DEVIDAYAL ROLLING & REFINERIES P. LTD, MUMBAI V. ITO 6(2)(2), MUMBAI

ITA 3390/MUM/2013

• Counselvise Citation: 339019914 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 1999-2000
• Appeal Filed On: 02-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C TRIPURA SUNDARI
• Assessee Lawyers: R C JAIN
• Keywords: Value adopted by valuation officer; Capital asset; Depreciation; Retrospective amendment; Question of law; Cost of acquisition; Fair market value; Valuation report; Validity of assessment; Unabsorbed depreciation
• Section: 32; 133(6)

Judgement Text

, MH MHMH MH INCOME TAX APPELLATE TRIBUNAL,MUMBAI - D BENCH. , MK0 ,L VH ,E IKOYU MK0 ,L VH ,E IKOYU MK0 ,L VH ,E IKOYU MK0 ,L VH ,E IKOYU BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & DR. S.T.M . PAVALAN,JUDICIAL MEMBER /. ITA NO.3390/MUM/2013, ! ! ! ! / ASSESSMENT YEAR-1999-2000 DEVIDAYAL ROLLING & REFINERIES PVT. LTD., GUPTA MILLS ESTATE, REAY ROAD, MUMBAI-400010 VS ITO 6(2)(2), 5TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 PAN:AAACD1766B ( '# / APPELLANT) ( $%'# / RESPONDENT) &' ( ) / ASSESSEE BY : SHRI R.C. JAIN ( ) / REVENUE BY : SMT. C. TRIPURA SUND ARI ( (( ( '* '* '* '* / DATE OF HEARING : 07-08-2014 +,! ( '* / DATE OF PRONOUNCEMENT : 20-08-2014 , 1961 1961 1961 1961 ( ( ( ( 245 245 245 245( (( (1 11 1) )) ) '6' 7 '6' 7 '6' 7 '6' 7 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM : CHALLENGING THE ORDER DT.07.01.2013 OF THE CIT(A)-1 2,MUMBAI,ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: A:VALIDITY OF ASSESSMENT : 1.THE LD. CIT (APPEALS) ERRED IN HOLDING THAT THE A SSESSMENT MADE BY ITO IN TOTAL DISREGARD OF DIRECTIONS OF THE HON ITAT WAS VALID IN LAW. 1.1.THE LD CIT (APPEALS) ERRED IN HOLDING THAT THE ITO HAD VALIDLY ASSUMED JURISDICTION TO REFER THE MATTER OF VALUATION TO DVO. 1.2THE LD. CIT (APPEALS) DID NOT APPRECIATE THAT IN THE FACTS OF THE CASE THE REFERENCE TO THE DVO WAS OUTSIDE THE AMBIT OF SECTION 55A OF THE ACT. 1.3THE LD. CIT (APPEALS) ERRED IN HOLDING THAT THE REPORT OF DVO WAS A GOOD PIECE OF EVIDENCE WHICH COULD BE CONSIDERED TO BE IN LINE WITH DIRECT IONS OF HON. ITAT. 1.4THE LD. CIT (APPEALS) DID NOT GIVE ANY OPPORTUNI TY TO THE APPELLANT MUCH LESS A REASONABLE OPPORTUNITY.SHE DID NOT APPRECIATE THAT MERELY COMM UNICATING TO THE APPELLANTS REPRESENTATIVE ON HIS CELL PHONE AT THE FAG END OF THE MONTH IN WHICH THE ASSESSMENT WAS GETTING BARRED BY LIMITATION AMOUNTED TO AFFORDING OPPORTUNITY. 1.5THE LD. CIT (APPEALS) ERRED IN UPHOLDING THE ASS ESSMENT ALSO ON THE GROUND THAT NO UNABSORBED DEPRECIATION WOULD BE AVAILABLE TO THE A PPELLANT BY IGNORING THE LEGAL POSITION BROUGHT TO HER NOTICE. YOUR APPELLANT, THEREFORE, SUBMITS THAT THE ASSESSM ENT MADE BY ITO AND CONFIRMED BY CIT (APPEALS) IS ILLEGAL AND VOID AND, THEREFORE, BAD I N LAW. B:MERITS : 1.THE LD. CIT (APPEALS) ERRED IN CONFIRMING THE MAR KET VALUE OF LAND AS ON 1.04.8LBASED ON DVOS REPORT AT RS. 7 18444/- AS WAS ADOPTED IN EAR LIER ASSESSMENT ORDER IN TOTAL DISREGARD OF HON ITATS DIRECTIONS AND ACCORDINGLY ERRED IN CONF IRMING THE LONG TERM CAPITAL GAIN AT RS. 8495945/- AS WAS DONE EARLIER. 1.1THE LD. CIT (APPEALS) IN CONFIRMING THE ABOVE ER RED IN HOLDING THAT REFERENCE TO DVO COULD HAVE BEEN UNDER SECTION 55A OF THE ACT. 1.2THE LD. CIT (APPEALS) ERRED IN HOLDING THAT THE APPELLANT DID NOT DO ANYTHING TO BRING THE 2 ITA NO.3390/MUM/2013 DEVIDAYAL ROLLING & REFINERIES PVT. LTD. MATERIAL AND INFORMATION BY IGNORING THE FACT THAT THE SAME WAS AVAILABLE ON RECORD AND HER POINTED ATTENTION WAS DRAWN TO THE SAME. 1.3THE LD. CIT (APPEALS) ERRED IN HOLDING THAT THE ITO COULD NOT DO ANYTHING FURTHER AS THE ASSESSMENT WAS GETTING BARRED BY LIMITATION OF TIME . 2.THE LD. CIT (APPEALS) ERRED IN HOLDING THAT NO UN ABSORBED DEPRECIATION WAS AVAILABLE TO THE APPELLANT FOR BEING SET OFF 2.1IN SO DOING SHE DID NOT APPRECIATE THE MATERIAL PLACED ON RECORD. 