M/s Royal Calcutta Truff Club, Kolkata V. D.C.I.T Cir - 55,kolkata., Kolkata

ITA 231/KOL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1517 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 15-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 04-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KALYAN NATH
• Assessee Lawyers: J P KHAITAN SR; INSTRUCTED SHRI S JHAJHARIA
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Capital asset; Business expenditure; Principle of natural justice; Retrospective amendment; Question of law; Cost of acquisition; Fair market value; Valuation report; Revenue expenditure
• Section: 50C; 133(6); 201(1); 131; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM] I.T.A NO. 231/KOL/201 3 ASSESSMENT YEAR : 2008-0 9 M/S ROYAL CALCUTTA TURF CLUB -VS.- D.C.I. T., CIRCLE-55, KOLKATA KOLKATA [PAN : AAAAR 0769 A] (APPELLANT) (RESPONDENT) I.T.A NO. 204/KOL/2013 ASSESSMENT YEAR : 2008-0 9 D.C.I.T., CIRCLE-55, -VS- M/S. ROYAL CALCUTTA T URF CLUB KOLKATA KOLKATA [PAN : AAAAR 0769 A] (APPELLANT) (RESPONDENT) FOR THE ASSESSEE : SHRI J.P.KHAITAN,SR. ADVOCATE& INSTRUCTED BY SHRI S.JHAJHARIA, AR FOR THE DEPARTMENT : SHRI KALYAN NATH, ADDL. CIT, SR.DR DATE OF HEARING : 29.08.2017. DATE OF PRONOUNCEMENT : 01.09.2017. ORDER PER N.V.VASUDEVAN, JM I.T.A.NO.231/KOL/2013 IS AN APPEAL BY THE ASSESSEE WHILE ITA NO.204/KOL/2013 IS APPEAL BY THE REVENUE. BOTH THE APPEALS ARE DIRECTED AGAINST THE ORDER DATED 28.01.2011 OF CIT(A)-XXXVI, KOLKATA RE LATING TO A.Y.2008-09. ITA NO.231/KOL/2013 (ASSESSEES APPEAL) : 2. GROUNDS NOS.1 TO 3 RAISED BY THE ASSESSEE RE AD AS FOLLOWS :- 2 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 2 1. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCE S OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN CONFIRMING THE ARBI TRARY DISALLOWANCE OF THE PROJECT DEVELOPMENT EXPENSE OF RS.L,39,07,8801- (TO TAL EXPENSE CLAIMED RS.L,73,84,853/- ON A/C OF REPAIR & MAINTENANCE OF THE CLUB LESS 1/5TH PORTION OF IT AMORTISED I.E RS.34,76,973/- DEBITED IN P&L A/C AND ALLOWED IN THE ASSESSMENT) HOLDING THE ENTIRE EXPENSE AS CAPITAL LOSS NOT ALLO WABLE AS BUSINESS EXPENDITURE ON THE ALLEGED GROUND THAT THE PROJECT UNDERTAKEN FOR DEVELOPMENT AND CREATION OF FIXED ASSETS WAS ABANDONED AS NON-VIABLE. THE DECISIONS ARRIVED AT BY THE A.O & LD. CIT(A) WI THOUT PROPERLY CONSIDERING AND APPRECIATING THE FACTS WERE WHOLLY UNWARRANTED, UNCALLED FOR AND BAD IN LAW. 2. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN ALSO HOLDING THE AM ORTISED 1/5TH PORTION OF THE SAID PROJECT DEVELOPMENT EXPENSE OF RS.34,76,973/- ( 1/5TH OF RS.L,73,84,853/- ) AS CAPITAL LOSS AND REVERSING, ON THE SAME ALLEGED GRO UND AS IN GR. NO. 1 ABOVE, THE A.O'S DECISION IN ALLOWING DEDUCTION OF THE SAID SU M OF RS.34, 76,973/-, EVEN THOUGH THIS WAS NOT AT ALL AN ISSUE IN THE GROUNDS OF APPEAL FILED BY THE APPELLANT A.O.P. THE ACTION OF THE LD. CIT(A), IN REVERSING THE A.O' S DECISION TO ALLOW THE SAID DEDUCTION, WAS WHOLLY UNWARRANTED, UNCALLED FOR, WI THOUT JURISDICTION AND BAD IN LAW. 3. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN REVERSING THE A.O'S DECISION TO ALLOW THE AFORESAID DEDUCTION OF THE 1/5TH AMORTISED PORTION OF EXPENSE OF RS.34,76,973/- AND THEREBY REDUCING THE BUSINESS LOSS VIS-A-VIS ENHANCING THE ASSESSED TOTAL INCOME BY A SUM OF RS.34,76,973/- WITHOUT ISSUING A PRIOR NOTICE U/ S 251(2) OF THE ACT AND WITHOUT ALLOWING A REASONABLE OPPORTUNITY OF HEARING TO THE APPELLANT STATUTORILY REQUIRED UNDER THE ACT BEFORE MAKING SUCH ENHANCEMENT OF IN COME. THE ACTION OF THE LD. CIT(A) WAS WHOLLY UNWARRANTED , UNCALLED FOR, WITHOUT JURISDICTION AND BAD IN LAW. 3. THE ASSESSEE IS AN AOP FOUNDED AS A CLUB TO P ROMOTE THE ACTIVITY OF HORSE RACING AND TO PROVIDE CLUB FACILITIES TO ITS MEMBERS. IN T HE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y.2008-09, THE AO NOTICED THAT A SUM OF RS.1 ,73,84,853/- WAS CLAIMED AS DEDUCTION BY THE ASSESSEE WHILE COMPUTING INCOME UN DER THE HEAD PROFITS AND GAINS 3 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 3 OF BUSINESS OR PROFESSION. THE AFORESAID SUM WAS INCURRED BY THE ASSESSEE TOWARDS RENOVATION OF CLUB PREMISES AT 11, RUSSEL STREET, K OLKATA. THE AO FOUND THAT IN THE BOOKS OF ACCOUNT, THE ASSESSEE HAD CLAIMED ONLY 1/5 TH OF THE EXPENSES NAMELY A SUM OF RS.34,76,973/-. THE EXPLANATION OF THE ASSESSEE WIT H REGARD TO THE AFORESAID EXPENSES WAS THAT IN THE CLUB PROPERTY AT 11, RUSSEL STREET, KOLKATA CERTAIN DEVELOPMENT EXPENSES WERE INCURRED FOR A PROJECT CALLED CITY CLUB PROJEC T. THE CITY CLUB PROJECT HAD TO BE ABANDONED AS THERE WAS AN AGREEMENT DATED 24.11.200 7 WHEREBY THE CLUB CUM HOSPITALITY FACILITY ON THE SAME PREMISES AT 11, RU SSEL STREET, KOLKATA WAS TO BE CONSTRUCTED BY EDENIC PROP BUILD PVT. LTD., SUBSIDI ARY OF EMAAR MGF LAND LTD. THE DEVELOPMENT CARRIED OUT BY INCURRING EXPENSES FOR D EVELOPING CITY CLUB PROJECT HAD TO BE DEMOLISHED. THE EXPENSES INCURRED IN DEVELOPING THE CITY CLUB PROJECT AT THE PREMISES AT 11, RUSSEL STREET, KOLKATA WERE THEREFO RE CLAIMED AS EXPENDITURE INCURRED ON AN ABANDONED PROJECT AND WAS REVENUE EXPENDITURE AND HAD TO BE ALLOWED IN FULL SINCE THE SAME WAS INCURRED IN THE PREVIOUS YEAR RE LEVANT TO AY 2008-09. IN THE BOOKS OF ACCOUNTS THE ASSESSEE AMORTIZED THE EXPENDITURE INCURRED ON DEVELOPING CITY CLUB PROJECT OVER A PERIOD OF 5 YEARS. THE ASSESSEE SU BMITTED THAT WHEN IT COMES TO DETERMINATION OF INCOME, THE ENTRIES IN BOOKS OF AC COUNTS ARE IRRELEVANT AND THE ENTIRE PROJECT DEVELOPMENT EXPENSES WAS CLAIMED AS A LOSS INCIDENTAL TO THE BUSINESS OF THE ASSESSEE OR REVENUE EXPENDITURE WHICH SHOULD BE ALL OWED IN FULL AS DEDUCTION. 4. THE AO, HOWEVER, WAS OF THE VIEW THAT SINCE THE ASSESSEE HAS CLAIMED THE EXPENDITURE BY SPREADING IT OVER FOR THE PERIOD OF FIVE YEARS IN THE BOOKS OF ACCOUNTS AND THEREFORE THE ASSESSEE IS ENTITLED TO CLAIM ONL Y A SUM OF RS.34,76,973/- IN LIEU OF THE CLAIM FOR DEDUCTION OF A SUM OF RS.,1,73,84,853/- A S MADE IN THE RETURN OF INCOME. THE DIFFERENCE BETWEEN THE SUM OF RS.1,73,84,853 AND RS .34,76,973/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 4 5. ON APPEAL BY THE ASSESSEE, THE CIT(A) HELD TH AT THE ENTIRE LOSS IN QUESTION WAS CAPITAL LOSS AND CANNOT BE ALLOWED AS A DEDUCTION W HILE COMPUTING THE INCOME OF THE ASSESSEE FROM BUSINESS. THE CIT(A) HAS POWER TO ENH ANCE THE INCOME ASSESSED BY THE AO U/S.251 OF THE INCOME TAX ACT, 1961 (ACT). HE I S HOWEVER REQUIRED TO GIVE NOTICE OF HIS INTENTION TO ENHANCE THE ASSESSMENT PRIOR TO EXERCISING HIS POWERS OF ENHANCEMENT U/S 251(2) OF THE ACT. IN EXERCISE OF SUCH POWER OF ENHANCEMENT HE DISALLOWED THE CLAIM OF THE ASSESSEE OF THE ENTIRE SUM OF RS.1,73,84,853/- AS AGAINST THE ACTION OF THE AO IN DISALLOWING ONLY THE DIFFERENCE BETWEEN THE SUM OF