ITA N o .67/ RPR/ 2013 Assessment Year 2008 - 09 Page 1 of 10 IN INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR [Coram: Pramod Kumar AM and C.M. Garg JM] ITA No.67/RPR/2013 Assessment Years: 2008-09 Seema Chadha .Appellant Gulmohar, Minocha Colony, Mungeli Road, Bilaspur (CG) [PAN: AFLPC 0987 J] Vs. Asstt. Commissioner of Income Tax Circle-1(1), Bilaspur. ... . Respondent Appearances by: S.R. Rao, for appellant Shital Shaswat Verma, for respondent Date of concluding hearing: 22.06.2016 Date of pronouncing order : 21.09.2016 ORDER Per Pramod Kumar, AM: 1. By way of this appeal, assessee appellant has challenged correctness of order dated 11.01.2103, passed by learned CIT(A), Bilaspur, in matter of assessment under section 143(3)/147 of Income Tax Act, 1961 for assessment year 2008-09. 2. Grievances raised by assessee are as follows :- 1. Id. CIT (Appeals) is not justified in upholding validity of proceedings u/s.147 of Income-tax Act 1961. 2. Id. CIT is not justified in upholding validity of reference made u/s.55A specifically when provisions, as prevailing on date of I TA N o .6 7/ RP R/ 2 01 3 As s ess m e nt Ye r: 20 08 - 0 9 Page 2 of 10 reference, authorize such reference only when value of asset as estimated made by registered valuer is less than its fair market value. 3. Id. CIT (Appeals) is not justified in confirming validity of learned DVO's Report, which was adopted by A.O., for making assessment as learned DVO has estimated value of asset as on 1.4.1981 on basis of irrelevant considerations and non-comparable sale instances and without disposing off appellant's objections by passing speaking order. 4. Id. CIT(A) is not justified in confirming additions made by A.O. to returned income on basis of DVO's report and in upholding income assessed by A.O. at Rs.45,84,024/-. 5. order of Id. CIT(A) is bad in law and on facts. 3. When this appeal was called out for hearing, learned representatives fairly agreed that whatever we decide in case of Smt. Seema Chadha Vs. ACIT (ITA No.66/RPR/13) will apply mutatis mutandis in this case as well. 4. Vide our order of even date, we have upheld plea of assessee in said case and reasoned as follows: 3. We have heard rival contentions, perused material on record and duly considered facts of case in light of applicable legal position. 4. Section 55A, as it stood prior to substitution of words is at variance with its fair market value for words is less than its fair market value w.e.f. 1st July 2012, did not permit reference being made to DVO in situation in which fair market value of asset as on 1.4.81 was more than fair market value claimed by assessee. very reference to Section 55A was thus illegal and devoid of any legally sustainable basis. fact that assessee herself requested for such reference, as has been highlighted by Assessing Officer time and again, would not clothe this reference with legality. Assessing Officer cannot capitalize out of ignorance of assessee. sense of fairplay by field officers towards taxpayers is not act of benevolence by field officers, but it is minimum civilized behaviour that is required to be extended to taxpayers. If authority is needed even for justifying these basics, one need not look beyond circulars issued by CBDT itself. In Circular No. 14, which has been taken note of by Hon ble Bombay High Court in case of Dattatraya Gopal Bhotte vs. CIT (1984) 150 ITR 460 (Bom), Board has these words of advice for field officers : I TA N o .6 7/ RP R/ 2 01 3 As s ess m e nt Ye r: 20 08 - 0 9 Page 3 of 10 "..................Officers of Department must not take advantage of ignorance of assessee as to his rights. It is one of their duties to assist taxpayer in every reasonable way, particularly in matter of claiming and securing any relief and in this regard officers should take initiative in guiding taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would in long run benefit Department for it would inspire confidence in him that he may be sure of getting square deal from Government........" 5. very reference to DVO was thus vitiated in law and report so obtained cannot be put against assessee. There is nothing more than DVO report, on facts of present case, to disturb valuation adopted by Assessing Officer, and that DVO report is devoid of any legal basis. impugned action of Assessing Officer, therefore, cannot be sustained. 