2.2THE LD. CIT (APPEALS) ALSO DID NOT APPRECIATE TH AT NO OPPORTUNITY WAS AFFORDED BY ITO TO SUBSTANTIATE THE CLAIM MADE IN THE RETURN OF INCOME IN THIS REGARD. YOUR APPELLANT, THEREFORE, SUBMITS THAT DUE RELIEF BE ALLOWED. YOUR APPELLANT CRAVES LEAVE TO ADD TO DELETE, ALTER OR AMEND ALL OR ANY OF THE GROUNDS OF APPEAL AT OR BEFORE THE DATE OF HEARING. BRIEF FACTS OF THE CASE: 2. IN THIS CASE ASSESSMENT U/S.143(3) OF THE ACT WAS C OMPLETED BY THE ASSESSING OFFICER(AO) ON 18/2/2002 DETERMINING THE TOTAL INCOME OF THE ASSE SSEE AT RS.95,70,800/-AGAINST THE RETURNED LOSS OF RS.7,07,259/.THE MAIN REASON FOR THE DIFFERENCE BETWEEN THE RETURNED INCOME AND ASSESSED INCOME WAS THAT DURING THE ASSESSMENT PROCEEDINGS T HE AO HAD NOTICED THAT THE ASSESSEE HAD SOLD 19400.04 METERS FREEHOLD PLOT OF LAND SITUATED AT M AJIWADE,THANE.FOR THE PURPOSES OF WORKING OUT THE LONG TERM CAPITAL GAINS(LTCG) ON SALE OF TH IS LAND,IT HAD ADOPTED FAIR MARKET VALUE (FMV)AS ON 1/4/1981 BASED ON REGISTERED VALUERS RE PORT AT RS.155/-PER SQUARE METRE AND ACCORDINGLY THE FAIR MARKET VALUE AS ON 1/4/1981 WO RKED OUT AT RS.30,07,000/-.EXPENSES OF RS.7,25,440/- ON ACCOUNT OF BETTERMENT CHARGES AND OF RS.7,00,400/- TOWARDS PROFESSIONAL FEES WERE ALSO DEDUCTED WHILE COMPUTING LONG TERM CAPITA L GAINS. SINCE THE ASSESSEE HAD NOT FURNISHED THE DETAILS OF THESE EXPENSES THE AO HAD DISALLOWED THESE EXPENSES AND WORKED OUT THE LONG TERM CAPITAL GAINS ACCORDINGLY.FURTHER THE AO DID NOT AG REED WITH THE FMV AS SHOWN BY THE ASSESSEE AND HAD ADOPTED THE SAME AND RS.25/-PER SQUARE METR E AND WORKED OUT THE LONG TERM CAPITAL GAINS AT RS.1,07,18,000/-.THE ASSESSEE PREFERRED AN APPEA L AGAINST THE ORDER OF THE AO AND THE FIRST APPELLATE AUTHORITY (FAA)UPHELD THE ORDER OF THE AO ON THIS ISSUE.AGGRIEVED ASSESSEE FILED A FURTHER APPEAL BEFORE THE ITAT WHO HAD BY THEIR ORD ER DATED 9/10/2006 RESTORED THE ISSUE TO THE FILE OF THE AO FOR RE-ADJUDICATION WITH A DIRECTION TO BRING SUBSTANTIAL MATERIAL ON RECORD FOR DECIDING THE FAIR MARKET VALUE AS ON 1/4/1981 AND A LSO TO VERIFY THE CLAIM OF EXPENSES MADE BY THE ASSESSEE.ACCORDINGLY,THE AO REFERRED THE MATTER U/S .SECTION 55A OF THE ACT FOR DETERMINATION OF FAIR MARKET VALUE WAS ON 1/4/1981 TO THE DISTRICT V ALUATION OFFICER(DVO).HE VIDE HIS PRELIMINARY VALUATION REPORT,DATED 7/12/2007,DETERMINED THE FMV OF THE PROPERTY IN QUESTION AS ON 1/4/1981 AT RS.40.77/-PER SQUARE METRE.THE ASSESSEE RAISED O BJECTIONS AGAINST THE SAME,HOWEVER,THE AO ADOPTED THE VALUE DETERMINED BY THE DVO AND CALCULA TED THE LTCG ON THE SALE OF LAND AT RS.84,95,945/-. IN THE FINAL VALUATION REPORT OF THE DVO,DATED 31/1 2/2007,HE VALUED THE LAND AND THE SAME AMOUNT AS MENTIONED IN THE PRELIMINARY VALUATION RE PORT AFTER TAKING INTO ACCOUNT THE OBSERVATIONS RAISED BY THE ASSESSEE.THE ASSESSEE PREFERRED AN AP PEAL BEFORE THE FAA AND HE BY ORDER DATED 10/10/2008 CONFIRMED THE ORDER OF THE AO.AN APPEAL WAS FILED BEFORE THE ITAT.VIDE ITS ORDER,DATED 17/9/2010,THE TRIBUNAL AGAIN RESTORED T HE ISSUE OF THE FMV OF THE LAND AS ON 1/4/ 1981 TO THE FILE OF THE AO TO DECIDE THE SAME IN CO MPLIANCE WITH THE DIRECTIONS OF THE ITAT DATED.9/10/2006 AFTER GIVING AN OPPORTUNITY OF BEIN G HEARD TO THE ASSESSEE.THE ISSUE PERTAINING TO SET-OFF OF UNABSORBED DEPRECIATION OF EARLIER YEARS WAS ALSO RESTORED TO THE FILE OF THE AO FOR FRESH ADJUDICATION. THE AO TOOK UP THE CASE OF THE ASSESSEE AND AFTER G IVING OPPORTUNITY TO IT.HE CALCULATED THE LTCG AT RS.84,95,945/-WHILE DOING SO THE AO HAD REQ UESTED THE JOINT SUB-REGISTRAR,CLASS-II, THANE TO PROVIDE A REGISTERED COPY OF SALE AGREEMEN T OF ANY PLOT OF INDUSTRIAL LAND IN THE SURROUNDING AREA OF THE PROPERTY IN QUESTION WAS SI TUATED. IN REPLY, THE JOINT-SUB-REGISTRAR HAD REQUESTED SOMEONE BE DEPUTED TO HIS OFFICE TO TAKE A PHOTO COPY OF THE RELEVANT SALE DEED. ACCORDINGLY, THE WARD INSPECTOR WAS DEPUTED AND HE OBTAINED A COPY OF A SALE DEED DATED 3 ITA NO.3390/MUM/2013 DEVIDAYAL ROLLING & REFINERIES PVT. LTD. 3/11/1981.THE SALE DEED PERTAINED TO PLOT OF FREEHO LD LAND BEARING SURVEY NO.258 SITUATED AT GRAM PANCHAYAT MAJIWADE,MOUJE-MAJIWADE,DISTRICT-THA NE.THE SALE DEED SHOWED THAT 1558.4 METER SQUARE HAD BEEN SOLD FOR A CONSIDERATION OF R S.5000/- WHICH WORKED OUT TO RS. 3.20 PER SQUARE METRE.THE AO PROCEEDED TO BRING THE SAME TO THE NOTICE OF THE AR OF THE ASSESSEE TELEPHONICALLY AND TO REQUESTED HIM TO ATTEND THE O FFICE FOR FURTHER PROCEEDINGS BUT WAS INFORMED THAT THE AR WAS OUT OF STATION AND WOULD REMAIN PRE SENT ON 30/12/2011.THE CASE WAS