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2016 (8) TMI 1455 - AT - Income TaxCapital gain computation - reference to DVO - scope of amendment in section 55A - rectification u/s 154 - HELD THAT - Such amendment to provisions of section 55A(a) is not retrospective and prospective therefore merely because the AO has made a reference to the DVO after the date of such amendment for an assessment year prior to the amendment is a highly debatable issue. The Hon ble Supreme Court in the case of T.S. Balaram ITO Vs. Volkart Brothers and Others 1971 (8) TMI 3 - SUPREME COURT has held that a mistake apparent on the record must be an obvious patent mistake and not something which can be established by a long run process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. Since in the instant case the issue as to whether the AO can make a reference to the DVO u/s.55A(a) of the I.T. Act after the amendment brought in the statute book w.e.f. 01-07-2012 but for an assessment year prior to that date where the fair market value adopted by the assessee as on 01-04-1981 is more than the fair market value determined by the AO is a highly debatable issue therefore following the decision of Hon ble Supreme Court in the case of T.S. Baralam ITO Vs. Volkart Brothers and Others (Supra) I hold that the CIT(A) was not justified in passing the order u/s.154 of the I.T. Act in the instant case which in my opinion is a highly debatable issue. Accordingly set aside the order of the CIT(A) passed the order u/s.154 of the I.T. Act. Grounds raised by the assessee are accordingly allowed.
Issues Involved:
1. Validity of reference to Departmental Valuation Officer (DVO) under Section 55A of the Income-tax Act. 2. Applicability of the amendment to Section 55A effective from 01-07-2012. 3. Scope of rectification under Section 154 of the Income-tax Act. Issue-wise Detailed Analysis: 1. Validity of Reference to DVO under Section 55A: The primary issue was whether the Assessing Officer (AO) was justified in referring the valuation of the property to the DVO under Section 55A of the Income-tax Act. The AO had made this reference because he believed the fair market value (FMV) declared by the assessee was higher than the FMV determined by the DVO. The CIT(A) initially deleted the addition made by the AO, relying on the decision of the Hon'ble Bombay High Court in the case of Puja Prints, which held that a reference under Section 55A could only be made if the value declared by the assessee was less than the FMV. The Tribunal upheld this view, stating that the AO's reference to the DVO was invalid as the conditions stipulated in Section 55A(a) were not satisfied. 2. Applicability of the Amendment to Section 55A Effective from 01-07-2012: The CIT(A) later rectified her order under Section 154, noting that the reference to the DVO was made after the amendment to Section 55A, which substituted the words "is less than the fair market value" with "is at variance with its fair market value," effective from 01-07-2012. However, the Tribunal found that the amendment was not retrospective and applied only from the date it came into effect. Since the assessment year in question was 2009-10, the Tribunal held that the provisions of Section 55A as they existed before the amendment should apply. The Tribunal cited the Hon'ble Bombay High Court's decision in Puja Prints, which clarified that the amendment was prospective and not retrospective. 3. Scope of Rectification under Section 154: The Tribunal also addressed whether the CIT(A) was justified in rectifying her order under Section 154. It was argued that the issue of whether the AO could refer the matter to the DVO after the amendment for an assessment year prior to the amendment was a highly debatable issue. The Tribunal agreed, stating that rectification under Section 154 is not permissible for debatable issues. The Tribunal referenced the Hon'ble Supreme Court's decision in T.S. Balaram, ITO Vs. Volkart Brothers and Others, which held that a mistake apparent on the record must be an obvious patent mistake and not something that requires a long process of reasoning. Given that the issue was debatable, the Tribunal concluded that the CIT(A) was not justified in passing the order under Section 154. Conclusion: The Tribunal allowed the appeals filed by the assessees, setting aside the CIT(A)'s order passed under Section 154 and upholding the original order that deleted the addition made by the AO on account of long-term capital gain. The Tribunal emphasized that the reference to the DVO was invalid under the provisions of Section 55A as they existed during the relevant assessment year, and the issue was too debatable to be addressed through rectification proceedings.
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