6. While on this issue, it is useful to take note of one more aspect of matter. Admittedly, even DVO report is based on comparable sale instances as per records of registration office but so far as situation prevailing as on 1.4.1981 is concerned, it is not common knowledge that underhand dealings in real estate transactions were more of rule than exception, and, for this short reason alone, comparable sale instances cannot be conclusively fair indicator of actual prevailing market rates. It was because of this widespread practice of understatement of sale consideration in large number of cases that legal remedies were introduced from time to time. Such being facts, sale consideration instances alone, as admittedly is basis of DVO report, cannot be sound basis of valuation. In any event, this issue is now covered, in favour of assessee in case of ACIT Vs Kabir Chadha and vice versa (order dated 19.12.2014) wherein coordinate bench has observed as follows: 5. We have heard rival submissions and perused material before us. undisputed facts of case are that assessee had sold part of land, that he got it valued by registered valuer, that he adopted value given in valuation report of plot as on 01.04.1981, that AO was of opinion that value shown by assessee was very high and thus he had tried to avoid pay taxes on long term capital gains, that AO collected information from office of registrar, that considering material received from state revenue authorities he reduced 3 ITA No. 180/BLPR/2011 Kabir Chadhha value of plot as on 01.04.1981,that he computed indexed cost of acquisition at Rs.75,186/- in hands of assessee against Rs.43,85,939/-claimed by him, that it resulted in addition of Rs.43,10,753/- to returned income of assessee. issue in short, before us, is to decide what was FMV of plot of land in question as on 01.04.1981. I TA N o .6 7/ RP R/ 2 01 3 As s ess m e nt Ye r: 20 08 - 0 9 Page 4 of 10 Here, we would like to refer to provisions of section u/s.55A of Act. provisions of section were introduced, w.e.f. 01.01.1973, by Taxation Laws (Amendment) Act 1972.Section reads as under "55A. Reference to Valuation Officer.- With view to ascertaining fair market value of capital asset for purposes of this Chapter, AO may refer valuation of capital asset to Valuation Officer- (a) in case where value of asset as claimed by assessee is in accordance with estimate made by registered valuer, if AO is of opinion that value so claimed is less than its fair market value ; (b) in any other case, if AO is of opinion- (i) that fair market value of asset exceeds value of asset as claimed by assessee by more than such percentage of value of asset as so claimed or by more than such amount as may be prescribed in this behalf; or (ii) that having regard to nature of asset and other relevant circumstances, it is necessary so to do. By amendment, w.e.f. 01.07.2012, words "is less than its fair market value" were substituted by words "is at variance with its fair market value". For better understanding of purpose of introducing it in Act, one has to take note of Explanatory Notes to section. Circular No.96 of 25.11.1972 is relevant in this regard as it reads as under: "Under new provisions, Income Tax Officer may refer valuation of any capital asset to VO in case where assessee has got assets valued by registered valuer and Income Tax Officer is of opinion that value as estimated by registered valuer (i.e., person registered as valuer under section 34AB of Wealth-tax Act)is less than fair market value of asset. Other cases in which reference may be made to VO would be where Income Tax Officer is of opinion that fair market value of asset exceeds value of assets as claimed by more than 15 percent of value claimed or by more than Rs. 25,000, whichever is less or where, having regard to nature of asset and relevant circumstances, Income tax Officer considers it necessary to do so. It will be seen that in case where assessee has opted for substitution of cost of acquisition of asset by its fair market value as on January 1,1954, fair market value as claimed by him may be higher than its actual fair market value. provisions of section 55A(a) and (b)(i) will therefore, not apply in such case. It will, however, be open to I TA N o .6 7/ RP R/ 2 01 3 As s ess m e nt Ye r: 20 08 - 0 9 Page 5 of 10 Income-tax Officer to make reference to VO under section 55A(b)(ii)." perusal of Memorandum explaining reasons behind introduction of section and explanatory notes for introduction of amendment to section w.e.f.01.07.2012 proves that section was inserted in Act with deliberate object of empowering AO to find out market value of capital assets for purpose of Chapter IV. In our opinion, intention of Legislature is obvious that AO can make reference to DVO for determining value of capital asset. We are of opinion that for purpose of ascertaining