LETTER DT. 29.12.2005,WAS PROVIDED TO THE ASSESSEE. FURTHER OBJECTIONS WERE RAISED BY THE ASSESSEE IN T HIS REGARD. FAA SPECIFICALLY ASKED THE ASSESSEE THAT WHETHER HE HAD ANY OBJECTION TO ISSUE OF DIRECTION TO THE AO FOR ADOPTION OF FAIR MARKET /VALUE OF THE PROPER TY AS ON 01.04.1981 AND AS ON 12.06.1995 ON THE BASIS OF DVOS REPORT.THE AR OF THE ASSESSEE OB JECTED TO SUCH PROPOSAL STATING THAT DVOS REPORT WAS NOT CORRECT.HE FURTHER STATED THAT OBJEC TIONS TO THE REPORT HAD ALREADY BEEN SUBMITTED EARLIER DURING THE COURSE OF APPEAL WHICH SHOULD BE CONSIDERED. HERE,IT WOULD BE USEFUL TO GO BACK TO THE EARLY HIS TORY OF THE PLOT OF LAND IN QUESTION,AS IT WAS SUBJECT MATTER OF THE URBAN LAND CEILING ACT,1976, (ULCA)APPLIED TO LAND AREA IN EXCESS OF 500 SQ.MTS.ASSESSEES FATHER HAD URBAN AREA OF 9926.775 9 SQ. MTS.AS PER THE ORDER,DT. 27.09.1990,OF THE COMPETENT AUTHORITY UNDER THE ULCA,THE SURPLUS LAND IN THE CASE OF THE ASSESSEE WAS DETERMINED AT 1609.10 SQ.MTS.THE DVO ADOPTED THE SA ID PORTION OF THE PLOT FOR VALUATION OF THE PROPERTY AS ON 01.04.1981.THE ASSESSEE OBJECTED TO THE SAME STATING THAT APPEAL AGAINST THE ORDER OF THE COMPETENT AUTHORITY WAS PENDING AND FINALLY THE MATTER WAS DECIDED IN HIS FAVOUR AND HENCE ULTIMATELY NO AREA WAS FOUND TO AS SURPLUS LA ND UNDER THE ULCA.THE ASSESSEE IN HIS FURTHER OBJECTION DT.30.12.2005 STATED THAT WHATEVER WAS DE CIDED IN 1982 BY THE COMPETENT AUTHORITY SHOULD NOT HAVE BEEN CONSIDERED FINAL WITHOUT CONSI DERING THE RESULT OF THE PENDING APPEAL.AFTER CONSIDERING THE OBJECTIONS OF THE ASSESSEE AND REPL Y BY THE DVO,FAA HELD THAT AREA COVERED BY ULCA AS NON-VACANT ,AS ON 01.04.1981,WAS TO BE TAKE N AT 1,689.10 SQ.MTRS. FOR THE PURPOSE OF VALUATION OF THE PROPERTY AS ON 15.05.1995, THE DVO HAD CONSIDERED THE EXTENT OF SURPLUS LAND AT 474.26 SQ. MTS.THE ASSESSEE OBJE CTED TO THE SAME STATING THAT APPEAL FILED BY HIM WAS FINALLY DECIDED IN HIS FAVOUR AND THE ENTIR E LAND WAS DECLARED NON-VACANT UNDER THE ULCA.THE DVO,IN HIS REPORT DT.29.12.2005,POINTED OU T THAT AS ON THE DATE OF CONVERSION OF LAND INTO STOCK-IN-TRADE THE ORDER DT.20.04.1995 UNDER T HE ULCA WAS THE ONLY ORDER AVAILABLE AND THEREFORE,IT WAS CONSIDERED FOR DETERMINING THE ARE A OF NON VACANT LAND.THE DVO EXPLAINED THAT APPELLANTS CLAIM TO THE CONTRARY WAS BASED ON SUBS EQUENT CLARIFICATION DT. 21.05.1997 ISSUED BY THE GOVT. MAHARASHTRA AND BY THAT TIME THE ASSESSEE HAD ALREADY ENTERED INTO AGREEMENT ON 07.09.1995 WHEN THE EXTENT OF SURPLUS LAND, STOOD A T 474.26 SQ.MTS.FAA,AFTER CONSIDERING THE SUBMISSIONS OF AO AND THE DVO HELD THAT SURPLUS LAN D AS ON 15.05.1995 WAS TO BE DETERMINED AT 474.26 MTS. THE ASSESSEE ALSO OBJECTED TO THE REDUCTION OF 10% FROM THE LAND AREA FOR RG (RECREATIONAL GROUND) I.E. 992.67 SQ. MTS. WHILE VALUING THE PROP ERTY AS ON 15.05.1995 MADE.HE ARGUED THAT THAT SUCH REDUCTION WAS INCORRECT AND TO THAT EXTENT,THE VALUATION DONE BY THE DVO WAS LESS,THAT WHILE CALCULATING THE AREA THE ENTIRE PLOT SHOULD HAVE BE EN CONSIDERED.FAA REJECTED THE OBJECTION RAISED BY THE ASSESSEE.OTHER OBJECTIONS RAISED BY THE AO W ERE ALSO REJECTED. WITH REGARD TO THE REFERENCE MADE TO THE DVO U/S.55 A OF THE ACT,FOR DETERMINATION OF FMV OF THE PROPERTY OF THE ASSESSEE AS ON 01.04.1981 AND 1 5.05.1995 AND THE REPORT PREPARED BY THE DVO,FAA HELD THAT THE DVO WAS THE COMPETENT AND STA TUTORY AUTHORITY FOR THE PURPOSE OF SEC.55A OF THE ACT,THAT THE FMV OF THE PROPERTY ON THE AFORESAID TWO DATES AS DETERMINED BY HIM VIDE HIS REPORT DT.11.03.2005 HAD TO BE ACCEPTED IN PREFERENCE TO THE FAIR MARKET VALUE DETERMINED BY THE AO AND THE REGISTERED VALUE. IN SHORT,HE REJECTED ALL THE OBJECTION RAISED BY TH E ASSESSEE AND HELD THAT VALUE ADOPTED BY THE DVO ON BOTH THE RELEVANT DATES I.E.01.04.1981 AND 1 5.05.1995 WAS THE CORRECT FIGURE FOR DETERMI - 4 ITA NO. 2187/MUM/2006 PRADEEP G. VORA NING THE VALUE OF THE PLOT OF LAND IN QUESTION. 3. ADDITIONAL GROUND RAISED BY THE ASSESSEE,CHALLENGES THE REFERENCE MADE BY THE AO TO THE DVO, U/S.55A OF THE ACT TO FOR DETERMINING FAIR MARKET V ALUE(FMV)ON THE DATE OF CONVERSION FOR COMPUTING CAPITAL GAIN.AN APPLICATION WAS FILED BY THE ASSESSEE TO ADMIT THE ADDITIONAL GROUND. BEFORE US,DEPARTMENTAL REPRESENTATIVE (DR)OBJECTED THE ADMISSION OF ADDITIONAL EVIDENCE AND ARGUED THAT THE ASSESSEE HAD NOT RAISED THE SAID GR OUND EITHER BEFORE THE AO OR BEFORE THE FIRST APPELLATE AUTHORITY (FAA),THAT HE SHOULD NOT BE ALL OWED TO ARGUE THE ISSUE OF REFERENCE MADE BY THE AO TO THE VALUATION OFFICER,BEFORE THE TRIBUNAL FOR THE FIRST TIME.AUTHORISED REPRESENTATIVE (AR)SUBMITTED THAT ADDITIONAL GROUND WAS VITAL FOR DECIDING THE MAIN ISSUE,THAT IT WAS ONLY A LEGAL GROUND AND NEW FACTS WERE NOT TO BE INVESTIGATED. I N HIS SUPPORT HE PLACED RELIANCE ON THE FOLLOWING CASES: A)NATIONAL THERMAL POWER CO. LTD. VS. CIT 229 ITR 3 83 (SC), B)AHMEDABAD ELECTRICITY V CIT, 199 ITR 351(BOM-FB), 3.1. FIRST WE WOULD LIKE TO TAKE UP THE ISSUE OF ADMISSI ON OF ADDITIONAL GROUND.INCOME-TAX APPELLATE TRIBUNAL(TRIBUNAL),THE LAST FACT FINDING AUTHORITY,IS SUPPOSED TO DECIDE THE DISPUTES BETWEEN THE SOVEREIGN AND THE CITIZENS,SO THAT CORR ECT TAX LIABILITIES CAN BE DETERMINED.FOR THAT PURPOSE IT ADJUDICATES THE GROUNDS OF APPEAL FILED BEFORE IT.IT MAY HAPPEN THAT THE ASSESSEE OR THE AO MAY RAISE AN ADDITIONAL GROUND (AG)OF APPEAL AND TRIBUNAL HAS TO DECIDE IT.THE CASE BEFORE US,IS ONE OF SUCH CASES,WHERE AG HAS BEEN RAISED.AS STATED EARLIER,AR AND DR HAD ARGUED IN FAVOUR OF AND AGAINST THE ADMISSION OF AG.CONSIDERI NG THE CONTENTIONS OF BOTH THE SIDES,WE ARE OF THE OPINION THAT IT WOULD BE USEFUL TO MENTION THE HISTORICAL BACKGROUND AND DEVELOPMENT OF LAW OF AG,AS WELL AS THE JUSTIFICATION OF ADMITTING OR NOT ADMITTING THE SAME. IT IS SAID THAT THE POWER OF THE TRIBUNAL TO ALLOW AN ADDITIONAL PLEA/ADDITIONAL EVIDENCE ORIGINATES FROM THE PRINCIPLE THAT SUBSTANTIAL JUSTICE SHOULD NOT SUFFER BECAUSE OF NON CONSIDERATION OF AN AG OR AN ADDITIONAL EVIDENCE.AS PER THE ESTABLISHED JU DICIAL NORMS TRIBUNAL HAS TO ALLOW/ DISALLOW THE ADDITIONAL PLEA AND ADDITIONAL EVIDENCE AFTER APPLY ING ITS JUDICIAL MIND.RULE11 OF ITAT APPELLATE RULES,1963,SUCCESSOR TO THE RULE 21 OF THE OF THE A PPELLATE TRIBUNAL RULES,1946 DEALS WITH THE ADMISSION OF AN AG.BOTH THESE RULES ARE MORE ARE LE SS SIMILAR TO THE PROVISIONS OF RULE 