COMMISSIONER OF INCOME TAX V. SURINDER SINGH BEDI

ITA/230/2011

AI Insights

The case involves an appeal by the Commissioner of Income Tax, Patiala against Surinder Singh Bedi, the proprietor of Bedi Motors, concerning the assessment of capital gains for the assessment year 2007-08. The primary legal issue was whether the Assessing Officer (AO) was correct in referring the matter to the District Valuation Officer (DVO) under Section 55A of the Income Tax Act, 1961, to determine the fair market value of a building for capital gains computation. The CIT(A) and ITAT both ruled against the AO's action, leading to the revenue's appeal in the High Court. The court referenced similar cases and legal provisions to conclude that the fair market value should not be used as the full value of consideration for capital gains tax purposes.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 704106 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 05-03-2014
• Assessment Year: misc
• Other Referred Cases: CIT and another v. George Henderson & Co. Limited, CIT v. Gillanders Arbuthnot & Co., CIT vs. Smt. Nilofer I. Singh
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S K MUKHI
• Assessee Lawyers: SAVITA SAXENA
• Keywords: Assessment Year 2007-08; Capital Gains; Fair market value; Valuation Officer
• Section: 143(3); 143(1); 48; 55A; 260A; 45

Judgement Text

"ITA No.230 of 2011 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.230 of 2011 (O&M) Date of decision: 05.03.2014 The Commissioner of Income Tax, Patiala ……Appellant Vs. Surinder Singh Bedi,Prop.Bedi Motors, Mandi Gobindgarh …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MS. JUSTICE ANITA CHAUDHRY Present: Ms. Savita Saxena, Advocate for the revenue. Mr. S.K.Mukhi, Advocate for the assessee. Ajay Kumar Mittal,J. 1. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 30.11.2010, Annexure A.3 passed by the Income Tax Appellate Tribunal, Chandigarh Bench ‘B’ Chandigarh (in short, “the Tribunal”) in ITA No.1038/CHD/2010, claiming following substantial questions of law:- i) Whether in the facts and circumstances of the case, the ITAT is legally correct in uploading the CIT(A)'s order that reference to valuation cell for determination of Fair Market Value (FMV) of a capital asset for the purposes of computation of capital gains could not be made by the AO, even when Section 55A of the Income Tax Act, 1961 empowers the AO to do so? ii) Whether in the facts and circumstances of the case, the Singh Gurbax 2014.05.21 17:33 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.230 of 2011 (O&M) 2 ITAT is legally correct in holding that Fair Market value of a capital asset has no relevance in order to determine full value of consideration for the purposes of computation of capital gains? iii) Whether in the facts and circumstances of the case, the ITAT is legally correct in upholding the CIT(A)'s order deleting the addition of ` 35,90,505/- made by the AO by taking the difference in sale consideration as per report of the Valuation Officer and the sale agreement (i.e. ` 63,40,505/- - ` 27,50,000/-), which addition has been made on the basis of a report received as a consequence of reference under section 55A?” 2. A few facts relevant for the decision of the controversy involved, as narrated in the appeal may be noticed. The assessee is an individual. He filed his return declaring an income of ` 10,46,271/- for the assessment year 2007-08 on 27.7.2007 which was processed under section 143(1) of the Act on 19.3.2008. The case was taken up for scrutiny and assessment was completed vide order dated 15.12.2009, Annexure A.1 at an income of `46,36,780/- making addition of ` 35,90,505/- on account of short term capital gain after adopting fair market value of building at ` 63,40,505/- as per technical report of the valuation Officer. Aggrieved by the order, the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 18.5.2010, Annexure A.2, the CIT(A) allowed the appeal holding that reference to valuation cell for determination of capital gains could not be made by the Assessing Officer. Not satisfied with the order, the revenue filed appeal before the Tribunal. Vide order dated 30.11.2010, Annexure A.3 the Tribunal dismissed the appeal. Hence the instant appeal by the revenue. Singh Gurbax 2014.05.21 17:33 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.230 of 2011 (O&M) 3 3. Learned counsel for the revenue submitted that since there was no collector rate which was prevalent, therefore,it was necessary to refer the matter to the DVO under Section 55A of the Act. 4. On the other hand, learned counsel for the respondent assessee submitted that reference under section 55A of the Act could only be made in respect of cases covered by provisions under Sections 45(IA), Section 45(2) and 45(4) of the Act. Sections 45 and 48 refer to full value of consideration. Unless there was a provision specifically providing that the fair market value will be treated to be full value of consideration, the fair market value cannot be taken as the full value of consideration as per Section 45 read with section 48 of the Act. Reliance was placed on judgments in CIT and another v. George Henderson & Co. Limited, (1967) 66 ITR 622 (SC) and CIT v. Gillanders Arbuthnot & Co. (1973) 87 ITR 407 (SC) and Delhi High Court judgment in CIT vs. Smt. Nilofer I.Singh, (2009) 309 ITR 233. 5. After hearing learned counsel for the parties, we do not find any merit in the appeal. The primary question that arises for consideration in the appeal is whether the Assessing Officer was justified in making a reference to the DVO under Section 55A of the Act for ascertaining the fair market value of the capital asset which was transferred. 6. Identical issue has been considered in ITA No.463 of 2010 (Commissioner of Income Tax III, Ludhiana v. Shri Dharam Pal Aggarwal, Prop. Shakti International, K-59, Sarabha Nagar, Ludhiana) decided today wherein it has been held that 'full value of consideration' appearing in section 48 of the Act does not have any reference to the fair market value but to the consideration referred to in the sale deeds as the sale Singh Gurbax 2014.05.21 17:33 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.230 of 2011 (O&M) 4 price of the assets which have been transferred. Further, it was concluded that reference under Section 55A of the Act to the Valuation Officer for ascertaining the fair market value of the capital asset was unjustified. For the detailed reasons recorded therein, the substantial questions of law are answered against the revenue and in favour of the assessee. Consequently, the appeal is dismissed. (Ajay Kumar Mittal) Judge March 05, 2014 (Anita Chaudhry) 'gs' Judge Singh Gurbax 2014.05.21 17:33 I attest to the accuracy and integrity of this document High Court Chandigarh "