RS.1,73,84,853 AND RS.34,76,973/-. THE FOLLOWING WERE THE RELEVA NT OBSERVATIONS OF CIT(A): 3.1 GROUND NO.2 : APPELLANT HAS CLAIMED RS.L,73,8 4,853/- AS PROJECT DEVELOPMENT EXPENSES IN THE COMPUTATION OF INCOME AND 1/5TH AMO RTIZED VALUE AT RS.34,76,973/- IN P/L ACCOUNT. AS THE PROJECT BECAME NON-VIABLE AN D HAS TO BE ABANDONED, APPELLANT WRITTEN OFF IN THE ACCOUNTS AND CLAIMED A S REVENUE EXPENDITURE. THE A.O. ALLOWED ONLY RS.34,76,973/- I.E. 1/5TH OF SUCH EXPE NSES WHILE APPELLANT CLAIMED FULL VALUE OF EXPENSES OF RS.1,73,84,853/- TO BE AL LOWED. HOWEVER, APPELLANT IS NOT ENTITLED FOR AMORTIZED EXPENSES OF RS.34,76,973/- A ND FULL EXPENSES OF RS.1, 73,84,853/- AS DEDUCTION AS THIS IS A CAPITAL LOSS TO THE APPELLANT AND IS NOT ALLOWABLE BUSINESS EXPENDITURE. APPELLANT WAS DEVEL OPING A PROJECT AND CREATING FIXED ASSET FOR WHICH EXPENSES WERE BEING INCURRED WHEN PROJECT WAS ABANDONED IN BETWEEN, EXPENSES WRITTEN OFF ARE CAPITAL LOSS. HEN CE, APPELLANT CLAIM TO ALLOW RS.1,73,84,853/- AS REVENUE EXPENSES IS DISMISSED A ND' ALSO 1/5 TH AMORTIZED EXPENSES OF RS.34,76,973/- AS ALLOWED BY AO IS ALSO DISMISSED. 6. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE HAS RAISED GROUNDS NO. 1 TO 3 BEFORE THE TRIBUNAL. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEAR NED COUNSEL FOR THE ASSESSEE REITERATED THE STAND TAKEN BY THE ASSESSEE IN THE G ROUNDS OF APPEAL RAISED BEFORE THE TRIBUNAL, WHICH WE HAVE SET OUT IN THE EARLIER PART OF THIS ORDER. HE ALSO PLACED RELIANCE ON CERTAIN DECISIONS RENDERED BY THE HONBLE CALCUT TA HIGH COURT WHEREIN IT WAS HELD THAT EXPENDITURE INCURRED ON AN ABANDONED PROJECT A RE ALLOWABLE AS DEDUCTION IN COMPUTING INCOME FROM BUSINESS. THE LEARNED DR REL IED ON THE ORDER OF THE CIT(A) 5 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 5 AND SUBMITTED THAT THE DETAILS OF THE EXPENSES ARE NOT EVIDENT FROM THE ORDER OF ASSESSMENT AND IT IS ALSO NOT CLEAR AS TO WHETHER B Y INCURRING THE DEVELOPMENT EXPENSES IN QUESTION ANY CAPITAL ASSET WAS CREATED AND AS TO WHETHER THE VALUE OF THE SAID CAPITAL ASSET WERE CAPITALIZED. THE LEARNED COUNSEL FOR TH E ASSESSEE POINTED OUT THAT THE ONLY BASIS OF DISALLOWANCE BY THE AO WAS THAT THE EXPEND ITURE WAS TO BE ALLOWED AT 1/5 TH OVER A PERIOD OF 5 YEARS AS PER THE ENTRIES IN THE BOOKS OF ACCOUNTS. THE CIT(A) DISALLOWED THE ENTIRE EXPENDITURE WAS A CAPITAL LOSS. AT THIS STAGE IT IS NOT OPEN TO THE LEARNED DR TO ARGUE THAT THE DETAILS OF THE LOSS ARE NOT GIVEN AND WHETHER ANY CAPITAL ASSET WAS CREATED BY INCURRING OF THE AFORESAID EXPENSES. 8. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RI VAL SUBMISSIONS. AS RIGHTLY SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE ISSUE BEFORE THE TRIBUNAL IS (A) WHETHER THE EXPENDITURE IN QUESTION IS A REVENUE EXPENDITURE OR A LOSS INCIDENTAL TO THE BUSINESS AS CLAIMED BY THE ASSESSEE OR CAPITAL LOSS AS HELD BY THE CIT(A) AND (B) WHETHER THE ENTIRE EXPENDITURE HAS TO BE ALLOWED AS A DEDUCTION OR ON THE BASIS OF ENTRIES IN THE BOOKS OF ACCOUNTS ONLY 1/5 TH OF THE EXPENDITURE HAS TO BE ALLOWED AS DEDUCTION. THE FACT THAT THE EXPENDITURE IN QUESTION AROSE OUT OF AN ABANDONED P ROJECT HAS NOT BEEN DISPUTED BY THE AO AND THEREFORE THE ABOVE TWO QUESTIONS ALONE ARE REQUIRED TO BE ADJUDICATED. 9. IT IS SEEN FROM A READING OF THE ORDER OF THE CIT(A) THAT IN COMING TO THE CONCLUSION THAT THE LOSS IS A CAPITAL LOSS, HE HAS NOT GIVEN A NY REASON WHATSOEVER. AS THE FACTS OF THE CASE GO TO SHOW THAT CONSTRUCTION OF THE CITY C LUB PROJECT WAS INCIDENTAL TO THE OBJECTS OF THE ASSESSEE CLUB. THE ACTIVITY OF THE CONSTRUCTION OF THE CITY CLUB PROJECT WAS AN INCOME EARNING ACTIVITY OF THE ASSESSEE. IT IS B ECAUSE OF THE SUBSEQUENT AGREEMENT FOR DEVELOPMENT OF CLUB CUM HOSPITALITY SERVICES INSTEA D OF CITY CLUB PROJECT, THE DEVELOPMENT CARRIED OUT HAD TO BE ABANDONED AND REM OVED. THE SUBSEQUENT ACTIVITY OF DEVELOPING CLUB CUM HOSPITALITY FACILITY WAS ALSO I NCIDENTAL AND ANCILLARY TO THE OBJECTS OF THE CLUB AND WAS REVENUE EARNING ACTIVITY. IN SU CH CIRCUMSTANCES WE ARE OF THE VIEW 6 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 6 THAT DEDUCTION CLAIMED OUGHT NOT HAVE BEEN CONSIDER ED AS CAPITAL LOSS AS WAS DONE BY CIT(A). ON THE ISSUE WHETHER THE ENTIRE EXPENDITUR E CAN BE CLAIMED AS DEDUCTION OR ONLY 1/5 TH OF THE EXPENDITURE CAN BE CLAIMED BASED ON THE TRE ATMENT OF THE EXPENDITURE IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THE LAW IS W ELL SETTLED THAT ENTRIES IN THE BOOKS OF ACCOUNTS CLAIMING ONLY 1/5 TH OF THE EXPENDITURE, CANNOT STAND IN THE WAY OF THE ASSESSEE CLAIMING LEGITIMATE BUSINESS LOSS OR REVENUE EXPEND ITURE AS A DEDUCTION IN FULL WHILE COMPUTING INCOME FROM BUSINESS. ON THE QUESTION WHE THER THE LOSS ON ACCOUNT OF AN ABANDONED PROJECT IT IS A CAPITAL LOSS OR REVENUE L OSS, THE LAW IS WELL SETTLED BY A SERIES OF DECISIONS OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF BINANI CEMENT VS CIT 277 CTR 49 (CAL), AFTER FOLLOWING ITS DECISION IN T HE CASE OF CIT VS GRAPHITE INDIA LTD. 221 ITR 420 (CAL) HELD THAT AN EXPENDITURE MADE FO R ACQUISITION OF NEW FACILITY SUBSEQUENTLY ABANDONED AT WORK-IN- PROGRESS STAGE W AS ALLOWABLE, AS EXPENSES INCURRED WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE CALCUTTA HIGH COURT IN THE CAS E OF CIT VS BRITANNIA INDUSTRIES LTD. 376 ITR 299 AND THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS ANJANI KUMAR CO.LTD. 259 ITR 114(RAJ). KEEPING IN MIND THE FACTS OF THE PRESENT CASE AND THE RATIO LAID DOWN IN THE AFORESAID DECISIONS, WE ARE OF THE VIEW THAT THE ENTIRE EXPENDITURE OF RS.1,73,84, 853/- EXPENDITURE ON ABANDONED PROJECT DEVELOPMENT SHOULD BE ALLOWED AS DEDUCTION. WE HOLD AND DIRECT ACCORDINGLY AND ALLOW GROUNDS NO. 1 TO 2 RAISED BY THE ASSESSEE. AS FAR AS GROUND NO. 3 WHICH CHALLENGES T HE ACTION OF THE CIT(A) IN ENHANCING THE ASSESSMENT WITHOUT NOTICE TO THE ASSESSEE AS IS CONTEMPLATED U/S.251(2) OF THE ACT IS CONCERNED, WE ARE OF THE VIEW THAT IN THE LIGHT OF THE CONCLUSION DRAWN IN GROUNDS NO.1 AND 2 NO ADJUDICATION IS REQUIRED ON GROUND NO.3, T HOUGH WE AGREE WITH THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE THAT THERE WAS NO REASONABLE OPPORTUNITY OF HEARING AFFORDED TO THE ASSESSEE BEFORE ENHANCEMENT AS CONT EMPLATED U/S 251(2) OF THE INCOME TAX ACT, 1961 (ACT). 7 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 7 10. GROUNDS NO.4 TO 8 AND ADDITIONAL GROUNDS OF APPEAL RAISED BY THE ASSESSEE READ AS FOLLOWS :- 4. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCE S OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN CONFIRMING THE ARBI TRARY ASSESSMENT OF THE LONG TERM CAPITAL GAIN ( IN SHORT L.T.C.G ) ON TRANSFER OF A LANDED PROPERTY AT KOLKATA AT AN ABNORMAL FIGURE OF RS.I0,48,23,234/- PURELY O N AN HYPOTHETICAL ESTIMATE WITHOUT ANY BASIS BY REJECTING / IGNORING THE REPOR T OF THE REGISTERED & APPROVED VALUER APPOINTED BY THE APPELLANT (IN SHORT A.V.R) AND THE APPELLANT'S COMPUTATION OF L.T.C.G AT RS. 50,36,693/- LEGALLY & VALIDLY MA DE ON THE BASIS OF A.V.R. 5. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN CONFIRMING THE ACTI ON OF THE A.O IN MAKING, WITHOUT ANY REASON, A REFERENCE TO THE DEPARTMENTAL VALUATION OFFICER ( IN SHORT D.V.O ) U/S 55A OF THE ACT FOR DETERMINING 1 ASCERT AINING THE FAIR MARKET VALUE OF THE PROPERTY AS ON 01.04.1981 COMPLETELY IGNORING O R OTHERWISE OVERLOOKING THE FACT (A) THAT THE VALUE OF THE PROPERTY AS ON 01.04 .1981 DETERMINED BY THE APPELLANT'S VALUER WAS MORE THAN THE VALUE AS ON 01 .04.1981 ADOPTED BY THE A.O ON HIS OWN HYPOTHETICAL ESTIMATE AND (B) FURTHER TH AT SECTIONS 50C AND 55A OF THE ACT, FOR MAKING SUCH REFERENCE BY THE A.O, ARE NOT APPLICABLE IN THIS CASE. THE ACTIONS OF BOTH THE A.O & LD. CIT(A) WERE WHOLL Y UNWARRANTED, UNCALLED FOR, WITHOUT JURISDICTION AND BAD IN LAW . 6. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN CONFIRMING THE A.O' S ACTION IN MAKING A BASELESS ESTIMATION OF THE COST OF ACQUISITION OF THE LANDED PROPERTY AS ON 01.04.1981 AT RS. 20,46,600/- IN ABSENCE OF THE DEPARTMENTAL VALUATIO N REPORT ( I.E D.V.R) AND ASSESSING THE L.T.C.G AT RS.10,48,23,234/- ON ESTIM ATE COMPLETELY REJECTING 1 IGNORING, WITHOUT ASSIGNING ANY REASON, THE APPELLA NT'S COMPUTATION OF L.T.C.G LEGALLY & VALIDLY BASED ON THE A.V.R. THE ACTIONS OF BOTH THE A.O AND THE LD. CIT(A) WERE WHOLLY UNWARRANTED, UNCALLED FOR, WITHOUT JURISDICTION AND BAD IN LAW. 7.FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES A ND WITHOUT PREJUDICE TO GROUNDS NO. 5, & 6, THE LD. CIT(A) ERRED IN RELYING ON THE REPORT OF THE DEPARTMENTAL VALUATION OFFICER (DVO) WHEREIN THE FMV OF THE IMPU GNED PROPERTY WAS DETERMINED AT RS.20,46,600/- BASED ON ALLEGED SALE INSTANCES AND SUCH ACTION OF THE LD. CIT(A) IS WITHOUT APPRECIATING THE FACTS TH AT SUCH SALE INSTANCES WERE NOT AT ALL COMPARABLE AND HENCE THE RELIANCE SO PLACED BY THE LD. CIT(A) ON THE REPORT OF THE DVO IS WITHOUT APPRECIATING THE FACTS AND WHOLL Y ILLEGAL AND AS SUCH THE ACTION 8 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 8 OF THE LD. CIT(A) IN CONFIRMING THE ACTION OF THE A O IS COMPLETELY BAD, ILLEGAL AND LIABLE TO BE QUASHED/CANCELLED. 8.FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES A ND WITHOUT PREJUDICE TO GROUNDS NO. 5, & 6, THE LD. CIT(A) DID NOT ADJUDICATE ON TH E GROUND RAISED BY THE APPELLANT THAT THE REFERENCE FOR THE VALUATION OF PROPERTY AS ON 1.4.1981 TO THE DVO IS ILLEGAL AND THE REFERENCE SO MADE BY THE AO AND RELIANCE SO PLACED BY THE LD. CIT(A) ON SUCH REPORT OF THE DVO IS COMPLETELY ILLEGAL & VOID ABINITIO AND HENCE THE ACTION OF THE LD. CIT(A) IN SUCH RESPECT IN RELYING ON SUC H REPORT IS COMPLETELY BAD & ILLEGAL AND IT MAY KINDLY BE HELD ACCORDINGLY. ADDITIONAL GROUND : 'FOR THEIR FURTHER AND IN ANY EVENT AND WITHOUT PR EJUDICE TO GROUND NOS. 4 TO 8, THE PURPORTED VALUATION WAS MADE BY THE OVA IN GROS S VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE AND IS A NULLIFY IN AS MUCH AS THE NOTICE DATED MARCH 29, 2011 INVITING OBJECTIONS TO THE PROPOSED VALUATION AND G RANTING HEARING AT 11.30 A. M. ON APRIL 8, 2011 WAS RECEIVED BY THE APPELLANT IN T HE AFTERNOON ON APRIL 8, 2011 AND THE OVA FINALIZED HIS ESTIMATE ON APRIL 13, 201 1 (RECEIVED BY THE APPELLANT ON APRIL 20, 2011) WITHOUT HEARING THE APPELLANT OR CO NSIDERING THE OBJECTIONS FILED ON APRIL 19, 2011. 11. THE AFORESAID GROUNDS OF APPEAL ARE IN RELAT ION TO COMPUTATION OF LONG TERM CAPITAL GAIN EARNED BY THE ASSESSEE DURING THE PREV IOUS YEAR. THE ASSESSEE SOLD A PROPERTY AT CALCUTTA FOR A SUM OF RS.11,61,00,000. IT IS NOT IN DISPUTE THAT THERE WAS A LONG TERM CAPITAL GAIN (LTCG) ARISING ON SUCH SALE. U/S.48 OF THE ACT, CAPITAL GAIN IS COMPUTED BY REDUCING FROM THE FULL VALUE OF CONSIDE RATION RECEIVED ON TRANSFER, THE COST OF ACQUISITION OF THE PROPERTY AND THE COST OF IMPR OVEMENT THERETO AND EXPENSES INCURRED IN CONNECTION WITH THE TRANSFER. AS FAR A S DETERMINATION OF COST OF ACQUISITION IS CONCERNED, SEC.55(2) OF THE ACT LAYS DOWN WHAT C OST OF ACQUISITION IS FOR THE PURPOSE OF SEC.48 OF THE ACT. SEC.55(2)(B)(I) OF THE ACT P ROVIDES THAT WHERE CAPITAL ASSET BECAME PROPERTY OF THE ASSESSEE BEFORE 1.4.1981, TH E ASSESSEE HAS THE OPTION TO ADOPT THE FAIR MARKET VALUE OF THE ASSET AS ON 1.4.1981. THE DISPUTE RAISED IN GR.NO.4 TO 8 AND THE ADDITIONAL GROUND OF APPEAL FILED BY THE ASSESS EE BEFORE THE TRIBUNAL, IS WITH REGARD TO DETERMINATION OF THE FAIR MARKET VALUE AS ON 1.4 .1981. IT IS NOT IN DISPUTE THAT THE PROPERTY IN QUESTION WAS ACQUIRED PRIOR TO 1.4.1981 AND THE ASSESSEE WAS ENTITLED TO 9 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 9 ADOPT THE FMV AS ON 1.4.1981 WHILE COMPUTING LTCG. THE ASSESSEE FILED REPORT OF A REGISTERED VALUER, WHO IN HIS REPORT ADOPTED THE FM V AS ON 1.4.1981 OF THE PROPERTY AT RS.2,01,56,680 AND AFTER INDEXATION THE COST OF ACQ UISITION WAS DETERMINED AT RS.11,10,63,307. AFTER DETECTING THE COST OF ACQUI SITION AS DETERMINED ABOVE AND AFTER REDUCING THE SAME FROM THE FULL VALUE OF CONSIDERAT ION RECEIVED ON TRANSFER OF A SUM OF RS.11,61,00,000, THE ASSESSEE DECLARED LTCG OF RS.5 0,36,693. 12. U/S.55A OF THE ACT, THE AO HAS POWER TO A MA KE A REFERENCE TO THE VALUATION OFFICER REGARDING VALUATION OF A CAPITAL ASSET FOR THE PURPOSE OF ASCERTAINING FAIR MARKET VALUE OF A CAPITAL ASSET. SECTION 55A OF THE ACT R EADS THUS: '55A : WITH A VIEW OF ASCERTAINING THE FAIR MARKET VALUE OF A CAPITAL ASSET FOR THE PURPOSES OF THIS CHAPTER, THE ASSESSING OFFICER MAY REFER THE VALUATION OF CAPITAL ASSET TO A VALUATION OFFICER- (A) IN A CASE WHERE THE VALUE OF THE ASSET AS CLAIM ED BY THE ASSESESE IS IN ACCORDANCE WITH THE ESTIMATE MADE BY A REGISTERED V ALUER, IF THE ASSESSING OFFICER IS OF THE OPINION THAT THE VALUE SO CLAIMED IS LESS THAN ITS FAIR MARKET VALUE, (B) IN ANY OTHER CASE, IF THE ASSESSING OFFICER IS OF THE OPINION- (I) THAT THE FAIR MARKET VALUE OF THE ASSET EXCEEDS THE VALUE OF THE ASSET AS CLAIMED BY THE ASSESESE 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. 13. THE AO MADE A REFERENCE TO THE DVO U/S.55A O F THE ACT FOR DETERMINATION OF FMV AS ON 1.4.1981. THE TIME LIMIT FOR PASSING AN ORDER OF ASSESSMENT FOR THE RELEVANT AY WAS GETTING BARRED. THE DVO DID NOT FURNISH HIS REPORT TO THE AO. IN THE CIRCUMSTANCES, THE AO COMPUTED LTCG AS FOLLOWS, IGN ORING THE FMV AS ON 1.4.1981 GIVEN BY THE ASSESSEE IN THE REGISTERED VALUERS RE PORT: 10 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 10 6.2. AT THE TIME OF SCRUTINY ASSESSMENT, INCOMPLIA NCE TO ABOVE REQUISITION, THE A.R OF THE A HAS FURNISHED ONE VALUATION REPORT DONE BY SHRI NIRMAL KANTI CHAKRABORTY, CHARTERED ENGINEER, ARCHITECT, DATED 1 2/03/2008. 