2 OF ORDER XLI OF THE CODE OF CIVIL PROCEDURE,1908.RULE 2 OF T HE SAID ORDER READS AS UNDER: 2 .GROUNDS WHICH MAY BE TAKEN IN APPEAL- THE APPELLANT SHALL NOT EXCEPT BY LEAVE OF THE COUR T, URGE OR BE HEARD IN SUPPORT OF ANY GROUND OF OBJECTION NOT SET FORTH IN THE MEMORANDUM OF APPEAL ,BUT THE APPELLATE COURT IN DECIDING THE APPEAL, SHALL NOT BE CONFINED TO THE GROUNDS OF OBJ ECTIONS SET FORTH IN THE MEMORANDUM OF APPEAL OR TAKEN BY LEAVE OF THE COURT UNDER THIS RULE: PROVIDED THAT THE COURT SHALL NOT REST ITS DECISION ON ANY OTHER GROUND UNLESS THE PARTY WHO MAY BE AFFECTED THEREBY HAS HAD A SUFFICIENT OPPORTUNIT Y OF CONTESTING THE CASE ON THAT GROUND. THE FIRST IMPORTANT MATTER RELATING TO ADMISSION OF AN AG WAS DECIDED IN THE YEAR 1937 BY THE HONBLE CHIEF COURT OF OUDH,WHILE ADJUDICATING THE MATTER OF BEHARI LALL-RAMCHANDRA (5ITR 417).IT WAS HELD BY THE HONBLE COURT THAT THE VIEW ;THAT AG OF APPEAL COULD NOT BE FILED AFTER THE EXPIRY OF THE PERIOD PRESCRIBED BY ACT FOR FILING A N APPEAL;WAS AN ERRONEOUS VIEW,THAT SUCH GROUNDS DATED BACK TO THE DATE OF THE ORIGINAL APPE AL,OF WHICH WHEN ADMITTED,THEY WOULD BECOME A PART OF THE APPEAL,THAT AG COULD BE FILED BY THE APPELLANT AND ENTERTAINED BY THE APPELLATE AUTHORITIES IN THE EXERCISE OF THEIR DISCRETION AT ANY TIME BEFORE THE APPEAL IS DECIDED,THAT IF THE AUTHORITIES EXERCISED THEIR DISCRETION IN REFUSING TO ENTERTAIN AN AG IN AN IMPROPER MANNER,THE DISCRETION WOULD BE OPEN TO CORRECTIONS,THAT THE AG .S WERE INTENDED TO QUESTION THE PRINCIPLE ON WHICH THE ASSESSMENT HAD BEEN BASED BY THE AO,THAT THE OBJECTION RAISED IN THOSE GROUNDS WENT TO 5 ITA NO. 2187/MUM/2006 PRADEEP G. VORA THE ROOT OF THE ASSESSMENT. SECOND IMPORTANT CASE ABOUT THE AG IS THE CASE OF B YRAMJI & CO.IN THAT MATTER HONBLE NAGPUR HIGH COURT HAD DELIBERATED UPON RULE 21 OF THE APPE LLATE TRIBUNAL RULES,1946.HONBLE COURT (11 ITR 286)HELD AS UNDER: THE APPELLATE TRIBUNAL MAY GRANT LEAVE TO URGE AN A DDITIONAL GROUND OF APPEAL EVEN THOUGH IT HAS NOT BEEN ADDED TO THE MEMORANDUM OF APPEAL BY M EANS OF A PROPER AMENDMENT.THERE IS ALSO NOTHING IN THE RULES WHICH PROVIDES THAT AN APPLICA TION FOR LEAVE TO URGE AN ADDITIONAL GROUND SHOULD BE STAMPED OR VERIFIED. THOUGH IT IS FOR THE APPELLATE TRIBUNAL TO EXERCISE ITS DISCRETION IN GRANTING LEAVE TO URGE AN ADDITIONAL GROUND OF APPEAL,THIS DISCRETION HAS TO BE EXERCISED JUDICIALLY AND NOT ARBITRARILY,AND IF IT IS FOUND THAT IT HAS BEEN EXERCISED ARBITRARILY, SUCH EXERCISE OF DISCRETION CAN BE INTERFERED WITH BY THE HIGH COURT. WHERE THE ADDITIONAL GROUND OF APPEAL SOUGHT TO BE URGED WAS A QUESTION OF LAW WHICH DID NOT INVOLVE ANY FURTHER INVESTIGATION INTO FACTS UPON W HICH THE APPELLATE TRIBUNAL REFUSED TO GRANT LEAVE TO URGE IT WAS THAT THIS NEW GROUND WAS NOT A DDED TO THE MEMORANDUM OF APPEAL BY A PROPER AMENDMENT AND THE APPLICATION FOR LEAVE WAS NEITHER STAMPED NOR VERIFIED. THIS RULE IS PRACTICALLY IN THE SAME WORDS AS ORDE R 41, RULE 2OF THE CIVIL PROCEDURE CODE.IT ONLY REQUIRES PERMISSION OF THE TRIBUNAL TO URGE AN ADDI TIONAL GROUND. THERE IS NOTHING IN THE RULE WHICH SAYS THAT THE ADDITIONAL GROUND HAS TO BE ADD ED TO THE MEMORANDUM OF APPEAL BY MEANS OF A PROPER AMENDMENT. WHETHER TO GRANT LEAVE OR NOT IS LEFT TO THE DISCRETION OF THE TRIBUNAL. UNDER THESE CIRCUMSTANCES OUR ANSWER TO THE QUESTIO N REFERRED TO US FOR DECISION IS THAT THE BENCH DID NOT PROPERLY USE ITS DISCRETION IN NOT PERMITTI NG THE APPLICANTS TO TAKE THE ADDITIONAL GROUNDS NOT RAISED IN THE MEMO OF APPEAL AND NOT ADDED TO I T BY MEANS OF A PROPER AMENDMENT. HONBLE JURISDICTIONAL HIGH IN THE MATTER OF HAZAR IMAL NAGJI & CO.(46 ITR 1168) HAS HELD THAT AN AG CAN BE RAISED BEFORE THE TRIBUNAL,EVEN IF SAM E WAS NOT ARGUED BEFORE THE DEPARTMENTAL AUTHORITIES.OBSERVATIONS OF THE HONBLE COURT READ AS UNDER : THE POWERS OF THE APPELLATE TRIBUNAL ARE SIMILAR T O THE POWERS OF THE APPELLATE COURT UNDER THE CIVIL PROCEDURE CODE.IN SO FAR AS A RESPONDENT ONLY WANTS TO MAINTAIN THE DECREE OF THE LOWER COURT WHICH IS IN HIS FAVOUR,HE IS ENTITLED TO SUPP ORT IT ON FRESH GROUNDS IF HE CAN DO SO, AND THE APPELLATE COURT ALSO WILL HAVE JURISDICTION TO PERM IT HIM TO DO SO, PROVIDED THAT THE FRESH GROUNDS WHICH HE WANTS TO URGE DO NOT REQUIRE A FURTHER INV ESTIGATION INTO FACTS WHICH ARE NOT ALREADY ON RECORD AND ARE NOT BASED ON FACTS WHICH WERE NEITHE R ALLEGED NOR ADMITTED NOR PROVED AND WHICH THE OTHER SIDE WAS NEVER CALLED UPON TO MEET IN THE LOWER COURT. SIMILARLY,IN THE CASE OF OSWAL COTTON SPINNING AND WEAVING MILLS.(129ITR761),ONE OF THE QUESTION RAISED BY THE DEPARTMENT BEFORE THE HONBL E PUNJAB AND HARYANA HIGH COURT WAS THAT THE TRIBUNAL WAS IN ERROR IN LAW IN ALLOWING THE AG TO BE RAISED BY THE ASSESSEE FOR THE FIRST TIME BEFORE IT,I.E.AT THE TIME OF HEARING THE APPEAL.DIS MISSING THE APPEAL HONBLE COURT HELD AS UNDER: AN ADDITIONAL GROUND CAN BE RAISED AT THE TRIBUNAL AT ADMISSION STAGE IN VIEW OF R. 11 OF THE INCOME-TAX (APPELLATE TRIBUNAL) RULES, 1963. AS PER THE COURTS THE POWERS OF THE TRIBUNAL,IN DEA LING WITH APPEALS HAVE BEEN EXPRESSED IN THE WIDEST POSSIBLE TERMS.THE WORDS PASS SUCH ORDER AS THE TRIBUNAL THINKS FIT INCLUDE ALL POWERS. BUT THE WORD THEREON IN SECTION 254 OF THE ACT,RESTRICTS THE JURISDICTI ON OF THE TRIBUNAL TO THE SUBJECT- MATTER OF THE APPEAL.THERE IS NOTHING IN THE ACT WH ICH RESTRICTS THE TRIBUNAL TO THE DETERMINATION OF QUESTIONS RAISED BEFORE THE DEPARTMENTAL AUTHORI TIES.ALL QUESTIONS,WHETHER OF LAW OR FACT,WHICH RELATES TO THE ASSESSMENT OF INCOME,MIGHT BE RAISED BEFORE THE TRIBUNAL.IT HAS THE POWER TO PASS ANY ORDER IT THOUGHT FIT AFTER GIVING THE PARTIES A PPROPRIATE OPPORTUNITY.BUT,SUCH ORDERS MUST BE PASSED ON THE SUBJECT-MATTER OF THE APPEAL.THE SUBJ ECT-MATTER OF THE APPEAL MUST BE VIEWED IN THE CONTEXT AND THE BACKGROUND OF THE FACTS AND CIRCUMS TANCES OF EACH CASE. 3.2. CERTAIN PRINCIPLES REGARDING RAISING AND ADMISSION OF AN AG BY THE TRIBUANL;CULLED OUT FROM THE ABOVE DISCUSSION AND VARIOUS OTHER DECISIONS OF THE HONBLE COURTS;CAN BE SUMMARISED AS UNDER: 6 ITA NO. 2187/MUM/2006 PRADEEP G. VORA I). NORMALLY,AN ASSESSEE;WHO HAS NOT PUT FORWARD A PART ICULAR CLAIM OR GROUND BEFORE THE AO OR THE FAA;CANNOT SEEK TO URGE THE SAME BEFORE THE TRI BUNAL EXCEPT WITH ITS PERMISSION. II). TRIBUNAL CANNOT REFUSE TO ENTERTAIN AN AG