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2018 (7) TMI 2029 - AT - Income TaxLTCG of immovable property - reference to DVO - assessee has submitted a valuation report of Registered Valuer who has valid the property based on sale instances whereas the AO adopted the fair market value of property based on DVO report - Whether AO was justified in applying the provisions of Section55A(b)(ii) of the Act at relevant point of time? - scope of amendment - HELD THAT - Reference to DVO can be made in two situations; first, the value is adopted based on report of registered valuer and second, in any other case. In assessee's case, fair market value adopted as on 01.04.1981 is based on valuation report of registered Valuer. AO should have applied the provisions of 55A(a) and according to said provision, fair market value claimed by assessee can be rejected only if fair market value is less than fair market value as per AO. As fair market value claimed by assessee as on 1st April, 1981 is higher than that estimated by AO provisions of 55A should not be invoked. The provisions of Section 55A(b)(ii) as resorted by Assessing Officer for referring the matter to DVO can be invoked only in case the valuation report is not submitted by assessee. Thus, reference made by Assessing Officer u/s.55A(b)(ii) was not correct. Where the fair market value of property is shown more than the Fair Market Value, the AO cannot refer the same to valuation relating to assessment year falling before the date of 01.07.2012. Since the assessment made is for the assessment year 2010-11, the AO cannot make reference to DVO for the valuation of property, where value of property is not less than the value of fair market value. This view is supported with decision of CIT v. Puja Prints 2014 (1) TMI 764 - BOMBAY HIGH COURT wherein it was held that the Assessing Officer referred the issue of valuation to the Departmental Valuation Officer only because in his view the valuation of property as on 1981 as made by the assessee was higher than the fair market value. Therefore, invocation of section 55A (a) was not justified. Contention of the Learned Departmental Representative that reference was made after 01.07.2012 is not tenable in law as the amendment made in section is substantive in nature which is relevant to assessment year commencing after the date of amendment i.e. F.Y. 2012-13 relevant to A.Y. 2013-14, hence, it is not applicable for the assessment year 2010-11, as the assessment involved is prior to period of 01.07.2012. AO was not justified in referring to DVO or adopting valuation based on valuation report. The amendment in section 55A was qua prior period to 01.07.2012 and not qua proceeding prior to 01.07.2012. - Decided in favour of assessee.
Issues Involved:
1. Justification of the Assessing Officer (AO) in making the addition of ?5,92,550 on account of long-term capital gain by referring the valuation to the Departmental Valuation Officer (DVO) under Section 55A(a) of the Income Tax Act, 1961, for the assessment year 2010-11. Detailed Analysis: 1. Reference to Valuation Officer and Applicability of Section 55A(a): The primary issue revolves around the AO's decision to refer the valuation of an immovable property to the DVO and the subsequent addition of ?5,92,550 to the assessee's long-term capital gain. The assessee sold a property and declared its fair market value (FMV) based on a registered valuer’s report. The AO, however, referred the valuation to the DVO, who estimated a significantly lower FMV, leading to the disputed addition. 2. Assessee's Argument: The assessee argued that the provisions of Section 55A(a), which allow for such a reference if the AO believes the declared value is less than the FMV, were not applicable for the assessment year 2010-11 as the amendment effective from 01.07.2012 did not apply retrospectively. The assessee relied on several judicial precedents, including CIT v. Puja Prints and CIT v. Daulal Mohta (HUF), which held that the AO could not refer the matter to the DVO if the declared value was more than the FMV. 3. Revenue's Argument: The Revenue contended that since the reference to the DVO was made after 01.07.2012, the amended provisions of Section 55A(a) applied, allowing the AO to make such a reference if the declared value varied from the FMV. 4. Tribunal's Findings: The Tribunal examined the rival submissions and relevant case laws. It observed that the assessee had submitted a valuation report from a registered valuer, which the AO disregarded in favor of the DVO's report. The Tribunal noted that the law applicable at the time of the assessment year 2010-11 did not permit the AO to refer the valuation to the DVO if the declared value was higher than the FMV. 5. Legal Precedents and Interpretation: The Tribunal referred to the judgments of the Bombay High Court in CIT v. Puja Prints and CIT v. Daulal Mohta (HUF), which clarified that the AO could not invoke Section 55A(a) if the declared value was more than the FMV. The Tribunal also cited the Gujarat High Court's decision in CIT v. Gauragiben S Shodhan, which reinforced this interpretation. Additionally, it relied on the Pune Tribunal's decision in ACIT v. Bhima Dada Kharate and the Mumbai Tribunal's decision in Pradeep G. Vora v. ITO, which held that the amendment to Section 55A(a) effective from 01.07.2012 was not retrospective. 6. Conclusion: The Tribunal concluded that the AO was not justified in referring the valuation to the DVO or adopting the DVO's valuation for the assessment year 2010-11. The amendment to Section 55A(a) effective from 01.07.2012 did not apply to assessments for periods before this date. Consequently, the Tribunal allowed the assessee's appeal, setting aside the addition of ?5,92,550. Judgment: The appeal of the assessee was allowed, and the order pronounced in the open Court on 11.07.2018 concluded that the AO's reference to the DVO for the valuation of the property was not justified for the assessment year 2010-11.
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