BEING BARRED BY LIMITATION ON 31/12/2011.AO HELD THAT THE RE WAS SUFFICIENT MATERIAL AVAILABLE ON RECORD,THAT THE RATE AS DETERMINED BY THE DVO IN TH E FINAL VALUATION REPORT WERE REASONABLE TO DECIDE THE ISSUE,THAT THE DVO HAD ADOPTED THE MOST WIDELY USED TECHNIQUE KNOWN AS MARKET DATA METHOD OF VALUATION I.E. BY COMPARING THE SALE INST ANCES OF SIMILAR PROPERTIES IN THE NEARBY LOCALITY AND NEAREST POINT OF TIME AFTER GIVING DUE CONSIDERATION FOR VARIOUS FACTORS INFLUENCING THE VALUATION FOR DETERMINATION OF FMV,THAT INVESTIGATI ON AND INQUIRIES MADE AS DIRECTED BY THE ITAT HAD CLEARLY SHOWN THAT THE LAND RATE PER SQUAR E METRE WAS RS.320/-,THAT THE DVO HAD DETERMINED THE RATE AT RS.40.77 PER SQUARE METRE AF TER GIVING DUE CONSIDERATION TO FACTORS INFLUENCING THE RATES.AS A RESULT,HE ADOPTED THE RA TE QUOTED BY THE DVO FOR CAPITAL GAINS CALCULATION. 3. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE FILED AN APPEAL BEFORE THE FAA.IN THE APPELLATE PROCEEDINGS IT WAS SUBMITTED THAT IT HAD FILED ITS RETURN OF INCOME DISCLOSING LTCG AT RS. 4,39,948/-,THAT THE NET SALE VALUE WAS DECLARED AT RS.1,24,20,358/-.,THAT OUT OF THE SALE VALUE EXPENSES INCURRED IN CONNECTION WITH THE SALE AT RS .14,25,840/ WERE DEDUCTED,THAT FROM THE AMOUNT REMAINING INDEXED COST OF ACQUISITION BASED ON MARKET VALUE AS ON 1/4/1981 WAS TAKEN AT RS.30,07,000/- (AT RS.155 PER SQUARE METRE),THAT IT WAS DEDUCTED FROM THE AMOUNT OF RS.1,05, 54,570/-,THAT THE VALUE AS ON 1/4/1981 WAS SUPPORTE D BY THE VALUERS REPORT,THAT IN THE ORIGINAL ASSESSMENT THE AO HAD ESTIMATED THE MARKET VALUE OF THE LAND AT RS.25 PER SQUARE METRE AND HAD IGNORED THE VALUERS REPORT AND THE EXPENDITURE CLA IMED IN CONNECTION WITH THE TRANSFER,THAT THE ITAT HAD IN ITS ORDER,DATED 9/10/2006,HAD DIRECTED THE AO TO BRING SUBSTANTIAL MATERIAL ON RECORD FOR DECIDING THE FMV OF THE PROPERTY IN QUESTION,TH AT THE ASSESSEE HAD PLACED NECESSARY EVIDENCE BEFORE THE AO BUT HE IGNORED THAT AND REFERRED THE MATTER FOR VALUATION UNDER SECTION 55A OF THE ACT TO THE DEPARTMENTAL-VALUER,THAT HE HAD ASSESSED THE CASE OF THE ASSESSEE BY RELYING ON THE PRELIMINARY-VALUATION REPORT OF THE DVO,THAT BY DOI NG SO THE AO HAD NOT DISCHARGED HIS POWERED JUDICIALLY,THAT THE FAA DID NOT DEAL WITH ALL THE G ROUNDS OF APPEAL FILED AND HAD CONFIRMED THE ORDER OF THE AO,THAT AR OF THE ASSESSEE HAD APPEARE D BEFORE THE AO AND EXPLAINED IT TO HIM THAT AS PER THE DIRECTIONS OF THE ITAT, IT WAS FOR THE D EPARTMENT TO COLLECT INFORMATION AND CONFRONT THE SAME TO THE ASSESSEE AFTER GIVING REASONABLE OP PORTUNITY,THAT THE AO HAD NOT COMMUNICATED ANY FACTUAL FINDINGS REGARDING THE RATE OF THE LAND TO THE AR OF THE ASSESSEE,THAT IN SPITE OF THE FAC T THAT THE CASE WAS FIXED FOR 29/12/2011 IT WAS ASSES SED ON 27/12/2011,THAT NO REASONABLE OPPORTUNITY WAS OFFERED,THAT THE AO HAD AGAIN ADOPT ED THE MARKET VALUE AS DETERMINED BY THE DVO. 3.1. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D ASSESSMENT ORDER THE FAA HELD THAT THE CONTENTION OF THE ASSESSEE COULD NOT BE ACCEPTED,TH AT FROM THE DIRECTIONS OF THE ITAT, IT WAS CLEAR THAT THE IT WAS NOT IN AGREEMENT WITH THE ESTIMATED VALUE OF RS.25 AS ADOPTED BY THE AO WHILE ASSESSING THE CASE OF THE ASSESSEE U/S 143 (3) BY O RDER DATED 18/2/2002 AND NOTICING THAT THERE WAS A VAST DIFFERENCE BETWEEN THE VALUE AS ADOPTED BY T HE AO AND AS DETERMINED BY THE REGISTERED VALUER OF THE ASSESSEE,THAT IT HAD DIRECTED THE AO TO PROCEED ON ACTUAL BASIS TO DETERMINE THE FMV OF THE PROPERTY,THAT THE AO HAD RESORTED TO INVOKIN G OF SECTION 55A OF THE ACT BY REFERRING THE QUESTION OF VALUE OF PROPERTY TO THE DVO SO THAT TH E ACTUAL AND THE CORRECT VALUE COULD BE DETERMINED,THAT THE AO HAD UTILISED THE VALUE AS DE TERMINED BY THE DVO IN THE PRELIMINARY REPORT FOR DECIDING THE ISSUE,THAT DVOS REPORT DID NOT CO NSIDER / DEAL WITH THE OBJECTION OF THE ASSESSEE,THAT THE CASE WAS ONCE RESTORED BACK TO TH E AO BY THE ITAT FOR PROPER COMPLIANCE OF THE DIRECTIONS GIVEN BY IT AS ON 9/10/2006,THAT IN THE ENSUING PERIOD THE AO HAD RECEIVED THE FINAL VALUATION REPORT OF THE DVO WHEREIN THE DVO HAD TAK EN COGNIZANCE OF THE DIRECTIONS AS RAISED BY 4 ITA NO.3390/MUM/2013 DEVIDAYAL ROLLING & REFINERIES PVT. LTD. THE