ARBITRARI LY,BUT HAS TO CONSIDER THE REASONS GIVEN BY THE APPELLANT FOR NOT URGING THE NEW GROUND BEFORE THE INITIAL AUTHORITIES.AN ORDER TO ADMIT OR NOT TO ADMIT AN AG HAS TO BE A REASONED OR SPEAKING ORD ER. IN THE MATTER OF MARUTI UDYOG LTD.A REQUEST WAS MAD E TO THE TRIBUNAL FOR ADMISSION OF AG.S.THE TRIBUNAL ADMITTED THE AG.S, BUT INSTEAD OF RECORDIN G REASONS FOR ADMITTING THE AG.S.,OBSERVED THAT THE REASONS COULD BE INCORPORATED IN THE ORDER TO BE PASSED IN THE APPEALS.A WRIT PETITION WAS FILED BEFORE THE HONBLE DELHI HIGH COURT TO QUASH THE ORDER.HONBLE COURT HELD THAT REQUIREMENT TO RECORD REASONS WAS INHERENT IN THE PROVISO TO RU LE 11 OF THE RULES,THAT THE TRIBUNAL HAD TO EXERCISE SUCH DISCRETION JUDICIALLY AND NOT ARBITRA RILY,THAT IT HAD DISCRETION IN APPROPRIATE CASES TO ALLOW ANY PARTY TO THE APPEAL TO RAISE A NEW GROUND BEFORE IT,THAT POWERS OF THE TRIBUNAL REFERABLE TO RULE 11 WERE JUDICIAL IN NATURE AND COULD NOT BE EXERCISED IN AN ARBITRARY MANNER AT THE PLEASURE OF THE TRIBUNAL,THAT WHETHER THE PERMISSION COULD B E GIVEN OR NOT DEPENDED BASICALLY ON THE FACTS OF EACH CASE,THAT THE REASONS WERE REQUIRED TO BE R ECORDED.ACCORDINGLY, THE TRIBUNAL WAS DIRECTED TO RECORD REASONS.(244ITR 303). III). IF THE TRIBUNAL COMES TO THE CONCLUSION, THAT THE R EASONS GIVEN FOR NOT URGING THE POINTS AT AN EARLIER STAGE ARE NOT GERMANE OR ARE UNREASONABLE,I T WILL BE WELL WITHIN ITS DISCRETION IN REFUSING TO ENTERTAIN THE NEW GROUNDS. IV). AN AG CAN BE FILED ANY TIME BEFORE THE HEARING IS A PPEAL IS TAKEN UP.THERE IS TIME LIMIT IN THE ACT FOR FILING APPEALS AND THE APPELLANTS ARE SUPPO SED TO ADHERE TO THAT LIMIT.BUT,IF AG.S ARE FILED, EVEN AFTER THE PRESCRIBED TIME-LIMIT FOR FILING OF APPEAL,SAME ARE TO BE ADJUDICATED UPON. V). RULE 11 OF THE RULES SPEAKS ONLY OF LEAVE TO RAISE AN AG AND THE LEAVE MAY BE SOUGHT FOR EITHER IN WRITING OR BY AN ORAL PRAYER. VI). AG SHOULD RELATE TO POINT OF LAW AND SHOULD GO TO R OOT OF ASSESSMENT AND SHOULD NOT INVOLVE FURTHER INVESTIGATION INTO FACTS.IT IS SAID THAT TH ERE CANNOT BE ANY ESTOPPEL AGAINST LAW.SO,IT IS PERMISSIBLE ON THE PART OF THE TRIBUNAL TO ENTERTAI N A GROUND BEYOND THOSE INCORPORATED IN THE MEMORANDUM OF APPEAL THOUGH THE PARTY URGING THE SA ID GROUND HAD NEITHER APPEALED BEFORE IT NOR HAD FILED A CROSS-OBJECTION IN THE APPEAL FILED BY THE OTHER PARTY. VII). THE QUESTION OF ENTERTAINING AN AG BY THE TRIBUNAL IS NOT A MERE QUESTION OF DISCRETION,BUT IT INVOLVES A QUESTION OF JURISDICTION ALSO.IF AN ASSE SSEE FILES AN APPLICATION FOR PERMISSION TO RAISE ADDITIONAL GROUNDS OF APPEAL IN RELATION TO THE SUB JECT-MATTER WHICH IS ALREADY BEFORE THE TRIBUNAL BY WAY OF AN APPEAL,THE MATTER WILL MERELY REST ON THE DISCRETION OF THE TRIBUNAL. BUT,WHERE AN ASSESSEE SEEKS TO BRING IN NEW ITEMS W HICH HAD NOT BEEN QUESTIONED BY HIM BEFORE THE ASSESSING AND APPELLATE AUTHORITIES AND WHICH H AD NOTHING TO DO WITH THE SUBJECT-MATTER OF THE APPEAL BEFORE THE TRIBUNAL AS ORIGINALLY FILED BY W AY OF ADDITIONAL GROUNDS OF APPEAL,THE QUESTION WILL ARISE AS TO WHETHER THE TRIBUNAL WILL HAVE JUR ISDICTION TO ENTERTAIN THE ADDITIONAL GROUNDS WITHOUT EXCUSING THE DELAY IN FILING THE APPEAL AND HENCE THE TRIBUNAL WILL BE JUSTIFIED IN REFUSING TO EXCUSE THE DELAY IN FILING SUCH ADDITIONAL GROUN DS OF APPEAL DEALING WITH A NEW SUBJECT-MATTER. VIII). AN ASSESSEE IS ENTITLED TO THE CLAIM FOR FURTHER DE PRECIATION ON THE ENHANCED VALUE OF THE ASSETS OR OTHER DEDUCTION OR EXEMPTION OR RELIEF,AS A RESULT OF THE APPEAL EFFECT OF THE DECISION OF THE SUPREME COURT,IN FORM OF AN AG. IX). AG MUST,RELATE TO THE SUBJECT-MATTER OF THE APPEAL AND IN THE GUISE OF RAISING AN AG A NEW ITEM OR SUBJECT-MATTER CANNOT BE ALLOWED TO BE INTR ODUCED UNDER RULE11.RULES,DO NOT PERMIT AN APPELLANT BEFORE THE TRIBUNAL TO INTRODUCE AN ALTOG ETHER NEW SUBJECT-MATTER OF APPEAL,IN RESPECT OF WHICH THE DECISION WAS ACCEPTED. IN THE MATTER OF CALCUTTA DISCOUNT COMPANY LTD.,HON BLE CALCUTTA HIGH COURT FOUND THAT THE TRIBUNAL HAD REJECTED THE APPLICATION AND AG MENTIO NED THEREIN,AS IT WAS OF THE OPINION SAME REMAINED OUTSIDE THE PURVIEW OF THE SUBJECT-MATTER OF THE APPEAL.DISMISSING THE APPEAL FILED BY THE ASSESSEE,HONBLE COURT HELD THAT SINCE THE ADDI TIONAL GROUNDS DID NOT FORM PART OF THE SUBJECT - 7 ITA NO. 2187/MUM/2006 PRADEEP G. VORA MATTER OF THE APPEAL,SO,NO REFERENCE TO THE HIGH CO URT AGAINST THAT ORDER WAS PERMISSIBLE.(82 ITR 941). X). IF AN AG IS RAISED BY AN ASSESSEE/AO AND IS ADMITTE D THE OTHER SIDE SHOULD BE PROVIDED SUFFICIENT OPPORTUNITY OF BEING HEARD WITH REGARD T O SUCH GROUND. XI). TRIBUNAL CANNOT GIVE A FINDING IN RESPECT OF THE AS SESSMENT OF AN YEAR WHICH IS NOT THE SUBJECT - MATTER OF THE APPEAL BEFORE IT.IT CAN GIVE A FINDIN G THAT THE DEDUCTION/INCOME DOES NOT BELONG TO THE RELEVANT ASSESSMENT YEAR/YEARS,BUT THOUGH IT MA Y INCIDENTALLY FIND THAT THE DEDUCTION/INCOME RELATES TO ANOTHER AY.,IT CANNOT GIVE A FINDING THA T THE DEDUCTION/INCOME BELONGS TO ANOTHER SPECIFIED YEAR.THE EXCEPTION IS WHERE AN AG HAS BEE N RAISED WITH THE LEAVE OF THE TRIBUNAL.(328 ITR 306) . XII). HONBLE BOMBAY HIGH COURT IN THE MATTER OF PRUTHVI BROKERS AND SHAREHOLDERS P. LTD.,HAS LAID DOWN THAT TRIBUNAL HAS JURISDICTION TO DEAL NO T MERELY WITH AG.S.,WHICH ARE AVAILABLE ON ACCOUNT OF CHANGE OF CIRCUMSTANCES OR LAW,BUT WITH AG.S.WHICH ARE AVAILABLE WHEN THE RETURN WAS FILED.THE WORDS COULD NOT HAVE BEEN RAISED MUST BE CONSTRUED LIBERALLY AND NOT STRICTLY. THERE MAY BE SEVERAL FACTORS JUSTIFYING THE RAISING OF A NEW PLEA IN AN APPEAL AND EACH CASE MUST BE CONSIDERED ON ITS OWN FACTS,THAT IN OTHER WORDS,GRO UNDS WHICH ARE NOT IN EXISTENCE WHEN THE RETURN IS FILED OR WHEN THE ASSESSMENT ORDER IS MADE FALL WITHIN THE SECOND CATEGORY,VIZ.,WHERE THE GROUND BECAME AVAILABLE ON ACCOUNT OF CHANGE OF CIR CUMSTANCES OR LAW.(349 ITR 336). 