2016 (2) TMI 696 - AT - Income Tax

Reference of matter to DVO - AO authority - Held that - AO has no jurisdiction to refer the matter to the DVO for determination of the value since the value declared by the assessee is more than the fair market value. We hold and direct accordingly. The ground raised by the assessee is accordingly allowed. - Decided in faovur of the assessee

Issues Involved:
1. Determination of Indexed Cost of Acquisition.
2. Validity of Reference to the Departmental Valuation Officer (DVO) under Section 55A of the Income Tax Act.
3. Jurisdiction of Assessing Officer (AO) to Refer to the DVO.

Detailed Analysis:

1. Determination of Indexed Cost of Acquisition:
The primary issue revolves around the determination of the indexed cost of acquisition of agricultural land as on 01-04-1981. The assessee declared a long-term capital loss of Rs. 1,04,12,335/- after claiming deductions under Sections 54B and 54F. The AO noted discrepancies in the valuation provided by the assessee's registered valuer, who cited two sale instances of developed land to determine the cost at Rs. 310/- per sq. mtr. However, the AO found that the land transferred by the assessee was agricultural and situated over 10 km away from Pune Railway Station/GPO. The AO's investigation revealed sale instances of agricultural land in the same area with values ranging from Rs. 10/- to Rs. 20/- per sq. mtr. Consequently, the AO rejected the valuation of Rs. 310/- per sq. mtr and determined the indexed cost of acquisition at Rs. 15/- per sq. mtr, resulting in a long-term capital gain of Rs. 1,45,46,250/-.

2. Validity of Reference to the Departmental Valuation Officer (DVO) under Section 55A:
The assessee contested the AO's reference to the DVO for valuation under Section 55A, arguing that the AO lacked jurisdiction since the value declared by the assessee was not less than the fair market value. The CIT(A) initially directed the AO to adopt the DVO's value of Rs. 75/- per sq. mtr. However, the assessee cited the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Puja Prints, which held that the amendment to Section 55A(a) in 2012 was not retrospective and that the AO could only refer to the DVO if the declared value was less than the fair market value.

3. Jurisdiction of Assessing Officer (AO) to Refer to the DVO:
The Tribunal examined whether the AO had the jurisdiction to refer the matter to the DVO. The Tribunal found that the AO's reference was invalid since the value declared by the assessee was more than the fair market value. The Tribunal cited several precedents, including the Pune Bench's decision in the case of Smt. Vijaya Chandrakant Tupe, which held that the AO could not refer to the DVO if the declared value exceeded the fair market value. The Tribunal concluded that the AO lacked jurisdiction to make the reference and directed that the AO's valuation be set aside.

Conclusion for ITA No.530/PN/2014:
The Tribunal allowed the assessee's ground of appeal, holding that the AO had no jurisdiction to refer the matter to the DVO as the value declared by the assessee was more than the fair market value. The other grounds raised by the assessee were dismissed as not pressed.

Conclusion for ITA No.531/PN/2014 and ITA No.1173/PN/2014:
The Tribunal applied the same reasoning as in ITA No.530/PN/2014, allowing the ground of appeal regarding the AO's lack of jurisdiction to refer to the DVO. The other grounds were dismissed as not pressed.

Final Judgment:
All three appeals filed by the assessee were partly allowed. The Tribunal pronounced the order in the open court on 15-01-2016.

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