FMV of capital asset, statute has provided two group of cases namely: (i) case mentioned at clause (a) above, where value of asset as claimed by assessee is in accordance with estimate by registered valuer ; and (ii) other cases mentioned at clause (b) above. In cases mentioned as (i) above, AO assumes jurisdiction, when there is valuation report in respect of asset and assessee adopts value of asset in accordance with such estimation and also if AO is of opinion that value claimed by assessee is less than FMV. In other cases mentioned as (ii) above and which are covered by provisions of clause (b) of section 55A,the AO is empowered to make reference to Valuation Officer, where AO is of opinion that FMV of asset exceeds value of assets as claimed by more than 15 % of value claimed or by more than Rs. 25,000, wherever is less or where, having regard to nature of asset and other relevant circumstance, AO considers it necessary to do so. In other words, section deals with cases where basis for FMV of asset is valuation report itself and assessee fails to adopt value of asset in accordance with estimate of such valuation report and cases where basis for such FMV of asset is other than valuation report. other situation envisages existence of such circumstances, that to make reference is justifiable. In such case, nature of assets and other relevant factors also play decisive role. reference can be made to VO, under section 55A,clause (b) sub-clause (ii),only if AO records existence of such other relevant circumstances on basis of which he forms such opinion. In other words, reference can be made if certain pre- conditions exit. For invoking provisions of section 55A of Act formation of opinion of AO that value claimed by assessee is less than its FMV is sine qua non. Recording reasons after order of reference, for valuation of registered valuer, is not substitute for pre decisional formation of opinion. (330 ITR506). In matter of Hotel Joshi, Hon ble Rajasthan High Court has held that for invoking sub-clause (ii) of clause (b) of section 55A of Act, AO I TA N o .6 7/ RP R/ 2 01 3 As s ess m e nt Ye r: 20 08 - 0 9 Page 6 of 10 is required to form opinion on basis of material on record that reference to DVO for ascertaining FMV of asset and having regard to nature of asset and other relevant circumstances (242 ITR 478). It will be useful to discuss few cases, dealing with section 55A of Act. In case of Anant Mills Ltd. reference under clause (b)(ii) of section 55A of Act was made by AO and asset in question was piece of land. Deciding writ petition filed by assessee, Hon ble Gujarat High Court held that reference could have been made, if AO was of opinion that having regard to nature of asset and other relevant circumstances, it was necessary so to do, that there was nothing special about nature of asset which would have justified AO to make reference to VO. No other relevant circumstances could be pointed out, that no attempt was made to justify action of AO under any other provision of Sec.55A.Finally, it was held by Hon ble Court that reference to DVO was not in accordance with law and it had to be quashed.(209 ITR 568). Hon ble Gujarat High Court in case of Hinaben Jayantilal Shah(310ITR31)has held that as per clause(b) of section 55A of Act, AO has to record opinion that (i) FMV of asset exceeds value of asset as claimed by assessee by more than such percentage or by more than such amount as may be prescribed ;or (ii) having regard to nature of asset and other relevant circumstances, it is necessary to make such reference. Clause (b) of section 55A of Act can be invoked only when value of asset claimed by assessee is not supported by valuation report of registered valuer. We would also like to discuss decision of Hon ble Bombay High Court, delivered in case of Puja Prints(360ITR697).In that case, assessee had claimed value of property as on 01. 04.1981 at Rs.35.99 lakhs on basis of report of government valuer. AO referred issue of valuation to DVO, who valued property at Rs. 6.68 lakhs as on First April, 1981.Consequently,the AO enhanced taxable capital gains of assessee. In appellate proceedings, FAA decided issue against it. Order of FAA was challenged before Tribunal. Deciding issue of FMV, Tribunal held that in view of section 55A it was not permissible for AO to make reference to DVO for purpose of valuation, as value of property declared by assessee was not less than its FMV. Department agitated issue before Hon ble High Court. Upholding order of Tribunal and following judgment of Daulal Mohta (HUF)(360ITR680) Hon ble Court held as under: There was no