3.3. WE WOULD LIKE TO SUM UP THE DISCUSSION BY HOLDING T HAT BOTH ON PRINCIPLE AND ON PRECEDENT, THERE IS NO REASON WHY THE TRIBUNAL MUST BE PRECLUD ED FROM HANDLING A POINT,WHETHER OF LAW OR FACT WHICH RELATE TO AN ASSESSMENT,WHICH APPERTAINS TO THE ASSESSEE'S ASSESSMENT MERELY BECAUSE NOBODY ELSE HAD HANDLED IT BEFORE OR BECAUSE IT HAD NOT OCCURRED EITHER TO THE ASSESSEE OR TO THE DEPARTMENT TO RAISE AND URGE THAT POINT AT EARLIER STAGES OF THE PROCEEDINGS.IN THE MATTER UNDER APPEAL IT IS NOT THE CASE OF THE DR THAT NECESSARY FACTS FOR DECIDING THE CONTROVERSY INVOLVED IN THE ADDITIONAL PLEA ARE NOT AVAILABLE ON RECORD.IT IS A LSO NOT A CASE WHERE FACTS ARE TO BE INVESTIGA -TED - RATHER IT IS A PURE LEGAL ISSUE THAT HAS BEEN RAISE D BEFORE US.SO,IN OUR OPINION,MERELY BECAUSE THE PLEA IN THE AG WAS NOT TAKEN BY THE ASSESSEE BEFORE THE FAA,IT COULD NOT BE A GROUND TO REFUSE THE APPLICATION FOR PERMISSION TO RAISE AN AG.SO,AG RAI SED BY THE ASSESSEE,IS ADMITTED. 4. NOW,WE WOULD TAKE UP THE CONTROVERSY WITH REGARD TO REFERENCE MADE BY THE AO FOR VALUATION OF THE PROPERTY OWNED BY THE ASSESSEE AT PUNE.DISTR ICT VALUATION OFFICER (DVO) DETERMINED THE FMV OF THE PLOT AS ON 01.04.1981 AND 12.06.1995 AT RS.45,97,600/- AND RS.12,82,41,000/- RESPECTIVELY, WHEREAS THE AO TOOK THE VALUE OF THE PLOT AT RS.29,51,916/-AS ON THE DATE OF CONVERSION. BEFORE US, AR STATED THAT ASSESSEE HAD RAISED OBJECTION BEFORE THE FAA ABOUT THE REPORT SUBMITTED BY THE DVO, THAT DIFFERENCE IN VAL UATION MADE BY THE REGISTERED VALUER AND THE DVO WAS DUE TO RATE OF LAND, THAT DVO HAD RELIED UP ON THE TWO SALE INSTANCES WHICH WERE NOT COMPARABLE, THAT OBJECTIONS RAISED BY THE ASSESSEE WERE NOT DEALT WITH BY THE FAA, THAT THE DVO HAD NOT CONSIDERED THE SALE INSTANCES RELIED UPON B Y THE ASSESSEE, THAT AGREEMENT DATED 07.09.1995 WITH THE PROJECT MANAGER WAS ALSO NOT CONSIDERED BY THE DVO, THAT THE DVO HAD NOT ATTRIBUTED ANY VALUE FOR RECREATION GROUND. HE RELIED UPON THE CASES OF HIABEN JAYANTILAL SHAH (310 ITR 31) AND DAULAT MOHTA (360 ITR 680) DELIVERED BY THE HON BLE HIGH COURTS OF GUJARAT AND BOMBAY RESPECTIVELY.DR CONTENTED THAT AOS REFERENCE U/S.5 5A(B)(II) COVERED THE SITUATIONS AS IN THE CASE OF THE ASSESSEE WHERE THE VALUE OF THE ASSETS CLAIM ED BY THE ASSESSEE WAS AS PER ITS REGISTERED VALUER AND MORE THAN THE FMV AS ON DATE OF CONVERSI ON, THAT HARMONIOUS CONSTRUCTION OF THE PROVISIONS OF SECTION 55A LED TO SECTION 55A(B) OF THE ACT, THAT THE INFLATED FMV OF THE ASSETS ON 01.04.1981 REDUCED TAXABLE LONG TERM CAPITAL GAIN, THAT INFLATED FMV OF THE ASSET AS ON DATE OF CONVERSION OF CAPITAL ASSET INTO STOCK-IN-TRADE WOU LD REDUCE THE TAXABLE BUSINESS PROFIT OF THE ASSESSEE, THAT AO WAS EMPOWERED TO LOOK INTO AND IN VESTIGATE SUCH ARRANGEMENT.DR RELIED UPON THE DECISION OF CHATURBHUJ VALLBHDAS HUF(130ITD230) .HE FURTHER ARGUED THAT JUDGMENT OF THE 8 ITA NO. 2187/MUM/2006 PRADEEP G. VORA HONBLE JURISDICTIONAL HIGH COURT DELIVERED IN THE CASE OF PUJA PRINTS WAS NOT APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION. 4.1. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.IT WOULD BE USEFUL TO CONSIDER THE HISTORY AND BACKGROUND OF THE SECTION 55A OF THE ACT ALSO.THE PROVISIONS OF THE SECTION WERE INTRODUCED ,W.E.F. 01.01.1973,BY THE T AXATION LAWS(AMENDMENT)ACT,1972.SECTION READS AS UNDER '55A. REFERENCE TO VALUATION OFFICER.- 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 THE CAPITAL ASSET TO A VALUATION OFFIC ER- (A) IN A CASE WHERE THE VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE IS IN ACCORDANCE WITH THE ESTIMATE MADE BY A REGISTERED VALUER,IF THE AO IS OF OPINION THAT T HE 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 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 OTHER RELEVANT CIRCUMSTANCES, IT IS NECESSARY SO TO DO.' BY AN AMENDMENT,W.E.F. 01.07.2012 ,WORDS 'IS LESS T HAN ITS FAIR MARKET VALUE' WERE SUBSTITUTED BY THE WORDS 'IS AT VARIANCE WITH ITS FAIR MARKET VALU E' . FOR BETTER UNDERSTANDING OF THE PURPOSE OF INTRODUC ING IT IN THE ACT,WE ONE HAS TO TAKE NOTE OF THE EXPLANATORY NOTES TO THE SECTION.CIRCULAR NO.96 OF 25.11.1972 IS RELEVANT IN THIS REGARD.WE WOULD LIKE TO REPRODUCE A PORTION OF THE CIRCULAR A ND SAME READS AS UNDER: 'UNDER THE NEW PROVISIONS,AN INCOME TAX OFFICER MA Y REFER THE VALUATION OF ANY CAPITAL ASSET TO A VO IN A CASE WHERE THE ASSESSEE HAS GOT THE ASSETS VALUED BY A REGISTERED VALUER AND THE INCOME TAX OFFICER IS OF THE OPINION THAT THE VALUE AS ES TIMATED BY THE REGISTERED VALUER (I.E.,A PERSON REGISTERED AS A VALUER UNDER SECTION 34AB OF THE WE ALTH-TAX ACT)IS LESS THAN THE FAIR MARKET VALUE OF THE ASSET.OTHER CASES IN WHICH A REFERENCE MAY B E MADE TO THE VO WOULD BE WHERE THE INCOME TAX OFFICER IS OF THE OPINION THAT THE FAIR MARKET VALUE OF THE ASSET EXCEEDS THE VALUE OF THE ASSETS AS CLAIMED BY MORE THAN 15 PERCENT OF THE VALUE CLA IMED OR BY MORE THAN RS. 25,000, WHICHEVER IS LESS OR WHERE, HAVING REGARD TO THE NATURE OF THE A SSET AND THE RELEVANT CIRCUMSTANCES, THE INCOME- TAX OFFICER CONSIDERS IT NECESSARY TO DO SO. IT WIL L BE SEEN THAT IN A CASE WHERE THE ASSESSEE HAS OPTED FOR SUBSTITUTION OF THE COST OF ACQUISITION O F AN ASSET BY ITS FAIR MARKET VALUE AS ON JANUARY 1,1954,THE FAIR MARKET VALUE AS CLAIMED BY HIM MAY BE HIGHER THAN ITS ACTUAL FAIR MARKET VALUE.THE PROVISIONS OF SECTION 55A(A) AND (B)(I) WILL THEREF ORE, NOT APPLY IN SUCH A CASE. IT WILL, HOWEVER, BE OPEN TO THE INCOME-TAX OFFICER TO MAKE A REFERENCE TO THE VO UNDER SECTION 55A(B)(II).' A PERUSAL OF THE MEMORANDUM EXPLAINING THE REASONS BEHIND THE INTRODUCTION OF THE SECTION AND THE EXPLANATORY NOTES FOR INTRODUCTION OF AMENDMENT TO SECTION W.E.F.01.07.2012 PROVES THAT THE SECTION WAS INSERTED IN THE ACT WITH THE DELIBERATE OBJECT OF EMPOWERING THE AO TO FIND OUT THE MARKET VALUE OF CAPITAL ASSETS FOR THE PURPOSE OF C HAPTER IV.IN OUR OPINION,INTENTION OF THE LEGISLATURE IS OBVIOUS THAT THE AO CAN MAKE A REFER ENCE TO THE DVO FOR DETERMINING THE VALUE OF A CAPITAL ASSET.ON SUCH REFERENCE,THE PROVISIONS,IN TER ALIA,OF SUB-SECTIONS (2)TO (6) OF SECTION 16A AND SUB-SECTIONS (3A) AND (4) OF SECTION 23 OF THE WEALTH-TAX ACT, 1957, ARE IPSO FACTO APPLICABLE BY EXTENSION,AS LAID DOWN UNDER SECTION 55A OF THE ACT ITSELF . WE ARE OF THE OPINION THAT FOR THE PURPOSE OF ASCER TAINING THE FMV OF A CAPITAL ASSET,THE STATUTE HAS PROVIDED TWO GROUP OF CASES NAMELY : (I) THE CASE MENTIONED AT CLAUSE (A) ABOVE,WHERE TH E VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE IS IN ACCORDANCE WITH THE ESTIMATE BY THE REGISTERE D VALUER ; AND (II) OTHER CASES MENTIONED AT CLAUSE (B) ABOVE. IN THE CASES MENTIONED AS (I) ABOVE,THE AO ASSUMES JURISDICTION,WHEN THERE IS A VALUATION REPORT IN RESPECT OF THE ASSET AND THE ASSESSEE ADOPTED TH E VALUE OF THE ASSET IN