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2014 (10) TMI 473 - AT - Income TaxDetermination of FMV of plot of land Calculation of LTCG Held that - No reference to the DVO can be made u/s 55A of the Act - section 55A(a) of the Act very clearly at the relevant time provided that a reference could be made to the DVO only when the value adopted by the assessee was less than the fair market value - the value adopted by the respondent-assessee of the property at ₹ 35. 99 lakhs was much more than the fair market value of ₹ 6. 68 lakhs even as determined by the DVO - the AO referred the issue of valuation to the DVO only because in his view the valuation of the property as on 1981 as made by the respondent-assessee was higher than the fair market value. In the aforesaid circumstances, the invocation of section 55A(a) of the Act is not justified - section 55A(a) of the Act as existing during the period relevant to the AY 2006-07 - very clearly reference could be made to Departmental VO only if the value declared by the assessee is in the opinion of AO less than its fair market value - It is not clear as to whether the reference was made under clause 55A(a) or 55A(b)(ii) of the Act and if it was made under section 55A(b)(ii) then what were the relevant circumstances for making such a reference - Recording of reasons for invoking a particular section of the Act and justification for invoking the specific clause are not available and nor were they brought to our notice - As the value shown by the assessee was not less than the FVM, there was no justification for making any reference to the DVO, by the AO in the year under consideration. Amendment to the section 55A of the Act is effective from 01. 07. 2012 thus, the order of the FAA is set aside Decided in favour of assessee. Benefit of set off of unabsorbed depreciation Held 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 following the decision in Commissioner of Income-tax, Hisar Versus G. TM Synthetics Ltd., Sirsa 2011 (2) TMI 150 - PUNJAB AND HARYANA HIGH COURT - Section 32(2) of the Act relates to carry forward of unabsorbed depreciation - the unabsorbed depreciation allowance could be set off against the income under any other head even where the business was not carried on Decided in favour of assessee.
Issues Involved:
1. Validity of Assessment 2. Merits of the Case Detailed Analysis: 1. Validity of Assessment: The primary contention of the assessee was that the assessment made by the Income Tax Officer (ITO) was in total disregard of the directions of the Honorable ITAT. The CIT (Appeals) upheld the ITO's assumption of jurisdiction to refer the matter of valuation to the District Valuation Officer (DVO), which the assessee argued was outside the ambit of Section 55A of the Income Tax Act. The CIT (Appeals) also considered the DVO's report as valid evidence and did not provide a reasonable opportunity for the assessee to respond, which was communicated only via a cell phone call at the end of the month when the assessment was getting barred by limitation. Additionally, the CIT (Appeals) upheld the assessment on the grounds that no unabsorbed depreciation would be available to the appellant, ignoring the legal position brought to her notice. The Tribunal found that the ITO did not comply with the directions of the Tribunal to conduct a proper enquiry and bring sufficient material on record to determine the fair market value (FMV) as on 01/04/1981. Instead, the ITO referred the matter to the DVO. The Tribunal concluded that the ITO's action of making a reference to the DVO was not as per the directions of the Tribunal and thus agreed with the assessee that the order of the Tribunal was not followed by the ITO while passing the order u/s 143(3) read with Section 254 of the Act for the first time. The Tribunal also found that the reference made by the ITO to the DVO u/s 55A of the Act was invalid, especially when a report of a registered valuer was available and the FMV shown in it was higher. 2. Merits of the Case: The CIT (Appeals) confirmed the market value of the land as on 01/04/1981 based on the DVO's report at Rs. 40.77 per square metre, which was adopted in the earlier assessment order, and accordingly confirmed the long-term capital gain (LTCG) at Rs. 84,95,945. The assessee argued that the CIT (Appeals) erred in confirming the above and that the reference to the DVO could not have been under Section 55A of the Act. The assessee also contended that the CIT (Appeals) ignored the material and information available on record and that no reasonable opportunity was provided by the ITO to substantiate the claim made in the return of income regarding unabsorbed depreciation. The Tribunal noted that the CIT (Appeals) did not appreciate the material placed on record and failed to provide an opportunity to the assessee to substantiate the claim. The Tribunal also found that the ITO had not complied with the instructions of the Tribunal to gather relevant and sufficient material to support his case and determine the FMV of the property. Instead of collecting relevant data, the ITO made a reference to the DVO, which was not justified as per the Tribunal's directions. The Tribunal held that the ITO's reference to the DVO was not in accordance with law and reversed the order of the CIT (Appeals), deciding the first ground in favor of the assessee. Regarding the set-off of unabsorbed depreciation, the Tribunal found that the ITO and CIT (Appeals) had decided the issue against the assessee because it was not carrying out business activities during the year under appeal. However, the Tribunal noted that the continuation of business was not a pre-condition for allowing the carrying forward of unabsorbed depreciation. Citing judgments from the Hon'ble Madras High Court and the Hon'ble Punjab and Haryana High Court, the Tribunal concluded that the assessee was entitled to carry forward the unabsorbed depreciation and decided the second ground of appeal in favor of the assessee. Conclusion: The Tribunal allowed the appeal filed by the assessee, reversing the order of the CIT (Appeals) on both grounds: the validity of the assessment and the merits of the case, including the set-off of unabsorbed depreciation. The Tribunal emphasized the necessity for the ITO to comply with the Tribunal's directions and the legal provisions under Section 55A of the Income Tax Act.
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