6.3. ON THOROUGH SCRUTINY OF SAID VALUATION REPORT IT IS FOUND THAT LAND RATE IS DETERMINED AT RS.4,41,000/- PER COTTAH AND THE TOTA L VALUATION OF 45.48 COTTAHS STANDS AS RS.2,00,50,680/- [RS.4,41,000 X 45.48]. W ITH THIS VALUATION AFTER ADDING RS.1,00,000/- FOR BOUNDARY WALL & GATE, TOTAL VALUE OF LAND ASSESSED IS RS.2,01,56,680/-. 6.4. NOT CONVINCED BY THE ABOVE VALUATION REPORT, T HE MATTER IS REFERRED TO VALUATION CELL, INCOME TAX DEPARTMENT IN DUE COURSE . THOUGH THE NECESSARY ACTION HAS ALREADY BEEN TAKEN BY THE VALUATION CELL , YET NO COMPLIANCE/VALUATION REPORT IS RECEIVED TILL DATE. 6.5. SINCE THE CASE IS TIME BARRED ON 31 ST DECEMBER, 2010, THERE IS NO OTHER ALTERNATIVE BUT TO COMPLETE THE CASE AFTER ESTIMATI NG THE VALUE OF LAND SALE ON THE BASIS OF SURROUNDING INFORMATION GATHERED FROM DEPA RTMENT AND OUTSIDE OF THE DEPARTMENT. WHEN THE VALUATION REPORT REACHES THIS OFFICE NECESSARY AMENDMENT WILL BE SUITABLY DONE AS PER LAW TO REVALUE/REASSES S THE CAPITAL GAIN. 6.6. IN VIEW OF ABOVE DISCUSSION AFTER CONSIDERIN G ALL THIS, FOR THE SAKE OF INTEREST OF REVENUE AND ATTEMPTING TO PLUG REVENUE LOSS, LAN D VALUE IS TAKEN AS RS.45,000/- PER COTTAH AS ON 01/01/1981, FOR WHICH THE TOTAL LA ND VALUE COMES TO RS.20,46,600/- AS ON 01/01/1981. AFTER INDEXING COST OF THE LAND S TANDS AS RS.1,12,76,766/- [20,46,600 X 551/100]. AS SUCH INDEX COST OF LAND V ALUE IS TAKEN AS RS.1,12,76,766/- IN LIEU OF RS.11,10,63,307/-. 14. BEFORE CIT(A) THE REPORT OF THE DVO WAS MAD E AVAILABLE AND IN HIS REPORT, HE ADOPTED THE FMV AS ON 1.4.1981 AT RS.20,46,600. TH E GRIEVANCE OF THE ASSESSEE WAS THAT THE DVO DID NOT GIVE PROPER OPPORTUNITY TO THE ASSESSEE BEFORE GIVING HIS REPORT AND THE GRIEVANCE IN THIS REGARD IS PROJECTED IN TH E ADDITIONAL GROUNDS OF APPEAL RAISED BEFORE THE TRIBUNAL. 15. FIRST AND FOREMOST OBJECTION OF THE ASSESSEE S BEFORE LEARNED CIT(A) WAS THAT REFERENCE TO THE DVO UNDER S. 55A WAS INVALID. UNDE R CL. (A) OF S. 55A OF THE ACT, THE AO IS ENTITLED TO MAKE THE REFERENCE TO THE VALUATI ON OFFICER IN A CASE WHERE THE VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE IN ACCORDAN CE WITH THE ESTIMATE MADE BY THE REGISTERED VALUER, IF THE AO IS OF THE OPINION THAT THE VALUE SO CLAIMED IS LESS THAN THE FAIR MARKET VALUE. IN ANY OTHER CASE, AS PROVIDED U NDER CL. (B) OF S. 55A OF THE ACT, THE AO HAS TO RECORD AN OPINION THAT (I) THE FAIR MARKE T VALUE OF THE ASSET EXCEEDS THE VALUE 11 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 11 OF THE ASSET AS CLAIMED BY THE ASSESSEE BY MORE THA N 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 MA KE SUCH A REFERENCE. THE ASSESSEE HAD CLAIMED THE VALUATION AS ON 1ST APRIL, 1981 AT A SU M OF RS. RS.2,01,56,680 BEFORE INDEXATION BASED ON THE REPORT OF A REGISTERED VALU ER. THEREFORE, THE AO WAS REQUIRED TO FORM AN OPINION THAT THE VALUE SO CLAIMED IS LESS T HAN THE FAIR MARKET VALUE. THE REFERENCE BY THE AO WAS ON THE GROUND THE FMV AS ON 1.4.1981 IS MORE THAN THE FMV AS ON 1.4.1981. THEREFORE CL. (A) OF S. 55A OF THE ACT CANNOT BE MADE APPLICABLE. CLAUSE (B) OF S. 55A OF THE ACT CAN BE INVOKED ONLY IN ANY OTHER CASE, NAMELY, WHEN THE VALUE OF THE ASSET CLAIMED BY THE ASSESSEE IS NOT SUPPORT ED BY AN ESTIMATE MADE BY A REGISTERED VALUER. THE ASSESSEES THUS SUBMITTED THAT ON THE FA CTS OF THE PRESENT CASE, CL. (B) OF S. 55A OF THE ACT ALSO CANNOT BE INVOKED. THEREFORE, T HERE SHOULD BE NO QUESTION OF HAVING RECOURSE TO SUB-CL. (II) OF CL. (B) OF S. 55A OF TH E ACT. THE APPELLANT HAS RELIED ON HIABEN JAYANTILAL SHAH VS. ITO 310 ITR 31 (GUJ), CIT VS. DAULAL MOHTA (HUF), IT APPEAL NO. 1031 OF 2008 (BOMBAY HIGH COURT) DT. 22ND SEPT., 20 08. IT WAS FURTHER CONTENDED THAT A REFERENCE CAN BE MADE UNDER S. 55A(B)(II) BY THE AO IF HE IS OF THE OPINION HAVING REGARD TO THE NATURE OF ASSET AND OTHER RELEVANT CI RCUMSTANCES THAT IT IS NECESSARY TO DO SO. IT IS OBLIGATORY ON THE PART OF THE AO TO RECOR D SUCH OTHER RELEVANT CIRCUMSTANCES ON THE BASIS OF WHICH HE FORMS SUCH OPINION IN ORDER T O REFER THE MATTER TO THE VALUATION CELL UNDER SAID CLAUSE. IT WAS CONTENDED THAT ONLY IN CASES OTHER THAN THE CASE WHERE THERE IS NO VALUERS REPORT GIVEN BY THE ASSESSEE, THE AO IS EMPOWERED TO MAKE REFERENCE UNDER S. 55A(B) AND NOT OTHERWISE. 16. THE CIT(A) HOWEVER DID NOT AGREE WITH THE VI EW OF THE ASSESSEE AND HE ADOPTED THE VALUE AS GIVEN BY THE DVO AND COMPUTED LTCG. T HE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF THE CIT(A): THE SUBMISSION OF THE A/R AND ASSESSMENT ORDER WER E DULY CONSIDERED. THE VALUE OF PROPERTY WAS DETERMINED BY THE APPELLANT THROUGH REGD. VALUER AS ON 01.04.1981 AT RS.2.01 CRORES AND BY THE A.O. THROUG H DVO AT RS.20,60,244/-. IN 12 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 12 THE ASSESSMENT ORDER VALUE OF THIS PROPERTY AS' 1. 4.81 WAS DETERMINED AT RS.20,46,600/- BASED ON SALE INSTANCES. AS A.O. WHI LE FINALIZING ASSESSMENT COULD NOT GET THE REPORT FROM DVO, HE BASED ON SALES INST ANCES COMPLETED ASSESSMENT BY TAKING VALUE ON 1.4.81 AT RS.20,46,600/-. REPORT OF DVO WAS RECEIVED ON 13-04- 2011. COPY OF THE DVO REPORT WAS GIVEN TO THE AIR D URING APPELLATE PROCEEDING. IT IS PERTINENT TO MENTION HERE THAT A SHARP DIFFER ENCE WAS FOUND IN THE VALUATION DONE BY REGISTERED VALUER AT RS.2.01 CRORES AND VAL UATION DONE BY DVO AT RS.20,60,244/-. FOR THIS APPELLANT HAS NO REPLY. PR ACTICALLY THIS DIFFERENCE CAN'T BE SO WIDE. IT IS NOT IMPORTANT WHETHER THE AO. CAN R EFER TO DVO OR NOT, BUT IT IS IMPORTANT TO DETERMINE CORRECT VALUE ON 01.04.81. A PPELLANT HAS DECLARED HIGH VALUE OF PROPERTY AT 1.4.81 TO CLAIM HIGH COST AFTE R INDEXATION AND PAY LESSER TAX. THIS DEVICE IS ADOPTED BASICALLY TO EVADE LONG TERM CAPITAL GAIN TAX. HENCE, FOR THE PURPOSE OF CAPITAL GAIN VALUE OF PR OPERTY IS TAKEN AT RS.20,60,244/- AS DETERMINED BY DVO AS ON 1.4.81 IN STEAD OF RS.2, 05,56,680/- AS TAKEN BY APPELLANT BASED ON SALES INSTANCES. THIS GROUND OF APPEAL IS THEREFORE DISMISSED. 17. AGGRIEVED BY THE ORDER OF THE CIT(A), THE AS SESSEE HAS RAISED GR.NO.4 TO 8 AND ADDITIONAL GROUND BEFORE THE TRIBUNAL. 18. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITT ED BEFORE US THAT WHAT IS APPLICABLE IN THE PRESENT CASE IS CLAUSE (A) OF SEC.55A(2) OF TH E ACT. HENCE TO MAKE A REFERENCE UNDER SECTION 55A OF THE ACT, ASSESSING OFFICER HAS TO FORM AN OPINION THAT THE FMV AS ON 1.4.1981 CLAIMED IN THE REGISTERED VALUERS REPO RT IS LESS THAN THE FAIR MARKET VALUE. ON THE OTHER HAND, THE OPINION OF THE ASSESSING OFF ICER HERE IS THAT THE VALUE SHOWN WAS VERY HIGH OR IN OTHER WORDS, MORE THAN THE FAIR MAR KET VALUE. THIS BEING THE CASE, A REFERENCE UNDER SECTION 55A COULD NOT HAVE BEEN MAD E. HE PLACED RELIANCE ON THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT -VS.