ACCORDANCE WITH SUCH ESTIMATION AND ALSO IF THE AO IS OF THE OPINION TH AT THE VALUE CLAIMED BY THE ASSESSEE IS LESS THAN 9 ITA NO. 2187/MUM/2006 PRADEEP G. VORA THE FMV. IN OTHER CASES MENTIONED AS (II) ABOVE AND WHICH AR E COVERED BY THE PROVISIONS OF CLAUSE (B) OF SECTION 55A,THE AO IS EMPOWERED TO MAKE A REFERENC E TO THE VALUATION OFFICER, WHERE THE AO IS OF THE OPINION THAT THE FAIR MARKET VALUE OF THE AS SET EXCEEDS THE VALUE OF THE ASSETS AS CLAIMED BY MORE THAN 15 % OF THE VALUE CLAIMED OR BY MORE THAN RS. 25,000, WHEREVER IS LESS OR WHERE, HAVING REGARD TO THE NATURE OF THE ASSET AND OTHER RELEVANT CIRCUMSTANCE, THE AO CONSIDERS IT NECESSARY TO DO SO. IN OTHER WORDS,SECTION DEALS WITH CASES WHERE THE B ASIS FOR FMV OF THE ASSET IS THE VALUATION REPORT ITSELF AND THE ASSESSEE FAILS TO ADOPT THE V ALUE OF THE ASSET IN ACCORDANCE WITH THE ESTIMATE OF SUCH VALUATION REPORT AND CASES WHERE THE BASIS FOR SUCH FMV OF THE ASSET IS OTHER THAN THE VALUATION REPORT.THE OTHER SITUATION ENVISAGES THE EXISTENCE OF SUCH CIRCUMSTANCES,THAT MAKE REFERENCE NECESSARY.IN SUCH A CASE,NATURE OF THE AS SETS AND OTHER RELEVANT FACTORS ALSO PLAY A DECISIVE ROLE. 4.1. WE WOULD LIKE TO MENTION THE BROAD PRINCIPLES EMERG ING OUT OF VARIOUS JUDICIAL DECISIONS OF THE HONBLE COURTS WITH REGARD TO REFERENCE TO BE M ADE BY THE AO TO THE DVO U/S.55A OF THE ACT: I). THE POWER OF THE AO IN THE COURSE OF MAKING AN ASSE SSMENT UNDER THE ACT IS WIDE AND, FOR OBTAINING FULL INFORMATION,HE MAY MAKE SUCH ENQUIRY AS HE CONSIDERS NECESSARY.IN THE COURSE OF SUCH ENQUIRY,THE AO MAY TAKE THE ASSISTANCE OF ANY PERSON HAVING EXPERTISE.BUT,THE AO IS NOT ENTITLED TO MAKE A REFERENCE TO THE VO U/S.55A OF T HE ACT.A REFERENCE MADE TO A VO U/S.55A HAS A DEFINITE CONNOTATION AND A DEFINITE STATUTORY EFFEC T AND,THEREFORE,UNLESS THE CONDITIONS PRECEDE-NT FOR MAKING SUCH REFERENCE ARE SATISFIED,IN EXERCISE OF HIS GENERAL POWER OF ENQUIRY,THE AO CANNOT MAKE A REFERENCE UNDER THE SAID PROVISION. II). REFERENCE TO VO U/S. 55A CAN BE MADE ONLY TO ASCERT AIN FVM OF CAPITAL ASSET FOR DETERMIN- ING CAPITAL GAINS.VALUATION OBTAINED IN A CASE NOT INVO LVING CAPITAL GAINS HAS NO STATUTORY EFFECT. III). THE AO LOSES HIS POWER IN THE MATTER OF VALUATION O NLY WHERE THE VO MAKES A REPORT.IF THE VO DOES NOT SUBMIT HIS REPORT,THE POWER OF VALUATIO N HAS TO REVERT TO THE AO.UNLESS THE VO SENDS HIS REPORT,THERE IS NO BAR ON THE AO 'S COMPLETING THE ASSESSMENTS TAKING THE VALUE OF THE ASSET REFERRED FOR VALUATION IN THE BEST POSSIBLE METHOD IN THE LIMITING CIRCUMSTANCES OF THE SITUATION.SO,IF,TILL THE EXPIRY OF LIMITATION,NO RE PORT OF VALUATION COMES FROM THE DVO,THE ORIGINAL POWER OF THE AO TO VALUE THE ASSET HIMSELF REVIVES. IV). REFERENCE UNDER CLAUSE (B)(II) OF SECTION 55A CAN B E MADE,IF THE AO IS OF THE OPINION THAT HAVING REGARD TO THE NATURE OF THE ASSET AND OTHER RELEVANT CIRCUMSTANCES, IT WAS NECESSARY SO TO DO. IN THE CASE OF ANANT MILLS LTD. A REFERENCE UNDER C LAUSE (B)(II) OF SECTION 55A OF THE ACT WAS MADE BY THE AO AND THE ASSET IN QUESTION WAS A PIEC E OF LAND.DECIDING THE WRIT PETITION FILED BY THE ASSESSEE,HONBLE GUJARAT HIGH COURT HELD THAT R EFERENCE COULD HAVE BEEN MADE,IF THE AO WAS OF THE OPINION THAT HAVING REGARD TO THE NATURE OF THE ASSET AND OTHER RELEVANT CIRCUMSTANCES, IT WAS NECESSARY SO TO DO,THAT THERE WAS NOTHING SPECIAL A BOUT THE NATURE OF THE ASSET WHICH WOULD HAVE JUSTIFIED THE AO TO MAKE A REFERENCE TO THE VO.NO O THER RELEVANT CIRCUMSTANCES COULD BE POINTED OUT,THAT NO ATTEMPT WAS MADE TO JUSTIFY THE ACTION OF THE AO UNDER ANY OTHER PROVISION OF SECTION 55A.FINALLY,IT WAS HELD BY THE HONBLE COURT THAT T HE REFERENCE TO THE DVO WAS NOT IN ACCORDANCE WITH LAW AND IT HAD TO BE QUASHED.(209 ITR 568) V). THE PURPOSE OF SECTION 55A OF THE ACT IS NOT TO ENA BLE THE AO TO MAKE A ROVING AND FISHING INQUIRY FOR FINDING OUT MATERIALS FOR REOPENING OR REVISING A COMPLETED ASSESSMENT. PENDENCY OF AN ASSESSMENT INCLUDING REASSESSMENT IS A SINE QUA NON FOR GIVING JURISDICTION TO THE AO TO MAKE A REFERENCE UNDER THE SAID SECTION OF THE ACT.IT HAS NO RELEVANCE AND CANNOT BE APPLIED AFTER THE ASSESSMENT IS COMPLETED AND BEFORE THE REASSESSMENT HAS COMMENCED,THAT IS,TO CONSIDER THE QUESTION WHETHER THE COMPLETED ASSESSMENT IS BASED ON UNDERVALUATION. VI). A VALUATION REPORT IS ONLY AN OPINION OF A VALUER.T HE SAME DOES NOT AMOUNT TO INFORMATION 10 ITA NO. 2187/MUM/2006 PRADEEP G. VORA WITHIN THE MEANING OF SECTION 147 NOR CAN IT FORM A GROUND FOR REASON TO BELIEVE THAT THE ASSESSEE HAD FAILED TO DISCLOSE HIS INCOME FULLY AND TRULY W ITHIN THE MEANING OF SECTION 147 OF THE ACT. THE REASON TO BELIEVE OF AN AO CANNOT BE SUBSTITUTED BY AN OPINION OF A VALUER.IN OTHER WORDS, THE VALUATION REPORT COULD, AT BEST, BE CONSIDERED AS A MERE REASON, BUT COULD NOT BE A REASON TO BE BELIEVED BY THE ASSESSING AUTHORITY VII). THE SCOPE OF SECTION 55A OF THE ACT IS CONFINED TO ASCERTAINING THE FAIR MARKET VALUE OF A CAPITAL ASSET WHICH IS THE SUBJECT MATTER OF TRANSF ER.THOUGH THE EXPRESSION UNDER THIS CHAPTER IS REFERRED TO IN SECTION 55A,THE SECTION HAS APPLICAT ION ONLY TO TRANSACTIONS INVOLVING CAPITAL GAINS. VIII). FAA IS NOT REQUIRED STATUTORILY TO GIVE NOTICE UNDE R SECTION 246 OR SECTION 250 OR 251 OF THE ACT TO THE VALUATION OFFICER. SUB-SECTION (3A) OF S ECTION 23 AND THE PROVISO TO SUB-SECTION (5) OF SECTION 24 OF THE WEALTH-TAX ACT, 1957, DEALING WIT H APPEALS BEFORE THE FAA AND THE TRIBUNAL, SPECIFICALLY PROVIDE FOR OPPORTUNITY OF HEARING TO BE GRANTED TO THE VALUATION OFFICER.THERE ARE NO CORRESPONDING PROVISIONS IN SECTIONS 250 AND 254 OF THE ACT.MUTATIS MUTANDIS APPLICATION OF CERTAIN PROVISIONS OF SECTIONS 16A, 23 AND 24 OF TH E WEALTH-TAX ACT VIS-A-VIS SECTION 55A COULD NOT CHANGE THE POSITION. IX). THE POWER OF THE AO UNDER SECTIONS 131(1) AND 133(6 ) IS DISTINCT FROM AND DOES NOT INCLUDE THE POWER TO REFER A MATTER THE UNDER U/S.55A OF T HE ACT.A REPORT OF THE VO UNDER SECTION 55A MAY BE CONSIDERED BY THE AO,AS A PIECE OF EVIDENCE IF IT IS RELEVANT.HOWEVER, THE POWER OF INQUIRY GRANTED TO AN AO UNDER SECTIONS 133(6) AND 142(2) DOES NOT INCLUDE THE POWER TO REFER THE MATTER TO THE VO FOR AN ENQUIRY BY THE LATTER.WE AR E OF THE OPINION THAT IF THE POWER TO REFER ANY DISPUTE TO A VO WAS ALREADY AVAILABLE IN SECTIONS 1 31(1),133(6) AND 142(2) OF THE ACT,THERE WAS NO NEED TO SPECIFICALLY EMPOWER THE AO TO DO SO IN CERTAIN CIRCUMSTANCES U/S.55A.BUT,ORDER ISSUING COMMISSION TO VO UNDER SECTION 131(1)(D) OF THE ACT WITH REGARD TO COST OF CONSTRUCTION IS PERMISSIBLE AND IN THAT SITUATION IT WOULD NOT B E A REFERENCE U/S.55A OF THE ACT. X). FOR INVOKING THE PROVISIONS OF SECTION 55A OF THE A CT FORMATION OF OPINION OF THE AO THAT THE VALUE CLAIMED BY THE ASSESSEE IS LESS THAN ITS FMV IS A SINE QUA NON.RECORDING REASONS AFTER THE ORDER OF REFERENCE,FOR VALUATION OF THE REGISTERED VALUER,IS NOT A SUBSTITUTE FOR PRE DECISIONAL FORMATION OF OPINION.