2020 (8) TMI 189 - AT - Income Tax

Long term capital gain on sale of land - AO mandate to refer the matter to DVO for Fair Market Value - CIT -A deleted the addition as AO did not have mandate to refer the matter to DVO for Fair Market Value - HELD THAT - As far the FMV as on 4.09.2008 is concerned, the DVO has correctly valued the property as on 4.09.2008 at ₹ 40,20,54,000/ -, of which the appellant is a co-owner having share of 16,639 sq. mhos. Accordingly, the sale consideration of the appellant's share of the property @ ₹ 4806.67 (₹ 40,20,54,000/- divided by the total area of the property i.e. 83,645 sq. mtrs.) works out to ₹ 8,02,37,742/ -. Therefore, the sale consideration of the appellant's share of the property, as determined by the DVa, is taken at ₹ 8,02,37,742/-. As per the provisions of Section 55A of the Act for the year under consideration, reference can be made by the AO to the Valuation Officer for ascertaining the PMV of a capital asset where the AO is of the opinion that the value of the asset as claimed by the appellant, is less than its PMV. However, in the instant case, the AO has referred the matter to the DVO to verify the correctness of the value adopted by the Valuer's report as on 1.04.1981. This is not in line with the provisions of Section 55A of the Act as the section implies that the AO should be of the considered opinion that the value of asset claimed by the appellant is less than its PMV and not for any verification purpose. In the DVO's report, the PMV as on 1.04.1981 was determined at ₹ 68,45,000/- which was much lower than the valuation of the Approved Valuer of the aggregate amount of ₹ 2,27,08,814/-. Therefore, in light of the existing provisions of Section 55A of the Act, relevant for the A.Y. under consideration, the AO did not have the mandate to refer the matter for valuation of FMV as on 1.04.1981 to the DVO u/s 55A of the Act amendment to Section 55A of the Act by the Finance Act, 2012 wherein the words 'is less than its fair market value' was substituted by 'is at variance 'with its fair market value' is w.e.f. 1.07.2012 which was not applicable for the A.Y. in the instant case i.e.A.Y. 2010-11 with respect to seeking Valuation Report from the DVO for the FMV as on 1.04.1981. CIT(Appeals) has given a categoric findings on the issue after placing reliance on the various judicial pronouncements and therefore, there is no reason to interfere with the findings of the Ld. CIT(Appeals) and the same is thereby upheld. Thus, the grounds raised by revenue in the appeals are dismissed.

Issues Involved:
1. Deletion of addition made by the Assessing Officer (AO) under the head Long Term Capital Gain on sale of land.
2. Justification of AO's reference to the District Valuation Officer (DVO) for Fair Market Value (FMV) determination.
3. Adoption of cost of acquisition as per DVO's report.
4. Dismissal of appeals due to low tax effect as per recent CBDT Circular.

Issue-wise Detailed Analysis:

1. Deletion of Addition Made by AO Under Long Term Capital Gain:
The Revenue contested the deletion of the addition made by the AO under Long Term Capital Gain on the sale of land. The AO had assessed the Long Term Capital Gains at ?14,82,08,800/- for the sale of property, of which the assessee was a co-owner. During the assessment proceedings, the AO referred the property to the DVO to determine the FMV as on the date of sale and to verify the correctness of the cost of acquisition as on 01.04.1981. The Ld. CIT(Appeals) deleted the addition made by the AO, leading to the Revenue's appeal.

2. Justification of AO's Reference to DVO for FMV Determination:
The AO referred the matter to the DVO under Section 55A of the Income Tax Act, 1961, to ascertain the FMV of the property as on the date of sale and to verify the cost of acquisition as on 01.04.1981. The Ld. CIT(Appeals) held that the AO did not have the mandate to refer the matter to the DVO for FMV determination as per the provisions of Section 55A, which was applicable for the assessment year under consideration. The reference to the DVO was not in line with the provisions of Section 55A, as the AO should be of the opinion that the value of the asset claimed by the appellant is less than its FMV, not for verification purposes.

3. Adoption of Cost of Acquisition as per DVO's Report:
The DVO's report determined the FMV of the property as on 01.04.1981 at ?68,45,000/-, which was lower than the value declared by the appellant. The Ld. CIT(Appeals) adopted the valuation of the Approved Valuer, which was ?50,91,000/-, as the cost of acquisition. The Ld. CIT(Appeals) placed reliance on various judicial pronouncements, including the decisions of the Hon'ble Bombay High Court and Pune ITAT, which held that where the value determined by the DVO as on 01.04.1981 was lesser than the value declared by the appellant, reference to the DVO under Section 55A was not warranted.

4. Dismissal of Appeals Due to Low Tax Effect as per Recent CBDT Circular:
The appeals in ITA No.1934/PUN/2019, ITA No.1942/PUN/2019, and ITA No.1944/PUN/2019 were dismissed on account of low tax effect in terms of recent CBDT Circular No.17/2019 dated 08-08-2019, which revised the upward monetary limits for filing of appeals in Income Tax Cases before various Appellate Forums. The tax effect involved in these appeals was less than ?50 Lakhs, the threshold set by the CBDT Circular. The Tribunal clarified that the Revenue could approach the Tribunal for restoration of the appeal if it could show that the appeal is protected by the exceptions prescribed in the Circular.

Conclusion:
The Tribunal upheld the findings of the Ld. CIT(Appeals) and dismissed the Revenue's appeals in ITA No.1941/PUN/2019 and ITA No.1943/PUN/2019, confirming that the AO did not have the mandate to refer the matter to the DVO for FMV determination. The appeals in ITA No.1934/PUN/2019, ITA No.1942/PUN/2019, and ITA No.1944/PUN/2019 were dismissed due to low tax effect as per the recent CBDT Circular. All the appeals of the Revenue were dismissed.

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