- UMEDBHAI INTERNATIONAL (P) LTD. (2011) 338 ITR 506, IN A SIM ILAR SITUATION, WHERE THERE WAS A SUBSTITUTION OF THE COST AS ON 1.4.1981, BY VALUE B ASED BY DVO ON A REFERENCE UNDER SECTION 55A OF THE ACT, HELD THAT SUCH A REFERENCE COULD NOT BE MADE UNLESS AND UNTIL THE ASSESSING OFFICER FORMED AN OPINION THAT VALUE SHOW N BY THE ASSESSEE WAS LESS THAN FAIR MARKET VALUE. THE HONBLE CALCUTTA HIGH COURT FOLLO WED THE SAID DECISION IN THE CASE OF CIT VS. MINA DEOGUN 375 ITR 586 (CAL). HOWEVER IN A LATER DECISION RENDERED BY THE 13 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 13 HONBLE CALCUTTA HIGH COURT IN THE CASE OF NIRMAL K UMAR RAVINDRA KUMAR-HUF VS. CIT 386 ITR 10 (CAL.) THE HONBLE CALCUTTA HIGH COU RT TOOK A VIEW, IN A CASE WHERE FMV AS ON 1.4.1981 WAS SUPPORTED BY A REGISTERED VA LUERS REPORT HELD THAT THE REFERENCE WAS VALID AND FELL WITHIN THE AMBIT OF SE C.55A(2)((B)(II) OF THE ACT. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF THE COU RT: 7. THE PRINCIPAL CONTENTION BEFORE THE LEARNED TRI BUNAL WAS THAT THE ASSESSING OFFICER COULD NOT HAVE MADE A REFERENCE FOR EVALUAT ION OF THE PROPERTY UNDER SECTION 55A(A) AS THE FAIR MARKET VALUE ESTIMATED B Y THE REGISTERED VALUER ENGAGED BY THE ASSESSEE IS HIGHER THAN THE ACTUAL F AIR MARKET VALUE. THIS CONTENTION IS INHERENTLY INCORRECT. POLICY OF LAW I S TO TAKE THE FAIR MARKET VALUE AS ON 1S L APRIL, 1981 AS THE BASIS FOR THE PURPOSE OF INDEXA TION. IF THE ASSESSEE HAS SHOWN MORE THAN THE FAIR MARKET VALUE HE OBVIOUSLY, IS INTERESTED IN INCREASING THE INDEX COST FOR THE PURPOSE OF AVOIDING TO PAY C APITAL GAINS. THEREFORE, THE PRACTICE ADOPTED BY HIM CANNOT BE PERMITTED. EVEN A SSUMING THAT THERE IS A CASE IN WHICH THE ASSESSEE HAS OFFERED MORE THAN THE MAR KET VALUE, IT IS NOT THE POLICY OF LAW TO RECOVER MORE THAN WHAT IS ACTUALLY DUE FR OM THE ASSESSEE. IN EITHER CASE, THE CONTENTION OF THE ASSESSEE IS WRONG AND NOT ACC EPTABLE. IN THE CASE BEFORE US, THE ASSESSEE, HOWEVER, WAS INSPIRED BY SINISTER MOT IVE OF AVOIDING TO PAY CAPITAL GAIN AND THAT WAS THE REASON WHY HE INFLATED THE FA IR MARKET VALUE ON 1 ST APRIL, 1981. THE REFERENCE MADE BY THE ASSESSING OFFICER W AS COMPETENT. THE LEARNED TRIBUNAL WAS CORRECT IN HOLDING THAT THE CLAUSE (B) (II) TO SECTION 55A CARRIES A BROADER SPECTRUM WHICH CERTAINLY EMPOWERS THE ASSES SING OFFICER TO MAKE REFERENCE TO THE DVO WHEREIN IN HIS OPINION THE FAI R MARKET VALUE ESTIMATED BY THE ASSESSEE IS NOT PROPER AND SINCE IN THE PRESENT CASE THE REFERENCE HAS BEEN MADE BY THE ASSESSING OFFICER U/S.55A(B)(II) OF THE ACT, IN OUR CONSIDERED OPINION SUCH ACTION OF ASSESSING OFFICER WAS WELL W ITHIN THE PARAMETERS OF THE SPIRIT OF THE SECTION WHICH EMPOWERS THE ASSESSING OFFICER TO MAKE A REFERENCE TO DVO I.E. IN ANY OTHER CIRCUMSTANCES WHICH HE TH INKS THAT IT IS NECESSARY TO REFER THE MATTER TO THE DVO AND, THEREFORE, IN THE PRESENT CASE, THE ACTION OF ASSESSING OFFICER IN MAKING REFERENCE TO DVO WHILE NOT ACCEPTING THE VALUATION SHOWN BY THE ASSESSEE ON THE BASIS OF THE REGISTERE D VALUERS REPORT WAS WELL PERMISSIBLE UNDER THE LAW. IN A DECISION RENDERED BY THE ITAT KOLKATA BENCH IN THE CASE OF ITO, WARD 23(3), KOLKATA VS. SUDIP ROY ITA NO.2864/KOL/2013 ORDER DA TED 19.10.2016,(WHICH IS AUTHORED BY THE HONBLE ACCOUNTANT MEMBER OF THE PR ESENT BENCH) THIS TRIBUNAL FOLLOWED THE VIEW OF THE CALCUTTA HIGH COURT IN THE CASE OF NIRMAL KUMAR 14 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 14 RAVINDRAKUMAR HUF (SUPRA) FOR THE REASON THAT THE L ATTER DECISION HAS TO BE FOLLOWED THAN THE EARLIER DECISION OF THE HONBLE CALCUTTA H IGH COURT. 19. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITT ED THAT OUT OF THE THREE DECISIONS OF THE CALCUTTA HIGH COURT ON THE SAME ISSUE, TWO EARL IER DIVISION BENCH JUDGMENTS ARE IN FAVOUR OF THE ASSESSEE ACCEPTING THE VIEW CANVASSED BY THE ASSESSEE BEFORE CIT(A) BUT THE LATER JUDGMENT BY A DIVISION BENCH HAS TAKEN A CONTRARY VIEW. HE BROUGHT TO OUR NOTICE THAT IN THE LATER JUDGMENT, THE COURT DID NO T CONSIDER ITS EARLIER TWO JUDGEMENT ON THE SAME ISSUE. IT WAS SUBMITTED BY HIM THAT IN A SITUATION WHERE THERE ARE CONFLICTING DECISION OF HIGH COURT ON AN ISSUE WHIC H ARE IRRECONCILEABLE AND PRONOUNCED BY JUDGES OF CO-EQUAL STRENGTH, THEN THE EARLIER VIEW HAS TO BE FOLLOWED AS THE LATER DECISION HAS TO BE REGARDED AS PER INCURIUM . IN THIS REGARD HE DREW OUR ATTENTION TO A DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF SUNDEEP KUMAR BAFNA VS. STATE OF MAHARASHTRA & ANOTHER (2014) 16 SCC 623 WHEREIN THE HONBLE SUPREME COURT TOOK THE VIEW (AT PAGE-642 (PARA-19) THAT A DECISION OR JUDGMENT CAN ALSO BE PER INCURIAM IF IT IS NOT POSSIBLE TO RECON CILE ITS RATIO WITH THAT OF A PREVIOUSLY PRONOUNCED JUDGMENT OF A CO-EQUAL OR LARGER BENCH A ND WHEN HIGH COURTS ENCOUNTER TWO OR MORE MUTUALLY IRRECONCILABLE DECISIONS OF TH E SUPREME COURT CITED AT THE BAR, THE INVIOLABLE RECOURSE IS TO APPLY THE EARLIEST VIEW A S THE SUCCEEDING ONES WOULD FALL IN THE CATEGORY OF PER INCURIAM . THE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF THE HONBLE SUPREME COURT: 19. IT CANNOT BE OVER-EMPHASISED THAT THE DISCIPLI NE DEMANDED BY A PRECEDENT OR THE DISQUALIFICATION OR DIMINUTION OF A DECISION ON THE APPLICATION OF THE PER INCURIAM RULE IS OF GREAT IMPORTANCE, SINCE WITHOUT IT, CERTAINTY OF LAW, CONSISTENCY OF RULINGS AND COMITY OF COURTS WOULD B ECOME A COSTLY CASUALTY. A DECISION OR JUDGMENT CAN BE PER INCURIAM ANY PROVIS ION IN A STATUTE, RULE OR REGULATION, WHICH WAS NOT BROUGHT TO THE NOTICE OF THE COURT. A DECISION OR JUDGMENT CAN ALSO BE PER INCURIAM IF IT IS NOT POSS IBLE TO RECONCILE ITS RATIO WITH THAT OF A PREVIOUSLY PRONOUNCED JUDGMENT OF A CO-EQ UAL OR LARGER BENCH; OR IF THE DECISION OF A HIGH COURT IS NOT IN CONSONANCE W ITH THE VIEWS OF THIS COURT. IT MUST IMMEDIATELY BE CLARIFIED THAT THE PER INCURIAM RULE IS STRICTLY AND CORRECTLY 15 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 15 APPLICABLE TO THE RATIO DECIDENDI AND NOT TO OBITER DICTA. IT IS OFTEN ENCOUNTERED IN HIGH COURTS THAT TWO OR MORE MUTUALLY IRRECONCILABL E DECISIONS OF THE SUPREME COURT ARE CITED AT THE BAR. WE THINK THAT THE INVIO LABLE RECOURSE IS TO APPLY THE EARLIEST VIEW AS THE SUCCEEDING ONES WOULD FALL IN THE CATEGORY OF PER INCURIAM. 