(330 ITR506). XI). A REFERENCE CAN BE MADE TO VO,UNDER SECTION 55A,CLA USE (B) SUB-CLAUSE (II),ONLY IF AO RECORDS EXISTENCE OF SUCH OTHER RELEVANT CIRCUMSTA NCES ON THE BASIS OF WHICH HE FORMS SUCH OPINION.IN OTHER WORDS,A REFERENCE CAN BE MADE IF C ERTAIN PRE-CONDITIONS EXIT. IN THE MATTER OF HOTEL JOSHI,HONBLE RAJASTHAN HIGH COURT HAS HELD THAT FOR INVOKING SUB-CLAUSE (II)OF CLAUSE (B) OF SECTION 55A OF THE ACT,AO IS R EQUIRED TO FORM AN OPINION ON THE BASIS OF THE MATERIAL ON RECORD THAT REFERENCE TO THE DVO FOR AS CERTAINING THE FMV OF AN ASSET,IS NECESSARY HAVING REGARD TO THE NATURE OF THE ASSET AND OTHER RELEVANT CIRCUMSTANCES(242 ITR 478). HONBLE GUJARAT HIGH COURT IN THE CASE OF HIABEN JA YANTILAL SHAH(310ITR31)HAS HELD THAT AS PER THE CLAUSE(B) OF SECTION 55A OF THE ACT,THE AO HAS TO RECORD AN OPINION THAT (I) THE FMV OF THE ASSET EXCEEDS THE VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE BY MORE THAN SUCH PERCENTAGE OR BY MORE THAN SUCH AN AMOUNT AS MAY BE PRESCRIBED ;OR ( II) HAVING REGARD TO THE NATURE OF THE ASSET AND OTHER RELEVANT CIRCUMSTANCES,IT IS NECESSARY TO MAKE SUCH A REFERENCE.CLAUSE (B) OF SECTION 55A OF THE ACT CAN BE INVOKED ONLY WHEN THE VALUE OF THE ASSET CLAIMED BY THE ASSESSEE IS NOT SUPPORTED BY THE VALUATION REPORT OF A REGISTERED V ALUER. XII). THE ASSESSEE CAN BE SAID TO BE EFFECTIVELY PREJUDIC ED ONLY WHEN ACTION IS TAKEN BY THE INCOME- TAX AUTHORITIES ON THE BASIS OF THE REPORT SUBMITTE D BY THE DVO.EVEN OTHERWISE THERE IS NO PROVISION IN THE ACT WHICH DEALS WITH THE SITUATION AS TO WHAT WOULD HAPPEN TO A REFERENCE MADE TO THE DVO U/S.55A WHICH IS PENDING COMPLETION AT T HE TIME OF PASSING THE ASSESSMENT ORDER.OBVIOUSLY,THE ASSESSMENT ORDER CANNOT BE DEFE RRED IN VIEW OF THE LIMITATION PRESCRIBED FOR PASSING THE SAME.THE REPORT OF THE DVO AS AND WHEN RECEIVED BY THE AO,MAY BE ACTED UPON BY HIM AND IF HE DOES SO,THE VALIDITY OF THAT ACTION C AN BE QUESTIONED BY THE ASSESSEE.SECTION 55A DOES NOT CREATE ANY BAR ON THE DVO TO VALUE THE PRO PERTY ON THE BASIS OF A VALID REFERENCE MADE 11 ITA NO. 2187/MUM/2006 PRADEEP G. VORA BY THE AO . 4.2. HERE,WE WOULD ALSO LIKE TO DISCUSS THE RECENT DECIS ION OF THE HONBLE JURISDICTIONAL HIGH COURT, DELIVERED IN THE CASE OF PUJA PRINTS(360ITR6 97).IN THAT CASE,ASSESSEE HAD CLAIMED VALUE OF THE PROPERTY AS ON 01.04.1981 AT RS.35.99 LAKHS ON THE BASIS OF THE REPORT OF A GOVERNMENT VALUER.THE AO REFERRED THE ISSUE OF VALUATION TO TH E DVO,WHO VALUED THE PROPERTY AT RS. 6.68 LAKHS AS ON 01.04.1981.CONSEQUENTLY,THE AO ENHANCED THE CAPITAL GAINS OF THE ASSESSEE. IN THE APPELLATE PROCEEDINGS,FAA DECIDED THE ISSUE AGAINST THE ASSESSEE.ORDER OF THE FAA WAS CHALLENGED BEFORE THE TRIBUNAL.DECIDING THE ISSUE O F FMV,TRIBUNAL HELD THAT IN VIEW OF SECTION 55A IT WAS NOT PERMISSIBLE FOR THE AO TO MAKE A REF ERENCE TO THE DVO FOR THE PURPOSE OF VALUATION,AS THE VALUE OF THE PROPERTY DECLARED BY THE ASSESSEE WAS NOT LESS THAN ITS FMV. DEPARTMENT AGITATED THE ISSUE BEFORE THE HONBLE HI GH COURT.UPHOLDING THE ORDER OF THE TRIBUNAL AND FOLLOWING THE JUDGMENT OF DAULAL MOHTA (HUF)(36 0ITR680) HONBLE COURT HELD AS UNDER: THERE WAS NO DISPUTE THAT THE VALUE ADOPTED BY THE 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 AO REF ERRED THE ISSUE OF VALUATION TO THE DEPARTMENT - AL VO ONLY BECAUSE IN HIS VIEW THE VALUATION OF THE PROPERTY AS ON 1981 AS MADE BY THE ASSESSEE WAS HIGHER THAN THE FAIR MARKET VALUE. THEREFORE, T HE INVOCATION OF SECTION 55A(A) WAS NOT JUSTIFIED. (II) THAT THE AMENDMENT TO SECTION 55A(A) OF THE AC T IN 2012 BY WHICH THE WORDS 'IS LESS THEN ITS FAIR MARKET VALUE' WERE SUBSTITUTED BY THE WORDS 'I S AT VARIANCE WITH ITS FAIR MARKET VALUE' WAS MADE EFFECTIVE ONLY FROM JULY 1,2012.PARLIAMENT HAS NOT GIVEN RETROSPECTIVE EFFECT TO THE AMENDMENT.THEREFORE, THE LAW TO BE APPLIED IN THE A SSESSEE'S CASE WAS SECTION 55A(A) AS EXISTING DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2 006-07.AT THE RELEVANT TIME,VERY CLEARLY REFERENCE COULD BE MADE TO THE DEPARTMENTAL VO ONLY IF THE VALUE DECLARED BY THE ASSESSEE WAS IN THE OPINION OF AO LESS THAN ITS FAIR MARKET VALUE. (III)THAT SECTION 55A(B) STATES THAT IT WOULD APPLY IN ANY OTHER CASE, I.E., A CASE NOT COVERED BY SECTION 55A(A). THERE WAS NO DISPUTE THAT THE ISSUE WAS COVERED BY SECTION 55 A(A).THEREFORE, RECOURSE COULD NOT BE HAD TO THE RESIDUARY CLAUSE P ROVIDED IN SECTION 55 A(B)(II).THEREFORE, THE CENTRAL BOARD OF DIRECT TAXES CIRCULAR DATED NOVEMB ER 25 1972 (SEE [1973] 91 ITR (ST.) 1), COULD HAVE NO APPLICATION IN THE FACE OF THE CLEAR POSITION IN LAW. HENCE, THE REFERENCE TO THE DEPARTMENTAL VO BY THE AO ,WAS NOT SUSTAINABLE IN V IEW OF SECTION 55A(A)(II). 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 O F THE CASE AND IN LAW, THE INCOME-TAX APPELLATE TRIBUNAL WAS RIGHT IN HOLDING THAT THE REFERENCE MA DE BY THE AO TO THE VO PER SE IS BAD IN LAW ? FURTHER, WHETHER THE INCOME-TAX APPELLATE TRIBUNAL WAS JUSTIFIED IN OBSERVING THAT THE REFERENCE TO THE DVO UNDER SECTION 55A OF THE ACT IS TO BE MADE WHEN THE VALUE OF THE PROPERTY DISCLOSED BY THE ASSESSEE IS LESS THAN THE FAIR VALUE AND NOT VI CE VERSA THEREBY IGNORING THE PROVISIONS OF SECTION 55A(B)(II) OF THE ACT, AND PARAGRAPHS 26 TO 28 OF CIRCULAR NO.96, DATED NOVEMBER 25, 1972, OF THE CENTRAL BOARD OF DIRECT TAXES (SEE [1973] 91 IT R (ST.) 1) ? (B) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE INCOME-TAX APPELLATE TRIBUNAL WAS RIGHT IN DIRECTING THE AO TO ACCEPT TH E VALUATION GIVEN BY THE RESPONDENT AS THE FAIR MARKET VALUE ON THE BASIS OF THE REGISTERED VALUER' S REPORT AND WORKOUT CAPITAL GAINS ? (C)WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE INCOME-TAX APPELLATE TRIBUNAL 