ASSESSEE AND HAD DEALT WITH THEM ACCORDINGLY,TH AT IN COMPLIANCE TO THE ITATS DIRECTION THE AO HAD PROCEEDED TO MAKE ENQUIRIES FROM THE SUB-REG ISTRARS OFFICE OF THE CONCERN AREA TO ENSURE THAT THE SAME COULD BE ADOPTED FOR DETERMINATION OF THE FAIR MARKET VALUE AS ON 1/4/1981,THAT IT WAS INCORRECT TO SAY THAT THE AO HAD NOT COMPLIED W ITH THE DIRECTIONS OF THE ITAT WHILE FRAMING THE ASSESSMENT,THAT THE ACT AUTHORISED THE AO TO RE FER TO THE DVO FOR ASCERTAINING THE CORRECT VALUE OF AN ASSET BEFORE COMPUTING THE CAPITAL GAIN S TAX ARISING ON THE SAID ASSET IF THE AO WAS OF THE VIEW THAT THE VALUE AS DECLARED BY AN ASSESSEE WAS NOT CORRECT,THAT PROVISIONS OF SECTION SECTION 55A OF THE ACT EMPOWERED THE AO TO REFER TH E VALUATION OF A CAPITAL ASSET TO DVO.THE FAA REFERRED TO THE DECISIONS OF VIJAY KUMAR A. SHA H (126 TTJ 910) CHATURBHUJ VALLABHDAS HUF(ITA NO.3439/MUM/2007,AY 2004-05 ORDER DATED 20. 12.2010). DELIBERATING UPON THE PROVISIONS OF SECTION 55A OF THE ACT,HE HELD THAT T HE SUB-CLAUSE (II) OF CLAUSE (B) OF SECTION COVERED ALL THE CASES / INSTANCES FOR DETERMINING T HE FMV OF THE ASSET WHICH WERE NOT SPECIFICALLY PROVIDED UNDER CLAUSE (A) AND SUB-CLAUSE (I) OF CLA USE (B) ARE COVERED UNDER SUB-CLAUSE (II) OF CLAUSE(B) OF SECTION 55A OF THE ACT,THAT THE LANGUA GE OF THE SECTION 55A AND PARTICULARLY SUB- CLAUSE (II) OF CLAUSE (B)DO NOT STIPULATE THE CONDI TION,EXPRESSLY OR IMPLIEDLY,THAT NO REFERENCE CAN BE MADE IF THE CLAIM OF THE ASSESSEE WAS SUPPORTED BY THE VALUATION REPORT OF REGISTERED VALUER,THAT THE REFERENCE TO THE DVO WAS SPECIFICALLY PROVIDED UNDER THE STATUTE TO ASCERTAIN THE FMV OF THE CAPITAL ASSETS,THAT IF THE CONTENTION OF THE ASSESS EE WAS ACCEPTED THAT THE CLAIM OF THE ASSESSEE WAS SUPPORTED BY THE REGISTERED VALUERS VALUATION THE AO COULD NOT REFER THE VALUATION TO THE DVO THEN IN SUCH CASES THERE WOULD BE NO INQUIRY AND EX AMINATION BY THE AO EVEN IF THE VALUATION REPORT OF THE REGISTERED VALUER WAS PRIMA-FACIE NOT CORRECT,THAT THERE IS NO NEED TO WRITE ANY ELABORATE REASON FOR EXPRESSING THE OPINION BY THE AO FOR THE PURPOSE OF MAKING THE REFERENCE OF VALUATION TO THE DVO BECAUSE THE REFERENCE AS WELL AS THE VALUATION REPORT OF THE DVO WERE ONLY A PART OF THE ASSESSMENT PROCEEDINGS AND COULD NOT BE TAKEN AS A DECISION OF THE AO OR OF DVO,THAT THERE WAS NO REQUIREMENT OF ANY LONG-DRAWN REASONING FOR EXPRESSING THE OPINION BY THE AO TO INITIATE THE REFERENCE OF THE VALUATION O F THE CAPITAL ASSET TO THE DVO,THAT THE AO HAD JURISDICTION OVER THE CONCERNED PROPERTY I.E. VALUA TION OF THE CAPITAL ASSET AND AS THE DVO ALSO HELD AUTHORITY AND JURISDICTION TO VALUE THE PROPER TY AND SUBMIT THE VALUATION REPORT THE REFERENCE MADE BY THE AO COULD NOT BE HELD TO BE INCORRECT,TH E VALUATION REPORT OF THE DVO WAS REGARDED A GOOD PIECE OF EVIDENCE ON THE ISSUE OF FMV OF A CAP ITAL ASSET AS ON 1/4/1981,THAT IN COMPLIANCE TO THE DIRECTIONS OF THE TRIBUNAL,THE AO HAD FURTHER T RIED TO GATHER SUFFICIENT MATERIAL FOR ARRIVING AT THE TRUE AND CORRECT VALUE OF THE LAND AS ON 1/4/19 81 BY MAKING ENQUIRIES FROM THE OFFICE OF THE SUB-REGISTRAR OF THE CONCERNED AREA,THAT ON THE BAS IS OF AUTHENTIC SALE DEED PERTAINING TO NOVEMBER 1981 OF LAND SOLD IN THE AREA CONCERNED TH E RATE PER METRE WORKED OUT TO ONLY RS.3.20/- ,THAT THE DVO HAD ADOPTED A VERY FAIR METHOD BY WAY OF SCIENTIFIC TECHNIQUE FOR VALUATION AFTER TAKING INTO ACCOUNT SALE INSTANCES OF SIMILAR PROPE RTIES IN THE NEARBY LOCALITY AND ALL THE FACTORS INFLUENCING THE RATE THE AO HAD OPTED TO ADOPT THE VALUE AS SHOWN BY THE DVO IN HIS REPORT.FINALLY,HE DISMISSED THE APPEAL FILED BY THE ASSESSEE. 4. BEFORE US,THE AR STATED THAT THE AO HAD NOT COMPLIE D WITH THE INSTRUCTIONS OF THE TRIBUNAL,THAT IT HAD SPECIFICALLY DIRECTED HIM TO COLLECT RELEVAN T AND SUFFICIENT MATERIAL TO SUPPORT HIS CASE AND DETERMINE THE FMV OF THE PROPERTY,THAT THE REFERENC E MADE BY THE AO TO THE DVO WAS AGAINST THE PROVISIONS OF THE ACT,THAT THE ASSESSEE HAD ALREADY FURNISHED A REPORT FROM THE REGISTERED VALUER,THAT PROVISIONS OF THE SECTION 55 AT THE REL EVANT TIME DID NOT PERMIT REFERENCE TO THE DVO IF THE VALUE SHOWN BY THE ASSESSEE WAS MORE,THAT NO RE ASON WAS GIVEN IN THE ASSESSMENT ORDER FOR REJECTING THE VALUERS REPORT.HE RELIED UPON THE MATTERS OF URMILA BAWA(11SOT661)AND LALITABEN B KAPADIA (115TTJ938).DR ARGUED THAT THE ORDER WAS SUPPORTED BY THE REPORT OF THE DVO,THAT THE AO HAD MADE A REFERENCE ONCE HE FOUND THE VALUA TION REPORT FILED BY THE ASSESSEE WAS UNRELIABLE,THAT THERE WAS NO BASIS OF THE VALUATION REPORT OF THE DVO. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSE D THE MATERIAL ON RECORD.THE ISSUE BEFORE US IS DETERMINATION OF FMV OF A PLOT OF LAND AS ON 01/04/1981 FOR CALCULATING LTCG.FACTS OF THE 5 ITA NO.3390/MUM/2013 DEVIDAYAL ROLLING & REFINERIES PVT. LTD. CASE HAVE BEEN DISCUSSED AT LENGTH IN EARLIER PARAG RAPHS OF THE ORDER,SO,SAME ARE NOT BEING REPEATED HERE.IN OUR OPINION,IT WOULD BE USEFUL TO REPRODUCE THE ORDER OF THE TRIBUNAL DATED.26. 09.AND THE SAID ORDER READS AS UNDER: IN OUR OPINION THE REGISTERED VALUERS ARE BEING GR ANTED LICENCE UNDER INCOME-TAX ACT FOR PREPARING SUCH REPORTS. THE REPORT OF A REGISTERED VALUER POINTING OUT VALUATION OF CAPITAL ASSET IS AN EXPRESSION OF OPINION OF AN EXPERT. HIS REPORT C AN BE OUT RIGHTLY REJECTED IF IT IS ESTABLISHED THA T IT IS NOT A GENUINE REPORT. OTHERWISE HIS REPORT DE SERVES TO BE CONSIDERED WHILE EVALUATING THE OTHER EVIDENCE AVAILABLE ON RECORD. THE ABSENCE OF THE REGISTERED VALUER CAN BE ONE CIRCUMSTANCE WHICH CAN PERSUADE A QUASI JUDICIAL AUTHORITY TO DR AW AN ADVERSE INFERENCE AGAINST THE REPORT. THE LD. CIT(A) INSTEAD OF DISBELIEVING THE REPORT OUGHT TO HAVE POINTED OUT THE SPECIFIC DEFECT IN THE REPORT. IT APPEARS THAT THE LD. FIRST APPELLATE AUT HORITY EMPHASIZED ON THE FACT THAT FAILURE OF THE ASSESSEE TO PRODUCE THE REGISTERED VALUER ALONG WIT H SUPPORTING MATERIAL CONSIDERED BY HIM IN ARRIVING AT THE VALUATION MADE AT RS.155/- PER SQ. MET. IS SUFFICIENT FOR DISCARDING THIS VALUATION REPORT. IN OUR OPINION LD. FIRST APPELLATE AUTHORIT Y HAS NOT APPRECIATED THE FACTS AND CIRCUMSTANCES IN PROPER WAY. HAD THERE NOT BEEN ANY MATERIAL THEN HE OUGHT TO HAVE CALLED FOR A REMAND REPORT FROM THE A.O. AGAINST THIS VALUATION REPORT THERE I S NO DOCUMENTARY EVIDENCE IN THE POSSESSION OF A.O. WHICH CAN EXHIBIT THE FAIR VALUATION AS ON 1/4 /1981 OF THE DISPUTED LAND. THEREFORE, TAKING INTO CONSIDERATION ALL THE FACTS AND CIRCUMSTANCES WE DEEM IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE A.O. FOR RE-ADJUDICATION. THE LD A. O. SHALL CONDUCT A PROPER ENQUIRY AND BRING SUFFICIENT MATERIAL ON RECORD I.E. THE SALE DEED OF THE SURROUNDING LAND OR OTHER POTENTIAL FACTOR INFLUENCING THE FAIR MARKET VALUE OF THE LAND AS ON 1/4/1981. AS FAR AS THE OTHER GROUNDS ARE CONCERNED I.E DISALLOWANCE OF EXPENSES ON DEVELOPME NT OF THIS LAND, WE FIND THAT THE DETAILS SUBMITTED BY THE ASSESSEE HAVE NOT BEEN PROPERLY LO OKED INTO, THEREFORE, WE SET ASIDE THIS ISSUE ALSO TO THE FILE OF A.O. FOR RE-ADJUDICATION. THE C HARGING OF INTEREST U/S. 234 WOULD BE CONSEQUENTIAL. FROM THE ORDER OF THE TRIBUNAL,IT IS CLEAR THAT THE AO WAS SUPPOSED TO CONDUCT A PROPER ENQUIRY AND BRING SUFFICIENT MATERIAL ON RECORD I.E. THE SA LE DEED OF THE SURROUNDING LAND OR OTHER POTENTIAL FACTOR INFLUENCING THE FAIR MARKET VALUE OF THE LAN D AS ON 1/4/1981.BUT,WE FIND THAT INSTEAD OF COLLECTING RELEVANT DATA AND USING IT TO DETERMINE THE TAX LIABILITY OF THE ASSESSEE,HE MADE A REFERENCE TO THE DVO U/S.55 OF THE ACT.IT IS ONLY D URING THE LAST ROUND OF THE LITIGATION THAT HE DEPUTED HIS INSPECTOR TO GATHER INFORMATION FROM TH E OFFICE OF THE SUB-REGISTRAR.EVEN AFTER COLLECTING SOME INFORMATION,HE DID NOT USE IT TO FI NALISE THE ASSESSMENT,RATHER HE REFERRED TO THE REPORT OF THE DVO.IN THESE CIRCUMSTANCES,THE FIRST ISSUE TO BE DECIDED IS WHETHER THE AO HAD COMPLIED WITH THE ORDER OF THE TRIBUNAL.SECOND ISSU E TO BE DETERMINED IS WHETHER THE REFERENCE MADE BY THE AO TO THE DVO WAS VALID ESPECIALLY WHEN A REPORT OF A REGISTERED VALUER WAS AVAILABLE AND THE FMV SHOWN IN IT WAS HIGHER. THE TRIBUNAL HAD DIRECTED THE AO TO GATHER INFORMAT ION AS STATED ABOVE,BUT HE REFERRED THE MATTER TO THE DVO.THUS,HE DID NOT COMPLY WITH THE DIRECTIO NS OF THE TRIBUNAL.IN OUR OPINION HIS ACTION OF MAKING A REFERENCE TO THE DVO WAS NOT AS PER THE DIRECTIONS OF THE TRIBUNAL. THEREFORE,WE AGREE WITH THE ARGUMENT OF THE ASSESSEE THAT ORDER OF THE TRIBUNAL WERE NOT FOLLOWED BY THE AO WHILE PASSING THE ORDER U/S.143(3)R.W.S.254 OF THE ACT FOR THE FIRST TIME.IT WAS ONLY SECOND TIME OF THE PASSING ORDER TO GIVE EFFECT TO THE TRIBUNAL TH E AO HAD MADE EFFORTS TO FIND OUT THE DETAILS FROM THE OFFICE OF THE SUB-REGISTRAR.THAT CLEARLY S HOWS THE FAILURE ON PART OF THE AO TO FOLLOW THE INSTRUCTIONS OF THE TRIBUNAL. 