20. IT WAS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE EARLIER VIEW OF THE TWO DIVISION BENCHES SHOULD BE FOLLOWED IN PREF ERENCE TO THE LATER VIEW OF THE DIVISION BENCH AS IN THE LATER DECISION, THE TWO EA RLIER DECISIONS WERE NEITHER NOTICED NOR REFERRED TO. OUR ATTENTION WAS ALSO DRAWN TO T HE VIEW OF THE OTHER HIGH COURTS ON THE ISSUE OF VALIDITY OF REFERENCE U/S.55A(2)(A) OF THE ACT WHEN THE FMV AS ON 1.4.1981 ADOPTED BY AN ASSESSEE IN SUPPORT OF HIS COMPUTATI ON OF LTCG IS SUPPORTED BY A REGISTERED VALUERS REPORT. THE HONBLE BOMBAY HIG H COURT IN THE CASE OF DAULAL MOHATA HUF (SUPRA) DEALT WITH FOLLOWING SUBSTANTIAL QUESTION OF LAW : '(B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE HONBLE TRIBUNAL WAS RIGHT IN LAW TO OBSERVE THAT THE AO WA S NOT JUSTIFIED IN MAKING A REFERENCE UNDER S. 55A OF THE ACT TO THE DVO FOR DE TERMINATION OF THE FAIR MARKET VALUE OF THE PROPERTY ?' IN PARA NOS. 4 AND 5 OF ITS JUDGMENT HONBLE HIGH C OURT HELD AS FOLLOWS : '4. THE TRIBUNAL IN ITS ORDER DT. 23RD JULY, 2004 H AS CATEGORICALLY OBSERVED THUS : THE FIRST ISSUE THAT ARISES FOR OUR CONSIDERATION IS WHETHER THE REFERENCE MADE BY THE AO TO THE DVO UNDER S. 55A IS BAD IN LAW UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. THIS ISSUE, IN OUR CONSIDERED OPINION IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE JUDGMENT IN THE CASE OF MS. RUBAB M. KAZERANI VS. JT. CIT (2005) 97 TTJ (MUMBAI)(TM) 698 : (2004) 91 ITD 429 (MUMBAI)(TM). FURTHER THE ASSESSEE ALSO COVERED BY THE THIRD MEMBER (SIC) DECISION OF THE PUNE BENCH OF THE TRIBUNAL, THE CAS E OF THE SMT. KRISHNABAI TINGRE VS. ITO (2006) 103 TTJ (PUNE) 216 : (2006) 1 01 ITD 317 (PUNE) WHEREIN IT HAS BEEN HELD THAT REFERENCE TO DVO CAN ONLY BE MADE IN CASES WHERE THE VALUE OF CAPITAL ASSET SHOWN BY THE ASSESSEE IS LESS THAN ITS FAIR MARKET VALUE OF LAND AS ON 1ST APRIL, 1981 SHOWN BY THE ASSESSEE ON THE BAS IS OF APPROVED VALUERS REPORT BEING MORE THAN ITS FAIR MARKET VALUE, REFERENCE UN DER S. 35A WAS NOT VALID. RESPECTFULLY FOLLOWING THE PROPOSITIONS LAID DOWN I N THESE TWO CASES BY THE CO- ORDINATE BENCHES WE UPHOLD THE CONTENTION OF THE AS SESSEE AND HOLD THAT THE REFERENCE MADE BY THE AO TO THE DVO UNDER S. 55A IN THE PECULIAR FACTS AND 16 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 16 CIRCUMSTANCES OF THE CASE IS BAD IN LAW. THUS, ON T HE SOLE GROUND APPEAL OF THE ASSESSEE HAS TO BE ALLOWED. BEFORE PASSING, WE HAVE TO MENTION THAT THE ASSESSE E HAS SUBMITTED THE ARGUMENTS. AS ON THE BASIS OF THE LEGAL ASPECTS ITS ELF WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, WE REFRAIN FROM UNDERTAKING THIS ACADEMIC EXERCISE OF DISPOSING OF THIS CASE ON MERITS. 5. IN VIEW THEREOF THERE IS NO MERIT IN THE APPEAL. APPEAL STANDS DISMISSED.' 21. THE HONBLE GUJARAT HIGH COURT IN THE CASE O F HIABEN JAYANTILAL SHAH (SUPRA) HAS HELD ON THIS ISSUE AS FOLLOWS : 'UNDER CL. (A) OF S. 55A, THE AO IS ENTITLED TO MAK E THE REFERENCE TO THE VALUATION OFFICER IN A CASE WHERE THE VALUE OF THE ASSET AS C LAIMED BY THE ASSESSEE IS IN ACCORDANCE WITH THE ESTIMATE MADE BY THE REGISTERED VALUER, IF THE AO IS OF THE OPINION THAT THE VALUE SO CLAIMED IS LESS THAN THE FAIR MARKET VALUE. IN ANY OTHER CASE, AS PROVIDED UNDER CL. (B) OF S. 55A, THE AO H AS TO RECORD AN OPINION THAT (I) THE FAIR MARKET VALUE OF THE ASSET EXCEEDS THE VALU E OF THE ASSET AS CLAIMED BY THE ASSESSEE BY MORE THAN SUCH PERCENTAGE OR BY MORE TH AN 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 REFER ENCE. AS CAN BE SEEN FROM THE COMMUNICATION DT. NIL FROM DVO TO THE PETITIONER IN SOFAR AS THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1ST APRIL, 1981 IS CONCERNED, THE PETITIONER HAD CLAIMED THE SAME AT A SUM OF RS. 6,25,000 AS PER REGISTERED VAL UERS REPORT. THEREFORE, THE AO WAS REQUIRED TO FORM AN OPINION THAT THE VALUE S O CLAIMED IS LESS THAN THE FAIR MARKET VALUE. THE ESTIMATED VALUE PROPOSED BY THE D VO IS SHOWN AT RS. 3,97,000, WHICH IS LESS THAN THE FAIR MARKET VALUE SHOWN BY THE ASSESSEE AS ON 1ST APRIL, 1981. THEREFORE, CL. (A) OF S. 55A CANNOT BE MADE APPLICABLE. CLAUSE (B) OF S. 55A CAN BE INVOKED ONLY IN ANY OTHER CASE, NAMEL Y WHEN THE VALUE OF THE ASSET CLAIMED BY THE ASSESSEE IS NOT SUPPORTED BY AN ESTI MATE MADE BY A REGISTERED VALUER. IN THE FACTS OF THE PRESENT CASE, CL. (B) O F S. 55A ALSO CANNOT BE INVOKED. THEREFORE THERE IS NO QUESTION OF HAVING RECOURSE T O SUB-CL. (II) OF CL. (B) OF S. 55A OF THE ACT.' 22. THE LEARNED DR PLACED RELIANCE ON THE LATER DECISION OF THE HONBLE CALCUTTA HIGH COURT REFERRED TO ABOVE IN THE CASE OF NIRMAL KUMAR RAVICHANDRA KUMAR-HUF (SUPRA) 17 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 17 AND SUBMITTED THAT IF THE INTERPRETATION ADOPTED IN THE EARLIER DECISION IS FOLLOWED THEN THAT WOULD RESULT IN POLICY OF THE LAW NOT BEING GI VEN EFFECT. 23. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION T O THE RIVAL SUBMISSIONS. THE HONBLE CALCUTTA HIGH COURT IN THE EARLIER DECISION RENDERE D IN THE CASE OF UMEDBHAI INTERNATIONAL PVT.LTD. (SUPRA) AND SMT MINA DEOGUN (SUPRA) HAS TAKEN THE VIEW THAT WHERE FMV AS ON 1.4.1981 IN SUPPORT OF COMPUTATION OF LTCG AS MADE BY THE ASSESSEE IS SUPPORTED BY A REPORT OF A REGISTERED V ALUER, THAN TO MAKE A REFERENCE UNDER SECTION 55A OF THE ACT, ASSESSING OFFICER HAS TO FO RM AN OPINION THAT THE FMV AS ON 1.4.1981 CLAIMED IN THE REGISTERED VALUERS REPORT IS LESS THAN THE FAIR MARKET VALUE. ON THE OTHER HAND, IF THE OPINION OF THE ASSESSING OFF ICER IS THAT THE VALUE SHOWN WAS VERY HIGH OR IN OTHER WORDS, MORE THAN THE FAIR MARKET V ALUE, THEN NO VALID REFERENCE CAN BE MADE U/S.55A(2)(A)OF THE ACT. HOWEVER IN THE LATER DECISION RENDERED IN THE CASE OF NIRMAL KUMAR RAVICHANDRA KUMAR-HUF (SUPRA), THE HON BLE CALCUTTA HIGH COURT HAS TAKEN THE VIEW THAT TRIBUNAL WAS CORRECT IN HOLDING THAT THE CLAUSE (B)(II) TO SECTION 55A CARRIES A BROADER SPECTRUM WHICH CERTAINLY EMPOWERS THE ASSESSING OFFICER TO MAKE REFERENCE TO THE DVO WHEREIN IN HIS OPINION THE FAI R MARKET VALUE ESTIMATED BY THE ASSESSEE IS NOT PROPER AND SINCE IN THE PRESENT CAS E THE REFERENCE HAS BEEN MADE BY THE ASSESSING OFFICER U/S.55A(B)(II) OF THE ACT, IN OUR CONSIDERED OPINION SUCH ACTION OF ASSESSING OFFICER WAS WELL WITHIN THE PARAMETERS OF THE SPIRIT OF THE SECTION WHICH EMPOWERS THE ASSESSING OFFICER TO MAKE A REFERENCE TO DVO I.E. IN ANY OTHER CIRCUMSTANCES WHICH HE THINKS THAT IT IS NECESSARY TO REFER THE MATTER TO THE DVO AND, THEREFORE, IN THE PRESENT CASE, THE ACTION OF ASSES SING OFFICER IN MAKING REFERENCE TO DVO WHILE NOT ACCEPTING THE VALUATION SHOWN BY THE ASSESSEE ON THE BASIS OF THE REGISTERED VALUERS REPORT WAS WELL PERMISSIBLE UND ER THE LAW. IT THUS CLEAR THAT ON SAME FACTS, THE HONBLE CALCUTTA HIGH COURT HAS TAKEN IR RECONCILABLE VIEW. THE EARLIER VIEW HAS NOT BEEN REFERRED TO OR CONSIDERED IN THE LATER VIEW AND ALL THE JUDGEMENTS HAVE BEEN RENDERED BY JUDGES OF EQUAL STRENGTH. IN THE GIVEN CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE RATIO LAID DOWN BY THE HONBLE SUPREM E COURT IN THE CASE OF SUNDEEP 18 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 18 KUMAR BAFNA (SUPR) WOULD BE APPLICABLE. AS RIGHTLY CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE RATIO LAID DOWN IN THE SAID J UDGMENT WILL SUPPORT THE VIEW THAT THE EARLIER DECISIONS HAVE TO BE FOLLOWED. IN THAT VIE W OF THE MATTER, WE ARE OF THE VIEW THAT THE REFERENCE MADE IN THE PRESENT CASE TO THE DVO B Y THE AO HAS TO BE REGARDED AS INVALID. WE THEREFORE HOLD THAT REFERENCE BY THE A O TO THE DVO UNDER S. 55A FOR VALUATION OF FAIR MARKET VALUE OF THE PROPERTY AS O N 1ST APRIL, 1981 IS NOT VALID FOR THE REASON THAT THE AO WAS OF THE VIEW THAT FAIR MARKET VALUE DECLARED BY THE ASSESSEE AS PER GOVERNMENT REGISTERED VALUERS REPORT WAS MORE THAN THE FAIR MARKET VALUE WHEREAS IN LAW THE AO COULD MAKE A REFERENCE ONLY WHEN HE I S OF THE OPINION THAT THE VALUE SO CLAIMED IS LESS THAN THE FAIR MARKET VALUE AS ON 1. 