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 T HE FIRM AND TO THAT LIMITED EXTENT RESTORING THE ISSUE TO THE FILE OF THE AO FOR DETER-MINING THE D ATE OF ACQUISITION BY THE FIRM FOR THE PURPOSE OF INDEXATION, PARTICULARLY WHEN THIS ISSUE WAS NOT RA ISED EITHER BEFORE THE AO OR THE COMMISSIONER OF INCOME-TAX (APPEALS) AND, HENCE, DID NOT ARISE F ROM THE ORDER OF THE COMMISSIONER OF INCOME- TAX (APPEALS) ? WE HAVE CONSIDERED THE RIVAL SUBMISSIONS.WE FIND TH AT THE IMPUGNED ORDER DATED 18.02.2011, ALLOWING THE RESPONDENT-ASSESSEE'S APPEAL HOLDING T HAT NO REFERENCE TO THE DEPARTMENTAL VO CAN 12 ITA NO. 2187/MUM/2006 PRADEEP G. VORA BE MADE UNDER SECTION 55A OF THE ACT ONLY FOLLOWS T HE DECISION OF THIS COURT IN THE MATTER OF DAULAL MOHTA (HUF) (SUPRA).THE REVENUE HAS NOT BEEN ABLE T O POINT OUT HOW THE AFORESAID DECISION IS INAPPLICABLE TO THE PRESENT FACTS NOR HAS THE REVEN UE POINTED OUT THAT THE DECISION IN DAULAL MOHTA (HUF) (SUPRA) HAS NOT BEEN ACCEPTED BY THE RE VENUE. ON THE AFORESAID GROUND ALONE, THIS APPEAL NEED NOT BE ENTERTAINED. HOWEVER, AS THE SUB MISSIONS WERE MADE ON THE MERITS, WE HAVE INDEPENDENTLY EXAMINED THE SAME. 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 VO ONLY WHEN THE VALUE ADOPTED BY THE ASSESSEE WAS LESS THAN THE FAIR MARKET VALUE. IN THE PRESENT CASE, IT IS A N UNDISPUTED POSITION THAT THE VALUE ADOPTED BY THE RESPONDENT-ASSESSEE OF THE PROPERTY AT RS. 35.99 LA KHS WAS MUCH MORE THAN THE FAIR MARKET VALUE OF RS. 6.68 LAKHS EVEN AS DETERMINED BY THE DEPARTM ENTAL VALUATION OFFICER. IN FACT, THE AO REFERRED THE ISSUE OF VALUATION TO THE DEPARTMENTAL VO ONLY BECAUSE IN HIS VIEW THE VALUATION OF THE PROPERTY AS ON 1981 AS MADE BY THE RESPONDENT-A SSESSEE WAS HIGHER THAN THE FAIR MARKET VALUE. IN THE AFORESAID CIRCUMSTANCES, THE INVOCATI ON OF SECTION 55A(A) OF THE ACT IS NOT JUSTIFIED. THE CONTENTION OF THE REVENUE THAT IN VIEW OF THE A MENDMENT TO SECTION 55A(A) OF THE ACT IN 2012 BY WHICH THE WORDS 'IS LESS THAN ITS FAIR MARKET VA LUE' IS SUBSTITUTED BY THE WORDS 'IS AT VARIANCE WITH ITS FAIR MARKET VALUE' IS CLARIFACTORY AND SHO ULD BE GIVEN RETROSPECTIVE EFFECT.THIS SUBMISSION IS IN FACE OF THE FACT THAT THE 2012 AMENDMENT WAS MADE EFFECTIVE ONLY FROM JULY 1, 2012. PARLIAMENT HAS NOT GIVEN RETROSPECTIVE EFFECT TO TH E AMENDMENT. THEREFORE, THE LAW TO BE APPLIED IN THE PRESENT CASE IS SECTION 55A(A) OF THE ACT AS EX ISTING DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2006-07. AT THE RELEVANT TIME, VERY CLEARLY REFERENCE COULD BE MADE TO DEPARTMENTAL VO ONLY IF THE VALUE DECLARED BY THE A SSESSEE IS IN THE OPINION OF AO LESS THAN ITS FAIR MARKET VALUE. THE CONTENTION OF THE REVENUE THAT THE REFERENCE TO THE DEPARTMENTAL VO BY THE AO IS SUSTAINABLE IN VIEW OF SECTION 55A(A)(II) OF THE ACT IS NOT ACC EPTABLE. 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 U NDISPUTABLE 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 CENTRAL BOARD OF DIRECT TAXES CIRCULAR DATED NOVEMBER 25, 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 CENTRAL OF DIRECT TAXES IS NOT BINDING UPON THE ASSESSEE AND IT IS OPEN TO AN ASSESSEE TO CONTEND TO THE CONTRARY. THE CONTENTION OF THE REVENUE THAT THE AO IS ENTITL ED TO REFER THE ISSUE OF VALUATION OF THE PROPERTY TO THE DEPARTMENTAL VO IN EXERCISE OF ITS POWER UND ER 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 R EFER ANY DISPUTE WITH REGARD TO THE VALUATION OF THE PROPERTY WAS ALREADY AVAILABLE UNDER SECTION S 131(1), 136(6) AND 142(2) OF THE ACT,THERE WAS NO NEED TO SPECIFICALLY EMPOWER THE AO TO DO S O IN CIRCUMSTANCES SPECIFIED UNDER SECTION 55A OF THE ACT. IT FURTHER HELD THAT WHEN A SPECIFI C PROVISION UNDER WHICH THE REFERENCE CAN BE MADE TO THE DEPARTMENTAL VO IS AVAILABLE, THERE IS NO OCCASION FOR THE AO TO INVOKE THE GENERAL POWERS OF ENQUIRY. IN VIEW OF THE ABOVE AND PARTICULARLY IN VIEW OF CL EAR PROVISIONS OF LAW AS EXISTING DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2006-07, WE ARE OF THE VIEW THAT QUESTIONS (A) AND (B) DO NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW. 4.3 .WE FIND THAT ALL THE ARGUMENTS ADVANCED BY THE AR HAVE BEEN DEALT WITH BY THE HONBLE HIGH COURT DECISIVELY.THE RECORD AVAILABLE WITH US,DOES NOT INDICATE AS TO WHAT WAS THE OPINION FORMED BY THE AO BEFORE MAKING REFERENCE TO THE DVO.THEREF ORE, IT IS APPARENT THAT HE HAD, AT NO POINT OF TIME,FORMED AN OPINION THAT THE FMV;IN SUBSTITUT ION OF THE COST OF ACQUISITION,AS CLAIMED BY THE ASSESSEE;WAS REQUIRED TO BE DISTURBED BECAUSE P RESCRIBED PARAMETERS WERE NOT FULFILLED.IN OTHER WORDS,IT IS NOT CLEAR AS TO WHETHER THE REFER ENCE WAS MADE UNDER CLAUSE 55A(A) OR 55A(B)(II) OF THE ACT AND IF IT WAS MADE UNDER SECTION 55A(B)( II) THEN WHAT WERE THE RELEVANT CIRCUMSTANCES 13 ITA NO. 2187/MUM/2006 PRADEEP G. VORA FOR MAKING SUCH REFERENCE.RECORDING OF REASONS FOR INVOKING A PARTICULAR SECTION OF THE ACT AND JUSTIFICATION FOR INVOKING THE SPECIFIC CLAUSE ARE NOT AVAILABLE AND NOR WERE THEY BROUGHT TO OUR NOTICE.AS THE VALUE SHOWN BY THE ASSESSEE WAS NOT L ESS THAN THE FVM,SO,IN OUR OPINION,THERE WAS NO JUSTIFICATION FOR MAKING ANY REFERENCE TO THE DV O,BY THE AO IN THE YEAR UNDER CONSIDERATION.AMENDMENT TO THE SECTION 55A OF THE A CT IS EFFECTIVE FROM 01.07.2012. SO, REVERSING THE ORDER OF THE FAA,WE DECIDE THE ADDITI ONAL GROUND IN FAVOUR OF THE ASSESSEE. AS WE HAVE HELD THAT THE ADDITIONAL GROUND IS TO BE DECIDED IN FAVOUR OF THE ASSESSEE,SO,WE HOLD THAT GROUND NO.1 IS ACADEMIC IN NATURE.SAME IS ALLO WED FOR STATISTICAL PUROSE. AS FAR AS DECISION OF CHATURBHJ VALLABHDAS HUF,RELI ED UPON BY THE DR,IS CONCERNED WE ARE OF THE OPINION THAT SAME STANDS REVERSED BY THE JUDGMENTS OF HONBLE JURISDICTIONAL HIGH COURT DELIVERED IN THE CASES OF DAULAT MOHTA(HUF) AND PUJ A PRINTS(SUPRA). 