5.1. NOW,WE WILL TAKE UP THE ISSUE OF REFERENCE MADE BY THE AO THE DVO U/S.55A OF THE ACT.THE PROVISIONS OF THE SECTION WERE INTRODUCED ,W.E.F. 01.01.1973,BY THE TAXATION LAWS(AMENDMENT) ACT 1972.SECTION READS AS UNDER '55A. REFERENCE TO VALUATION OFFICER.- WITH A VIEW TO ASCERTAINING THE FAIR MARKET VALUE O F A CAPITAL ASSET FOR THE PURPOSES OF THIS CHAPTER, THE AO MAY REFER THE VALUATION OF THE CAPI TAL ASSET TO A VALUATION OFFICER- (A) IN A CASE WHERE THE VALUE OF THE ASSET AS CLAI MED BY THE ASSESSEE IS IN ACCORDANCE WITH THE ESTIMATE MADE BY A REGISTERED VALUER,IF THE AO IS OF OPINION THAT THE VALUE SO CLAIMED IS LESS THAN ITS FAIR MARKET VALUE ; (B) IN ANY OTHER CASE, IF THE AO IS OF OPINION- 6 ITA NO.3390/MUM/2013 DEVIDAYAL ROLLING & REFINERIES PVT. LTD. (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 AS SET 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 A ND 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 ESTIMATED BY THE REGISTERED VALUER (I.E.,A PERSON REGISTERED AS A VALUER UNDER SECTION 34AB OF THE WEALTH-TAX ACT)IS LESS THAN THE FAIR MARKET VALUE OF THE ASSET.OTHER CASES IN WHICH A REFERENCE MAY BE 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 CLAIMED OR BY MORE THAN RS. 25,000, WHICHEVER IS LESS OR WHERE, HAVING REGARD TO THE NATURE OF THE ASSET AND THE RELEVANT CIRCUMSTANCES, THE INCOME-TAX OFFICER CONSIDERS IT NECESSARY TO DO SO. IT WILL BE SEEN THAT IN A CASE WHERE THE ASSESSEE HAS OPTED FOR SUBSTITUTION OF THE COST OF ACQUISITION OF 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) W ILL THEREFORE, 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.WE ARE OF THE OPINION THAT FOR THE PURPOSE OF ASCERTAINING THE FMV OF A CAPITAL ASSET,THE STATUTE HAS PROVIDED TWO GROUP OF CASES N AMELY : (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 ADOPTES 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 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. A REFERENCE CAN BE MADE TO VO,UNDER SECTION 55A,CLAUSE (B) SUB-CLAUSE (II),ONLY IF AO RECORDS EXISTENCE OF SUCH OTHER RELEVANT CIRCUM STANCES ON THE BASIS OF WHICH HE FORMS SUCH OPINION.IN OTHER WORDS,A REFERENCE CAN BE MADE IF C ERTAIN PRE-CONDITIONS EXIT.FOR INVOKING THE 7 ITA NO.3390/MUM/2013 DEVIDAYAL ROLLING & REFINERIES PVT. LTD. PROVISIONS OF SECTION 55A OF THE ACT FORMATION OF O PINION OF THE AO THAT THE VALUE CLAIMED BY THE ASSESSEE IS LESS THAN ITS FMV IS A SINE QUA NON.REC ORDING REASONS AFTER THE ORDER OF REFERENCE,FOR VALUATION OF THE REGISTERED VALUER,IS NOT A SUBSTIT UTE FOR PRE DECISIONAL FORMATION OF OPINION.(330 ITR506).IN THE MATTER OF HOTEL JOSHI,HONBLE RAJAST HAN HIGH COURT HAS HELD THAT FOR INVOKING SUB-CLAUSE (II)OF CLAUSE (B) OF SECTION 55A OF THE ACT,AO IS REQUIRED TO FORM AN OPINION ON THE BASIS OF THE MATERIAL ON RECORD THAT REFERENCE TO T HE DVO FOR ASCERTAINING THE FMV OF AN ASSET,IS NECESSARY HAVING REGARD TO THE NATURE OF THE ASSET AND OTHER RELEVANT CIRCUMSTANCES(242 ITR 478). 5.2. NOW,WE WILL LIKE TO DISCUSS A FEW CASES,DEALING WIT H SECTION 55A OF THE ACT.IN THE CASE OF ANANT MILLS LTD. A REFERENCE UNDER CLAUSE (B)(II) O F SECTION 55A OF THE ACT WAS MADE BY THE AO AND THE ASSET IN QUESTION WAS A PIECE OF LAND.DECID ING THE WRIT PETITION FILED BY THE ASSESSEE,HONBLE GUJARAT HIGH COURT HELD THAT REFER ENCE 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 SEC.55A. FINALLY, IT WAS HELD BY THE HONBLE COURT THAT THE REFERENCE TO THE DVO WAS NOT IN ACCORDANCE WITH LAW AND IT HAD TO BE QUASHED.(209 I TR 568).HONBLE GUJARAT HIGH COURT IN THE CASE OF HINABEN JAYANTILAL SHAH(310ITR31)HAS HELD T HAT AS PER THE CLAUSE(B) OF SECTION 55A OF THE ACT,THE AO HAS TO RECORD AN OPINION THAT (I) THE FM V OF THE ASSET EXCEEDS THE VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE BY MORE THAN SUCH PERCENTAG E 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 SE CTION 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 VALUER.WE WOULD ALSO LIKE TO DISCUSS THE RECENT DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT,DELIVERED IN THE CASE OF PUJA PRINTS(360 ITR697).