dispute that value adopted by assessee of property at Rs. 35.99 lakhs was much more than fair market value of Rs.6.68 lakhs even as determined by Departmental Valuation Officer. In fact, AO referred I TA N o .6 7/ RP R/ 2 01 3 As s ess m e nt Ye r: 20 08 - 0 9 Page 7 of 10 issue of valuation to Department - al VO only because in his view valuation of property as on 1981 as made by assessee was higher than fair market value. Therefore, invocation of section 55A(a) was not justified. (ii) That amendment to section 55A(a) of Act in 2012 by which words "is less than its 5 ITA No. 180/BLPR/2011 Kabir Chadhha fair market value" were substituted by words "is at variance with its fair market value" was made effective only from July 1,2012.Parliament has not given retrospective effect to amendment. Therefore, law to be applied in assessee's case was section 55A(a) as existing during period relevant to assessment year 2006-07.At relevant time, very clearly reference could be made to Departmental VO only if value declared by assessee was in 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., case not covered by section 55A(a). There was no dispute that issue was covered by section 55 A(a).Therefore, recourse could not be had to residuary clause provided in section 55 A(b)(ii).Therefore, Central Board of Direct Taxes Circular dated November 25 1972 (see [1973] 91 ITR (St.) 1), could have no application in face of clear position in law. Hence, reference to Departmental VO by AO ,was not sustainable in view of section 55A(a)(ii). following questions of law have been formulated by Revenue for consideration by this court : (a) Whether, on facts and in circumstances of case and in law, Income-tax Appellate Tribunal was right in holding that reference made by AO to VO per se is bad in law ? Further, whether Income-tax Appellate Tribunal was justified in observing that reference to DVO under section 55A of Act is to be made when value of property disclosed by assessee is less than fair value and not vice versa thereby ignoring provisions of section 55A(b)(ii) of Act, and paragraphs 26 to 28 of Circular No.96, dated November 25, 1972, of Central Board of Direct Taxes (see [1973] 91 ITR (St.) 1) ? (b) Whether, on facts and in circumstances of case and in law, Income-tax Appellate Tribunal was right in directing AO to accept valuation given by respondent as fair market value on basis of registered valuer's report and workout capital gains ? (c) Whether, on facts and in circumstances of case and in law, Income-tax Appellate Tribunal was right in holding that ownership of property is required to be examined vis-avis various partnership deeds entered into by I TA N o .6 7/ RP R/ 2 01 3 As s ess m e nt Ye r: 20 08 - 0 9 Page 8 of 10 firm and to that limited extent restoring issue to file of AO for deter-mining date of acquisition by firm for purpose of indexation, particularly when this issue was not raised either before AO or Commissioner of Income-tax (Appeals) and, hence, did not arise from order of Commissioner of Income tax (Appeals) ? We have considered rival submissions. We find that impugned order dated 18.02.2011, allowing respondent- assessee's appeal holding that no reference to Departmental VO can be made under section 55A of Act only follows decision of this court in matter of Daulal Mohta (HUF) (supra).The Revenue has not been able to point out how aforesaid decision is inapplicable to present facts nor has Revenue pointed out that decision in Daulal Mohta (HUF) (supra) has not been accepted by Revenue. On aforesaid ground alone, this appeal need not be entertained. However, as submissions were made on merits, we have independently examined same. We find that section 55A(a) of Act very clearly at relevant time provided that reference could be made to Departmental VO only when value adopted by assessee was less than fair market value. In present case, it is undisputed position that value adopted by respondent- assessee of property at Rs. 35.99 lakhs was much more than fair market value of Rs. 6.68 lakhs even as determined by Departmental Valuation Officer. In fact, AO referred issue of valuation to Departmental VO only because in his view valuation of property as on 1981 as made by respondent-assessee was higher than fair market value. In aforesaid circumstances, invocation of section 55A(a) of Act is not justified. contention of Revenue that in view of amendment to section 55A(a) of Act in 2012 by which words "is less than its fair market value" is substituted by words "is at variance with its fair market value" is clarificatory and should be given retrospective