5. GROUND NO.2 IS ABOUT ALLOCATION OF PRELIMINARY COST (RS.36,87,000/-)AND COMMON AMENITIES (RS.76,96,000/-) BETWEEN BLDG.A AND THE BALANCE PRO JECT.DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT ASSESSEE HAD INCLUDED PROJECT MANAGEMENT FEES(RS.46.20 LAKHS),PRELIMINARY COST (RS.36.87LAKHS) AND COMMON AMENITIES(RS.76.96 LAKHS ) IN THE COST OF CONSTRUCTION OF THE BUILD - INGA.AO WAS OF THE OPINION THAT EXPENDITURE INCURRE D BY THE ASSESSEE UNDER THE ABOVE -MENTIONED THREE HEADS WERE IN THE NATURE OF GENERAL EXPENSES FOR THE ENTIRE PROJECT AND COULD NOT BE EXCLUSIVELY CONSIDERED AS THE EXPENSE INCURRED ON T HE FIRST BUILDING. HE HELD THAT THE PAYMENT OF ARCHITECT FEES, LEGAL AND PROFESSIONAL FEES AND PAY MENT OF LOCAL AGENCY, AMOUNTING TO RS.36.87 LAKHS WAS FOR CONSTRUCTION OF ENTIRE PROJECT,THAT T HE EXTERNAL LIGHTINGS/CLUB HOUSE WAS FOR THE ENTIRE PROJECT,THAT THE SAME SHOULD HAVE BEEN APPORTIONED IN RATIO OF SALABLE AREA OF BUILDING A TO THE TOTAL FLAT AREA FOR DETERMINING THE COST OF CONSTRU CTION OF BUILDING A. IN VIEW OF THE ABOVE, THE COMBINED EXPENSES OF RS.1.60 CRORES(RS.46.20 LAKHS + 36.87 LAKHS + 76. 96 LAKHS) WAS APPORTIONED BY THE AO IN THE RATIO OF SALABLE AREA OF BUILDING TO THE TOTAL SALABLE AREA. 5.1. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PREFERRE D AN APPEAL BEFORE THE FAA. IT WAS STATED BEFORE HIM THAT ASSESSEE HAD FILED THE DETAILS OF A BOVE EXPENSES, THAT IT WAS CLARIFIED THAT PROJECT MANAGEMENT FEES OF RS.46.20 LAKHS HAD BEEN PAID EXC LUSIVELY FOR BUILDING A ONLY,THAT APPORTIONING THE SAME OVER THE ENTIRE PROJECT WAS N OT CORRECT,THAT IT HAD FILED A COPY OF RECEIPT CONFIRMING THAT THE FEES PAID WAS ONLY FOR BUILDING A,THAT THE EXPENDITURE INCURRED SHOULD BE ENTIRELY ALLOWED AGAINST BUILDING A,THAT THE EXPEND ITURE ON COMMON FACILITIES REPRESENTED EXPENDITURE INCURRED ON VARIOUS FACILITIES AND WAS INCURRED FOR PHASE-1 OF THE PROJECT ONLY,THAT THE ENTIRE EXPENDITURE OF RS.36.87 LAKHS AND 76.96 LAKH S SHOULD BE ALLOWED AGAINST BUILDING A. ALTERNATIVELY,WITHOUT PREJUDICE TO THE ABOVE,ASSESS EE CONTENTED THAT ENTIRE EXPENDITURE OF RS.1.60 CRORES SHOULD APPORTIONED IN THE RATIO OF 25,671 SQ . FT TO1,15,000SQ.FT.IT WAS FURTHER CONTENDED THAT PROJECT MANAGEMENT FEE WAS DECIDED TO BE GIVEN BY THE ASSESSEE TO THE PROJECT MANAGER AT A CERTAIN PERCENTAGE OF SALES PRICE, THAT TWO AGREEME NTS WERE ENTERED INTO WITH THE PROJECT MANAGER IN THIS REGARD,THAT MANAGEMENT FEES WAS PAID SEPARA TELY FOR OTHER BUILDINGS,THAT THE ENTIRE MANAGEMENT FEES OF RS. 46.20 LAKHS ALLOTTED TO BUIL DING A.DISMISSING THE APPEAL FILED BY THE ASSESSEE,FAA HELD THAT THE BREAKUP OF COST OF CONST RUCTION AND LAND SHOWED THAT INTEREST WAS PAID TO THE PROJECT MANAGER,THAT INTEREST PAYMENT RELATE D TO ENTIRE PROJECT. 5.2. BEFORE US,AR SUBMITTED THAT AS PER AGREEMENT WITH B UYERS OF THE FLAT THE ASSESSEE WAS UNDER AN OBLIGATION TO PROVIDE THE FACILITIES LIKE SWIMMI NG POOL, HEALTH CLUB ETC. WHICH WERE FOR THE COMMON USE OF ALL THE FLAT OWNERS OF THE ENTIRE PRO JECT AND EXPENSES HAVE THEREFORE BEEN RIGHTLY ALLOCATED TO PHASE 1 VIZ.BLDG.A OF THE PROJECT.HE R ELIED UPON PAGE 157(PARA12) OF THE PAPER BOOK AND PAGE 206 (PARA 2)OF SUPPLEMENTARY PB.DR SUPPORT ED THE ORDER OF THE FAA. 5.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT WHILE ADJUDICATING THE ISSUE FAA HAS NOT PASSED A SPEAKIN G ORDER.HE HAS NOT CONSIDERED THE ALTERNATIVE ARGUMENT RAISED BY THE ASSESSEE,HE HAS ENDORSED THE ORDER OF THE AO WITHOUT ASSIGNING ANY REASON.IN THESE CIRCUMSTANCES,WE ARE OF THE OPINION THAT MATTER SHOULD BE RESTORED BACK TO THE FILE 14 ITA NO. 2187/MUM/2006 PRADEEP G. VORA OF THE FAA FOR FRESH ADJUDICATION.HE IS DIRECTED TO PASS A REASONED ORDER AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE.G ROUND NO.2 IS ALLOWED IN FAVOUR OF THE ASSESSEE,IN PART. 6. NEXT GROUND DEALS WITH ALLOCATION OF INTEREST COST OF RS.69,69,203/-OVER BLDG.A AND BALANCE PROJECT.DURING THE ASSESSMENT PROCEEDINGS,AO APPORT IONED THE INTEREST EXPENDITURE ALSO.WITH REGARD TO THE APPORTIONMENT OF INTEREST OF RS. 69,6 9,203/- ON THE BASIS OF ENTIRE PROJECT.ASSESSEE ARGUED BEFORE THE FAA THAT INTEREST WAS PERIOD COST ,THAT IT HAD TO BE APPORTIONED AGAINST BUILDING A ONLY AS INTEREST WAS PAID FOR THAT BUILDING ONLY. ALTERNATIVELY,IT WAS ARGUED THAT INTEREST INCURRED TILL 31.03.2002 AMOUNTING TO RS.46.08 LAKHS,THAT SA ME WAS INCURRED ENTIRELY FOR BUILDING A,THAT THERE WAS HARDLY ANY EXPENDITURE INCURRED ON OTHER BUILDING,THAT THE INTEREST FOR THE YEAR UNDER APPEAL OF RS.23.60 LAKHS SHOULD BE APPORTIONED BETW EEN BUILDING A AND BUILDING B EQUALLY,THAT THE COST INCURRED FOR THE BUILDING A AND THE BUILDI NG B WAS ALMOST SAME,I.E.RS. 2.03 CRORES AND RS. 2.04 CRORES FOR THE BUILDING A AND B RESPECTIVE LY.FAA DISMISSED THE APPEAL FILED BY THE ASSESSEE AND CONFIRMED THE ORDER OF THE AO. 6.1. BEFORE US,AR ARGUED THAT THE ASSESSEE FOLLOWED MERC ANTILE SYSTEM OF ACCOUNTING,THAT INTEREST MUST BE ALLOWED ON ACCRUAL BASIS,THAT ALLOCATION OF INTEREST WAS NOT JUSTIFIED BECAUSE,THAT BUILDING A WAS COMPLETED IN OCTOBER 2000,THAT FLATS WERE SOL D, AND FUNDS FROM FLAT SALES WERE AVAILABLE FOR THE BALANCE PROJECT,THAT INTEREST COST WAS INCURRED MAINLY FOR BLDG. A.ALTERNATIVELY, IT WAS ARGUED THAT INTEREST OF RS. 57,88,873/-SHOULD BE ALLOWED.H E REFERRED TO PAGE NO.1 OF THE ASSESSMENT ORDER AND PARA NO.8.2(PG.18)OF FAAS ORDER.HE RELIED UPON THE MATTER OF LOKHAND -WALA CONSTRUCTION (260 ITR 579)OF HONBLE BOMBAY HIGH COURT.DR SUPPOR TED THE ORDER OF THE FAA. 6.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE FAA HAD DEALT WITH THE ISSUE OF INTEREST APPORTIONMENT IN A SINGLE LINE AND IT IS THE PART OF THE SAME PARAGRAPH THAT DEALS WITH APPORTIONMENT OF OTHER EX PENSES.WHILE DECIDING GROUND NO.2 WE HAVE RESTORED BACK THE MATTER OF APPORTIONMENT OF EXPENS ES TO THE FILE OF THE FAA.FOLLOWING THE SAME,ISSUE OF APPORTIONING THE INTEREST EXPENDITURE IS ALSO REMITTED BACK TO THE FILE OF THE FAA FOR PASSING A SPEAKING ORDER AFTER HEARING THE ASSESSEE AND AFTER CONSIDERING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT RELIED UPON BY THE IT.GRO UND NO.3 IS ALLOWED PARTLY IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. 2*3 #)* 4 5 , 0 1*3 6 , * 78. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MAY,2014 . 1 , ./$ : ;# 30 EBZ EBZEBZ EBZ , 201 4 / , 0 < SD/- SD/- ( ' ' ' ' / VIVEK VARMA) ( / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, ;# /DATE: 30 TH MAY,2014. SK 1 1 1 1 , ,, , '*' '*' '*' '*' ='$* ='$* ='$* ='$* / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / %& 2. RESPONDENT / '(%& 3. THE CONCERNED CIT (A) / > ? , 4. THE CONCERNED CIT / > ? 5. DR I BENCH, ITAT, MUMBAI / '@0 '*# VKBZ VKBZ VKBZ VKBZ , . . . 6. GUARD FILE/ 0 2 15 ITA NO. 2187/MUM/2006 PRADEEP G. VORA ('* ('* ('* ('* '* '*'* '* //TRUE COPY// 1# / BY ORDER, A / 7 DY./ASST. REGISTRAR , /ITAT, MUMBAI