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 VALU ATION TO THE 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 T HE ISSUE AGAINST THE IT. 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 THAN 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). 8 ITA NO.3390/MUM/2013 DEVIDAYAL ROLLING & REFINERIES PVT. LTD. 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 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 9 ITA NO.3390/MUM/2013 DEVIDAYAL ROLLING & REFINERIES PVT. LTD. (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. WE FIND THAT ALL THE ARGUMENTS ADVANCED BY THE DR A ND THE FAA 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.THEREFORE, IT IS APPARENT THAT HE HAD, AT NO POINT OF TIME,FORMED AN OPINION THAT THE FMV DETERMINED BY THE VALUER.IN OTHER WORDS,IT IS NOT CLEAR AS TO WHETHER THE REFERENCE W AS 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 FOR MAKING SUCH A REFERENCE.RECORDING OF REASONS FOR IN VOKING 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 ACT IS EFFECTIV E FROM 01.07.2012.IN OUR OPINION LAW LAID DOWN BY THE CASES RELIED UPON BY THE FAA IS NOT A G OOD LAW NOW IN LIGHT OF THE ABOVE REFERRED TWO CASES OF THE HONBLE BOMBAY HIGH COURT.SO, REVE RSING THE ORDER OF THE FAA,WE DECIDE THE FIST GROUND IN FAVOUR OF THE ASSESSEE. 6. THE NEXT GROUND OF APPEAL IS REGARDING NOT ALLOWING THE BENEFIT OF SET-OFF OF UNABSORBED DEPRECIATION TO THE ASSESSEE.IN THE FIRST ROUND OF LITIGATION THE TRIBUNAL HAS DIRECTED THE AO TO PASS A SPEAKING ORDER AS TO WHY HE HAD REJECTED THE SET- OFF OF UNABSORBED DEPRECIATION OF EARLIER YEARS AS CLAIMED BY THE ASSESSEE. IN THE ORDER PASSED THE AO HELD THAT THE ASSESSEE HAD NOT MADE ANY SUBMISSIONS TO JUSTIFY THE CLAIM,THAT THERE WAS NO EXPRESS PROVISION IN THE ACT TO SET-OFF UNABSORBED DEPRECIATION AGAINST LONG TERM CAPITAL G AINS,THAT IT HAD STOPPED ITS MANUFACTURING ACTIVITIES SINCE 10/10/1991,THAT THE ASSESSEE HAD S HOWN ONLY LTCG AS ITS INCOME FOR THE YEAR UNDER CONSIDERATION,THAT THE UNABSORBED DEPRECIATIO N HAD NOT BEEN ALLOWED TO BE CARRIED FORWARD IN THE INTERVENING PERIOD,THAT THE UNABSORBED DEPRE CIATION AGAINST THE LONG TERM CAPITAL GAINS COULD NOT BE SET OFF. 7. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.AFT ER CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE ASSESSEE,HE HELD THAT THE SUBMIS SION OF THE ASSESSEE WAS SILENT ON THE FACT THAT THERE WAS NO BUSINESS ACTIVITY OF THE ASSESSEE SINC E 1991 AND IT HAD NOT BEEN ALLOWED TO CARRY FORWARD THE UNABSORBED DEPRECIATION AS THERE WAS NO BUSINESS ACTIVIT,THAT IT HAD NOT DENIED THE STATEMENT AS MADE BY THE AO,THAT THERE WOULD BE NO UNABSORBED DEPRECIATION AVAILABLE TO THE ASSESSEE FOR SETTING-OFF AGAINST THE CAPITAL GAINS IN THE YEAR UNDER CONSIDERATION. ACCORDINGLY, THE ACTION OF THE AO WAS UPHELD. 8. BEFORE US,AR STATED THAT AS PER THE PROVISIONS OF T HE ACT,THE ASSESSEE WAS ENTITLED TO CARRY FORWARD THE UNABSORBED DEPRECIATION,THAT CONTINUATI ON OF BUSINESS WAS NOT A PRE-CONDITION FOR ALLOWING THE CARRYING FORWARD.HE RELIED UPON THE JU DGMENT OF HONBLE MADRAS HIGH COURT DELIVERED IN THE CASE OF PIONEEER ASIA PACKING (P.) LTD.(170TAXMAN127).DR SUPPORTED THE ORDER OF THE FAA. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE AO AND FAA HAD DECIDED THE ISSUE AGAINST THE ASSESSEE, AS IT WAS NOT CARRYING OUT BUSINESS ACTIVITIES DURING THE YEAR UNDER APPEAL.WE FIND THAT THE HONB LE PUNJAB AND HARYANA HIGH COURT,IN THE 10 ITA NO.3390/MUM/2013 DEVIDAYAL ROLLING & REFINERIES PVT. LTD. MATTER OF G. T. M. SYNTHETICS LTD.