effect. This submission is in face of fact that 2012 amendment was made effective only from July 1, 2012. Parliament has not given retrospective effect to amendment. Therefore, law to be applied in present case is section 55A(a) of Act as existing during period relevant to assessment year 2006- 07. At relevant time, very clearly reference could be made to Departmental VO only if value declared by assessee is in opinion of AO less than its fair market value. contention of Revenue that reference to Departmental VO by AO is sustainable in view of section 55A(a)(ii) of Act is not acceptable. This is for reason that section 55A(b) 6 ITA No. 180/BLPR/2011 Kabir Chadhha of Act very clearly states that it would apply in any other case, i.e., I TA N o .6 7/ RP R/ 2 01 3 As s ess m e nt Ye r: 20 08 - 0 9 Page 9 of 10 case not covered by section 55A(a) of Act. In this case, it is undisputable position that issue is covered by section 55A(a) of Act. Therefore, resort cannot be had to residuary clause provided in section 55A(b)(ii) of Act. In view of above, Central Board of Direct Taxes Circular dated November 25, 1972, can have no application in face of clear position in law. This is so as understanding of statutory provisions by Revenue as found in Circular issued by Central of Direct Taxes is not binding upon assessee and it is open to assessee to contend to contrary. contention of Revenue that AO is entitled to refer issue of valuation of property to Departmental VO in exercise of its power under sections 131, 133(6) and 142(2) of Act is entirely based upon decision of Guwahati High Court in Smt. Amiya Bala Paul (supra).However, apex court in Smt. Amiya Bala Paul(supra) has reversed decision of Guwahati High Court and held that if power to refer any dispute with regard to valuation of property was already available under sections 131(1), 136(6) and 142(2) of Act, there was no need to specifically empower AO to do so in circumstances specified under section 55A of Act. It further held that when specific provision under which reference can be made to Departmental VO is available, there is no occasion for AO to invoke general powers of enquiry. In view of above and particularly in view of clear provisions of law as existing during period relevant to assessment year 2006-07, we are of view that questions (a) and (b) do not raise any substantial question of law. In our opinion after above order of Hon ble Bombay High Court, there is no confusion with regard to matters where assessee adopts value suggested by registered valuer. If FMV adopted by him is in accordance with valuation report i.e. not less than valuation report till 01.07.2012, than property in question cannot be referred for valuation by AO. record available with us, does not indicate as to what was opinion formed by AO before making reference to DVO. Therefore, it is apparent that he had, at no point of time, formed opinion that FMV determined by valuer. In other words, it is not clear as to whether reference was made under clause 55A(a) or 55A(b)(ii) of Act and if it was made under section 55A(b)(ii) then what were relevant circumstances for making such reference. Recording of reasons for invoking particular section of Act and justification for invoking specific clause are not available and nor were they brought to our notice. As value shown by assessee was not less than FVM, so, in our opinion, there was no justification for making any reference to revenue authorities of state government, by AO in year under consideration. Amendment to section 55A of Act is effective from 01.07. 2012 and as per that now reference can be made if there is I TA N o .6 7/ RP R/ 2 01 3 As s ess m e nt Ye r: 20 08 - 0 9 Page 10 of 10 variance in FMV. issue before us pertain to AY.2007-08. Respectfully, following judgments of Hon ble Bombay High Court, we decide effective ground of appeal against AO. 5. We see no reasons to take any other view of matter than view so taken by us in above case. Accordingly, impugned additions in computation of capital gains, on basis of DVO report on valuation of transferred asset as on 1.4.1981, must stand deleted. We direct so. 6. In result, appeal is allowed. Pronounced under rule 34(4) of Appellate Tribunal Rules 1963 today on 21st day of September, 2016. Sd/- Sd/- C.M. Garg Pramod Kumar (Judicial Member) (Accountant Member) Dated: 21 st day of September, 2016. PBN/* Copies to: (1) appellant (2) respondent (3) CIT (4) CIT(A) (5) DR (6) Guard File By order Assistant Registrar Income Tax Appellate Tribunal Raipur Bench, Raipur Seema Chadha v. Asstt. Commissioner of Income-tax Circle-1(1), Bilaspur