4.1981. SINCE DETERMINATION OF THE FAIR MARKET VALUE AS ON 1ST APRIL, 1981 WAS BASED ON THE REPORT OF THE DVO, THE SAME IS HELD INVALID. CONSEQUENTLY, ESTIMATION OF THE FAIR MARKE T VALUE OF THE PROPERTY AS ON 1ST APRIL, 1981 AS MADE BY THE ASSESSEE IS DIRECTED TO BE ACCEPTED. GROUND NO.4, 5 AND 8 ARE ALLOWED. GR.NO.6 & 7 AND THE ADDITIONAL GROUND OF APPEAL RAISED BY THE ASSESSEE DOES NOT CALL FOR ANY ADJUDICATION IN VIEW OF THE D ECISION THAT THE REFERENCE TO THE DVO IS INVALID AND HENCE THE LTCG COMPUTED BY THE ASSES SEE HAS TO BE ACCEPTED. WE HOLD AND DIRECT ACCORDINGLY. ITA NO.204/KOL/2013 (REVENUES APPEAL) 24. GROUNDS OF APPEAL RAISED BY THE REVENUE REA D AS FOLLOWS :- 1. LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACT S IN ALLOWING THE RELIEF TO THE TUNE OF RS. 1,51,65,191/-. 2. LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN APPRECIATING THAT THE AMOUNT 'PAYABLE' OCCURRING IN THE SAID CLAIM 40(A)(IA) HAS TO BE READ ALONG WITH THE CONTEXT. 3. LD. CIT(A) HAS ERRED IN LAW AS WELL AS IN NOT AP PRECIATING THAT A TAX STATUTE CANNOT BE INFLUENCED BY ASSESSEE'S SWIFTNESS TO CLE AR OFF HIS DUES TO A SUNDRY CREDITOR OTHER THAN STATE DUES. 19 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 19 4. LD. CIT(A) HAS ERRED IN LAW AS WELL AS IN NOT NO TING THAT MEANWHILE HON 'BLE ANDHRA H.C HAS BEEN PLEASED BY REVENUE'S CONTENTION TO SUSPEND THE OPERATION OF THE DECISION OF LD ITAT, SPECIAL BENCH, VISHAKAPATN AM BENCH, 477NIZ/2008. 5. THE APPELLANT CRAVES LEAVE TO ADD/DELETE OR CHAN GE ANY GROUND OF APPEAL. 25. THE FACTS WITH REGARD TO GROUNDS RAISED BY THE REVENUE ARE, AS WE HAVE ALREADY SEEN THAT THE ASSESSEE IS FOUNDED AS CLUB TO PROMOT E ACTIVITIES OF HORSE RACING, BESIDES PROVIDING CLUB FACILITIES TO ITS MEMBERS. THE ASSES SEE TELECASTS LIVE, HORSE RACES CONDUCTED IN DIFFERENT RACE COURSES ACROSS THE COUN TRY. THE MEMBERS OF THE ASSESSEE WATCH SUCH LIVE TELECAST AND INDULGE IN BETTING IN CONNECTION WITH THE HORSE RACE THAT ARE TELECAST LIVE. IT IS CALLED INTER STATE BETTING OPE RATION (ISBO). WHATEVER RECEIPT IS DERIVED BY THE ASSESSEE FROM ISBO, IS SHARED WITH T HE RACE CLUB/COURSE THAT ACTUALLY CONDUCTS THE RACE. BY WATCHING THE LIVE TELECAST OF THE RACE TAKING PLACE IN OTHER RACE COURSE, A PERSON CAN INDULGE IN BETTING IN ASSESSEE S PREMISES WHERE SUCH HORSE RACES ARE TELECAST LIVE. THE ASSESSEE GIVES INFORMATION R EGARDING RACES, DETAILS ABOUT THE HORSES TAKING PART IN THE RACE, THE TRAINER, THE JO CKEY ETC. AS SOON AS THE RACE IS OVER, THE INFORMATION ABOUT WINNING THE HORSE IS ALSO PASSED ON AND THE PRICE MONEY IS DISTRIBUTED ON THE WINNING TICKETS. OUT OF THE TOTA L BET MONEY COLLECTED ON THE TOTALIZER, A FIXED SUM IS RETAINED BY THE CLUB. IT IS A PLEA O F THE ASSESSEE THAT THE SUM IN QUESTION PAID TO THE OTHER CLUBS WAS NOT IN THE NATURE OF A COMMISSION ON WHICH THE ASSESSEE WAS OBLIGED TO DEDUCT TAX AT SOURCE U/S 194H OF THE ACT . 26. THE AO WAS OF THE VIEW THAT ON THE SUM OF RS .1,51,65,191/- WHICH WAS PAID TO THE OTHER CLUBS WAS IN THE NATURE OF COMMISSION WIT HIN THE MEANING OF SECTION 194H OF THE ACT. SINCE THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE ON THE SAID PAYMENTS THE SAID SUM WAS LIABLE TO BE DISALLOWED U/S 40(A)(IA) OF TH E ACT AND THE SUM DISALLOWED WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 20 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 20 27. BEFORE CIT(A) APART FROM REITERATING THE ST AND TAKEN BY THE ASSESSEE BEFORE AO THE ASSESSEE ALSO MADE A SUBMISSION THAT AS ON THE LAST DATE OF THE PREVIOUS YEAR, THE SUMS PAYABLE TO THE OTHER CLUBS HAD ALREADY BEEN PA ID AND NOTHING REMAINED PAYABLE. THE ASSESSEE RELYING ON THE DECISION OF THE SPECIAL BENCH OF ITAT, VISAKHAPATNAM IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS ADDL. CIT 136 ITD 23 (VISAKHAPATNAM)(SB) AND CONTENDED THAT THE DISALLOW ANCE U/S.40(A)(IA) OF THE ACT CAN BE MADE ONLY IN RESPECT OF SUMS WHICH REMAINED PAY ABLE AND NOT IN RESPECT OF SUMS WHICH HAD ALREADY BEEN PAID WITHOUT DEDUCTION OF TA X AT SOURCE. IN THE DECISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF MERIL YN SHIPPING (SUPRA) IT WAS HELD THAT DISALLOWANCE U/S 40(A)(IA) OF THE ACT CAN BE MADE O NLY IN RESPECT OF A SUM ON WHICH TDS OUGHT TO HAVE BEEN MADE BUT WAS NOT MADE REMAIN ED PAYABLE AND THAT IN THE CASE WHERE THE AMOUNTS WERE ALREADY PAID BY THE ASSESSEE AS ON THE LAST DATE OF THE PREVIOUS YEAR, NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT. THE CIT(A) FOLLOWING THE DECISION OF THE HONBLE SPECIAL BENCH IN THE CASE O F MERILYN SHIPPING (SUPRA) DELETED THE ADDITION MADE BY THE AO. 28. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENU E HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 29. WE HAVE HEARD THE SUBMISSIONS OF THE LD. C OUNSEL FOR THE ASSESSEE AND THE LD. DR..AT THE TIME OF HEARING IT WAS BROUGHT TO OUR NO TICE BY THE PARTIES THAT THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CRESCENT EXPORTS SYNDICATE (2013)216 TAXMAN.COM 258 (CAL) HAD TAKEN A VIEW THAT DISALLOWANCE U/S.40 (A)(IA) OF THE ACT CAN BE MADE EVEN IN A CASE WHEN THE SUM ON WHICH TAX WAS DEDUCTIBLE AND NOT DEDUCTED WAS PAID. THE HONBLE CALCUTTA HIGH COURT HAD OVERRULED THE DECIS ION OF THE SPECIAL BENCH ITAT IN THE CASE OF MERILYN SHIPPING (SUPRA. THE VIEW EXPR ESSED BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CRESCENT EXPORT SYNDICATE (SUP RA) HAS NOW BEEN APPROVED BY THE HONBLE SUPREME COURT IN THE CASE OF PALAM GAS SERV ICE LTD. VS CIT IN CA NO..5512 21 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 21 OF 2017 JUDGMENT DATED 04.05.2017 WHEREIN THE HONB LE SUPREME COURT HELD THAT THE PROVISION OF SECTION 40(A)(IA) OF THE ACT ARE APPLI CABLE EVEN WHEN THE AMOUNTS WHICH ARE CLAIMED AS AN EXPENDITURE ON WHICH TDS HAS NOT BEEN DEDUCTED HAS ALREADY BEEN PAID AS ON THE LAST DATE OF THE RELEVANT PREVIOUS Y EAR. IN OUR VIEW FOLLOWING THE DECISION OF THE HONBLE CALCUTTA HIGH COURT, WE ARE OF THE V IEW THAT THE ORDER OF THE CIT(A) DELETING THE ADDITION MADE BY THE AO CANNOT BE SUST AINED. 