( 347 ITR 458)HAS ,WHILE DISCUSSING THE PROVISIONS OF SECTION 32(2)OF THE ACT HELD AS UNDER: SECTION 32(2) OF THE INCOME-TAX ACT, 1961, RELATES TO CARRY FORWARD OF UNABSORBED DEPRECIATION. IT WAS AMENDED BY THE FINANCE ACT, 2000, WITH EFFEC T FROM APRIL 1, 2001, AND IS APPLICABLE TO THE ASSESSMENT YEAR 2001-02. THE FIRST PROVISO AND THE WORD 'FURTHER' IN THE SECOND PROVISO WERE DELETED.THE EFFECT OF OMISSION OF THE PROVISO WAS E NUMERATED BY THE CENTRAL BOARD OF DIRECT TAXES CIRCULAR NO. 794, DATED AUGUST 9, 2000, ([2000] 245 ITR (ST.) 21) TO THE EFFECT THAT THE UNABSORBED DEPRECIATION ALLOWANCE COULD BE SET OFF AGAINST THE INCOME UNDER ANY OTHER HEAD EVEN WHERE THE BUSINESS WAS NOT CARRIED ON. IN THE MATTER FOLLOWING SUBSTANTIAL QUESTION OF LAW WAS RAISED BEFORE THE HONBLE COURT 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HON'BLE INCOME-TAX APPELLATE TRIBUNAL WAS RIGHT IN ALLOWING SETTING-OFF THE INCO ME DERIVED DURING THE YEAR UNDER CONSIDERATION UNDER THE HEAD 'INCOME FROM OTHER SOURCES' FROM THE UNABSORBED DEPRECIATION, RELEVANT TO THE ASSESSMENT YEAR 1996-97 DESPITE CLOSURE OF BUSINESS BY THE ASSESSEE ?' FOLLOWING IS THE JUDGMENT OF THE HONBLE COURT: SECTION 32(2) OF THE ACT RELATES TO CARRY FORWARD OF UNABSORBED DEPRE-CIATION. IT HAS UNDERGONE VARIOUS CHANGES. IT WAS AMENDED BY THE FINANCE ACT, 2000, WITH EFFECT FROM APRIL 1, 2001, AND AS APPLICABLE TO THE ASSESS-MENT YEAR 2001-02, I.E., T HE ASSESSMENT YEAR IN QUESTION, THE FIRST PROVISO AND THE WORD 'FURTHER' IN THE SECOND PROVISO WERE D ELETED. THE PROVISO SO OMITTED READS THUS : 'PROVIDED THAT THE BUSINESS OR PROFESSION FOR WHIC H THE ALLOWANCE WAS ORIGINALLY COMPUTED CONTINUED TO BE CARRIED ON BY HIM IN THE PREVIOUS Y EAR RELEVANT FOR THAT ASSESSMENT YEAR.' THE EFFECT OF OMISSION OF THE AFORESAID PROVISO WAS ENUMERATED BY THE CENTRAL BOARD OF DIRECT TAXES, VIDE CIRCULAR NO. 794, DATED AUGUST 9, 2000 ([2000] 245 ITR (ST.) 21, 40) THAT THE UNABSORBED DEPRECIATION ALLOWANCE COULD BE SET OFF AGAINST THE INCOME UNDER ANY OTHER HEAD EVEN WHERE THE BUSINESS WAS NOT CARRIED ON. CLAUSE 22 OF THE SAID CIRCULAR WHICH IS RELEVANT I S AS UNDER : '22. REQUIREMENT OF CONTINUANCE OF THE SAME BUSINE SS FOR SET-OFF OF UNABSORBED DEPRECIATION DISPENSED WITH : 22.1 UNDER THE EXISTING PROVISIONS OF SUB-SECTION (2) OF SECTION 32 OF THE INCOME-TAX ACT, CARRIED FORWARD UNABSORBED DEPRECIATION IS ALLOWED TO BE SE T OFF AGAINST PROFITS AND GAINS OF BUSINESS OR PROFES-SION OF THE SUBSEQUENT YEAR, SUBJECT TO THE CONDITION THAT THE BUSINESS OR PROFESSION FOR WHICH DEPRECIATION ALLOWANCE WAS ORIGINALLY COMPUTE D CONTINUED TO BE CARRIED ON IN THAT YEAR. A SIMILAR CONDITION IN SECTION 72 FOR THE PURPOSE OF CARRY FORWARD AND SET OFF OF UNABSORBED BUSINESS LOSS WAS REMOVED LAST YEAR. 22.2 WITH A VIEW TO HARMONISE THE PROVISIONS RELAT ING CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION AND UNABSORBED LOSS, THE ACT HAS DISPE NSED WITH THE CONDITION OF CONTINUANCE OF THE SAME BUSINESS FOR THE PURPOSES OF CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION. 22.3 THIS AMENDMENT WILL TAKE EFFECT FROM 1ST APRI L, 2001, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2001-02 AND SUBSEQUENT YEARS .' COMMISSIONER OF INCOME-TAX (APPEALS) AND THE TRIBUN AL, THUS, RIGHTLY ALLOWED THE UNABSORBED DEPRECIATION RELEVANT TO THE ASSESSMENT YEAR 1996-9 7 TO BE SET OFF AGAINST THE INCOME FROM LONG- TERM CAPITAL GAINS AND INCOME FROM OTHER SOURCES FO R THE ASSESSMENT YEAR 2001-02. IN VIEW OF THE ABOVE, THE SUBSTANTIAL QUESTION OF L AW IS DECIDED AGAINST THE REVENUE AND THE APPEAL IS CONSEQUENTLY DISMISSED. RESPECTFULLY FOLLOWING THE ABOVE REFERRED TWO JUDGM ENTS OF THE HONBLE HIGH COURTS OF MADRAS AND P & H,WE DECIDE SECOND GROUND OF APPEAL IN FAVO UR OF THE ASSESSEE. AS A RESULT,APPE AL FILED BY THE ASSESSEE STANDS ALLOWED. 8'9 &' : ; ( 6 < ( ' => . ORDER PRONOUNCED IN THE OPEN COURT ON 20TH AUGUST,2014 . 7 ( +,! ? @ 20 VXLR VXLR VXLR VXLR , 201 4 , ( 6 A SD/- SD/- ( MK0 ,L VH ,E IKOYU MK0 ,L VH ,E IKOYU MK0 ,L VH ,E IKOYU MK0 ,L VH ,E IKOYU / DR. S.T.M.PAVALAN) ( / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER 11 ITA NO.3390/MUM/2013 DEVIDAYAL ROLLING & REFINERIES PVT. LTD. / MUMBAI, @ /DATE: 20.08.2014. SK 7 7 7 7 ( (( ( $'B $'B $'B $'B CB!' CB!' CB!' CB!' / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / '# 2. RESPONDENT / $%'# 22 3. THE CONCERNED CIT(A)/ D E , 4. THE CONCERNED CIT / D E 5. DR D BENCH, ITAT, MUMBAI / BF6 $' MH MHMH MH , . . . 6. GUARD FILE/ 6 8 %B' %B' %B' %B' $' $'$' $' //TRUE COPY// 7 / BY ORDER, G / = DY./ASST. REGISTRAR , /ITAT, MUMBAI