30. THE LD. COUNSEL FOR THE ASSESSEE, HOWEVER, MAD E TWO PRAYERS BEFORE US. FIRSTLY, IT WAS SUBMITTED THAT CIT(A) DID NOT DECIDE THE QUESTI ON WHETHER THE AMOUNT PAID TO THE OTHER CLUBS WOULD BE IN THE NATURE OF COMMISSION W ITHIN THE MEANING OF SECTION 194H OF THE ACT. SECONDLY, HE MADE A PRAYER FOR A REMAND OF THE ISSUE TO THE AO WITH A DIRECTION TO THE AO TO VERIFY IF THE PAYEES HAVE DE CLARED THE RECEIPT FROM THE ASSESSEE IN THEIR RETURN OF INCOME AND IF THEY HAVE SO DECLA RED THEN THE ADDITION U/S.40(A)(IA) OF THE ACT SHOULD BE DELETED BY THE AO. THE ABOVE SUB MISSION WAS MADE IN THE CONTEXT OF THE AMENDMENTS TO THE PROVISIONS OF SEC.40(A)(IA) O F THE ACT BY THE FINANCE ACT, 2012 W.E.F. 1-4-2013, WHEREBY A SECOND PROVISO WAS INSER TED WHICH PROVIDED THAT IF THE PAYEES HAVE FILED THEIR RETURN OF INCOME SHOWING TH E RECEIPTS FROM THE ASSESSEE IN THEIR RETURN OF INCOME THAN THE IT SHALL BE DEEMED THAT T HE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN SEC.40(A)(IA) OF THE ACT. 31. IT WAS ARGUED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSING OFFICER AND FIRST APPELLATE AUTHORITIES ARE VESTED WITH STA TUTORY POWERS U/S 133(6) OR 131 AND OR OTHER PROVISIONS AND THEY COULD HAVE MADE INQUIRES WITH THE PARTIES OR THEIR RESPECTIVE ASSESSING OFFICER. 32. IT WAS POINTED OUT BY HIM THAT ITAT, KOLKATA IN THE CASE OF RAMAKRISHNA VEDANTA MATH V. INCOME-TAX OFFICER, WARD 59 (1), KOLKATA, [ 2012] 24 TAXMANN.COM 29 (KOL.) 22 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 22 HAS TAKEN A VIEW THAT ONCE ASSESSEE FURNISHES LAWFU LLY MAINTAINED INFORMATION ABOUT RECIPIENTS, ASSESSING OFFICER SHOULD FIRST ASCERTAI N RELATED FACTS ABOUT PAYMENT OF TAXES DIRECTLY FROM RECIPIENTS BEFORE INVOKING SECTION 20 1 (1). IT WAS SUBMITTED THAT THE ABOVE DECISION ITAT KOLKATA IN THE ABOVE MENTIONED CASE WILL ALSO APPLY FOR THE PURPOSES OF SECTION 40(A)(IA) OF THE ACT. FURTHER R ELIANCE WAS ALSO PLACED ON THE DECISION OF THE ITAT KOLKATA IN THE CASE OF VAS ELE CTRONICS VS. ACIT, ITAT KOLKATA IN I.T.A NO. 662/KOL/2013 DATED 24-11-2015 WHEREIN FOLLOWING THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANS AL LAND MARK TOWNSHIP P. LTD. (2015) 377 ITR 635 (DEL), THE AO WAS DIRECTED TO VE RIFY WHETHER THE RECIPIENTS HAVE INCLUDED THE RECEIPTS PAID BY THE ASSESSEE IN THEIR RESPECTIVE RETURNS OF INCOME AND ALSO PAID TAXES ON THE SAME. 33. IT WAS THEREFORE SUBMITTED THAT THE DISALLOW ANCE U/S.40(A)(IA) OF THE ACT TO THE EXTENT SUSTAINED BY THE CIT(A) SHOULD BE SET ASIDE AND REMANDED TO THE AO TO VERIFY WHETHER THE RECIPIENTS HAVE INCLUDED THE RECEIPTS P AID BY THE ASSESSEE IN THEIR RESPECTIVE RETURNS OF INCOME AND ALSO PAID TAXES ON THE SAME. TO THE EXTENT THE RECIPIENTS FROM THE ASSESSEE HAVE SO INCLUDED THE S UM IN THEIR RETURNS OF INCOME AND FILED THE SAME, NO DISALLOWANCE U/S.40(A)(IA) OF TH E ACT SHOULD BE MADE BY THE AO. IN CASE THE RECIPIENT PARTIES ARE NOT COOPERATING IN P ROVIDING DETAILS, THE AO SHOULD BE DIRECTED TO CALL FOR THE INFORMATION U/S. 133(6) OR 131 OF THE ACT, FOR VERIFICATION OF THE SAME. 34. THE LEARNED DR RELIED ON THE ORDER OF THE C IT(A) AND SUBMITTED THAT THE BENEFIT OF THE SECOND PROVISO SHOULD NOT BE ALLOWED TO THE ASSESSEE AS THE TAX DEDUCTED AT SOURCE HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME U/S.139(1) OF THE ACT. ACCORDING TO HIM THE AMENDM ENT BY INSERTION OF SECOND PROVISO TO SEC.40(A)(IA) OF THE ACT CANNOT BE CONSTRUED TO HAVE RETROSPECTIVE EFFECT. HE PLACED 23 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 23 RELIANCE ON THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF THOMAS GEORGE MUTHOOT VS. CIT, KOTTAYAM (2015) 63 TAXMANN. COM 99 (KERALA). 35. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE AND THE LEARNED DR AND ARE OF THE VIEW THAT ON BOTH THE ASP ECTS PLEADED BY THE LD. COUNSEL FOR THE ASSESSEE, THE ASSESSEE DID NOT HAVE AN OPPORTUN ITY OF TAKING THIS PLEA BEFORE THE REVENUE AUTHORITIES. IN THE INTEREST OF JUSTICE WE DEEM IT FIT AND PROPER TO SET ASIDE THE ORDER OF CIT(A) ON THIS ISSUE AND REMAND THE ISSUE FOR FRESH CONSIDERATION ON TWO ASPECTS PLEADED BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE US. AS PER THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT READ WITH PROVISO T O SECTION 201(1) OF THE ACT INSERTED BY FINANCE ACT 2012 W.E.F. 01.04.2013 AND 01.07.2012 R ESPECTIVELY, IF IT IS ESTABLISHED THAT THE PERSON TO WHOM MADE THE PAYMENTS MADE ARE DISAL LOWED U/S 40(A)(IA) OF THE ACT HAS FURNISHED RETURN OF INCOME U/S 139 OF THE ACT AND H AS ALSO TAKEN INTO ACCOUNT THE SUM RECEIVED FROM THE ASSESSEE IN COMPUTING IN SUCH RET URN OF INCOME AND IF HE HAD PAID TAX ON THE INCOME DECLARED BY HIM ON SUCH INCOME AND FU RNISHED THE CERTIFICATE TO THE ABOVE EFFECT TO THE ACCOUNTANT IN FORM NO.26A, THEN THE ASSESSEE CANNOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT AND NO DISALLOWANCE U/S 40(A)(IA) OF THE ACT SHOULD BE MADE. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS ANSAL LAND MARK TOWNSHIP PVT. LTD. 377 ITR 635 (DEL) HAS HEL D THAT THE AFORESAID AMENDMENTS TO THE PROVISO TO SECTION 201(1) AND 40(A)(IA) OF THE ACT HAS TO BE HELD TO BE APPLICABLE WITH RETROSPECTIVE EFFECT AND WERE APPLICABLE RIGHT FROM THE TIME WHEN SECTION 40(A)(IA) OF THE ACT WERE ENACTED. THE DECISION RENDERED BY T HE HONBLE KERALA HIGH COURT IN THE CASE OF THOMAS GEORGE MUTHOOT (SUPRA) HAS TAKEN A V IEW CONTRARY TO THAT OF THE DELHI HIGH COURT IN THE CASE OF ANSAL LAND MARK TOWNSHIP (SUPRA). IN THE GIVEN CIRCUMSTANCES, RULE OF JUDICIAL PRECEDENT DEMANDS T HAT THE VIEW FAVOURABLE TO THE ASSESSEE MUST BE ADOPTED. THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF CIT V. VEGETABLE PRODUCTS LTD. REPORTED AS 88 ITR 192, HAS HELD THAT WHERE TWO VIEWS ARE POSSIBLE, THE VIEW IN FAVOUR OF THE ASSESSEE HAS TO BE PREFERRED. WE THEREFORE ADOPT THE 24 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 24 VIEW TAKEN BY THE HONBLE DELHI HIGH COURT IN THE C ASE OF ANSAL LAND MARK TOWNSIP (SUPRA) WHICH IS FAVOURABLE TO THE ASSESSEE. ACCOR DINGLY THE APPEAL OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 36. IN THE RESULT THE APPEAL BY THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 37. IN THE RESULT, APPEAL BY THE ASSESSEE IS ALLOW ED AND THE APPEAL BY THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 01.09.2017. SD/- SD/- [WASEEM AHMED] [ N.V.VASU DEVAN ] ACCOUNTANT MEMBER JUDICIAL M EMBER DATED : 01.09.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1. M/S. ROYAL CALCUTTA TURF CLUB, CALCUTTA RACE COU RSE, HASTING, KOLKATA-22. 2. D.C.I.T., CIRCLE-55, KOLKATA. 3. CIT(A)-XXXVI, KOLKATA 4. C.I.T.-XX, KO LKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PR IVATE SECRETARY HEAD OF OFFICE/ D.D.O., ITAT, KOLKATA BENCHE S 25 ITA NO.231 & 204/KOL/2013 M/S. ROYAL CALCUTTA TURF CLUB A.YR.2008-09 25