2021 (7) TMI 246 - AT - Income Tax

Capital gain computation - validity of reference to DVO under section 55A - determination of Fair market Value (FMV) - rejecting registered valuer's report for determining cost of acquisition of land as on 01.04.1981 - Whether Ld. CIT(A) as well as the A.O. has erred in computing LTCG by taking FMV as on 01.04.1981 on the basis of DVO report ignoring the statutory position of law that reference to DVO u/s 55A is not valid prior to 01.07.2013?- HELD THAT - There is no dispute that assessee while computing the capital gain adopted fair market value on the basis of Government approved value @ 300 per sq. mtr in respect of all 3 parcels of land. AO adopted value suggested by DVO in assessee s own case @ ₹ 185 per sq. mtr part of land and @ 200 per sq. mtr with regard to other part of land. We find that before the Tribunal the assessee has raised additional ground of appeal which is purely legal in nature. Assessee submits that the assessee vide adopting value of asset on higher rate than the fair market value and the amendment made in section 55A w.e.f. 01.07.2012 is not applicable. As relieng upon the decision of Pooja Prints 2014 (1) TMI 764 - BOMBAY HIGH COURT and CIT Vs Gaurngiben S Shodhan. 2014 (2) TMI 78 - GUJARAT HIGH COURT wherein it was held that the amended provision of section 55A is not retrospective. Further, we find that in similar said of fact this combination in Jagrutiben V. Patel 2020 (11) TMI 991 - ITAT SURAT from points the following order. Considering the aforesaid factual and legal discussion and keeping in view the binding decision of jurisdictional High Court in Jagrutiben V. Patel (supra) Hon'ble Bombay High in Pooja Prints (supra) that amended provision of section 55A is not applicable on the transaction made prior to 01.07.2012. - Decided in favour of assessee.

Issues Involved:

1. Addition of ?22,34,938/- by rejecting the registered valuer's report.
2. Dismissal of the claim under Section 54B of the Income Tax Act.
3. Validity of reference to the DVO under Section 55A prior to 01.07.2013.
4. Condonation of delay in filing the appeal.

Detailed Analysis:

1. Addition of ?22,34,938/- by rejecting the registered valuer's report:

The primary issue was the addition of ?22,34,938/- to the assessee's income by rejecting the registered valuer's report. The assessee had adopted a value of ?300 per sq. mtr for the purpose of indexation cost as on 01.04.1981 based on the valuation report of a registered valuer. The AO, however, collected sale instances from the Sub-Registrar's office and determined the land rate at ?94.45 per sq. mtr. The AO issued a show-cause notice and, after receiving the DVO's report, suggested a fair market value of ?185 per sq. mtr for Block No. 283 and ?200 per sq. mtr for R.S./Block No. 272/2, 272/3. The AO's assessment was upheld by the CIT(A), who approved the value suggested by the DVO.

2. Dismissal of the claim under Section 54B of the Income Tax Act:

The assessee's claim under Section 54B was dismissed by the CIT(A) on the grounds that the claim was not pressed during the appellate proceedings. The AO had initially rejected the claim under Section 54B and 54F, stating that the land sold was not used for agricultural purposes in the two years immediately preceding the sale. The CIT(A) sought a remand report, which indicated that the assessee had not provided sufficient documentary evidence for the purchase of new property or construction of a house. Consequently, the CIT(A) dismissed the claim under Section 54B but allowed the deduction under Section 54F based on the evidence provided.

3. Validity of reference to the DVO under Section 55A prior to 01.07.2013:

The assessee raised an additional ground of appeal challenging the validity of the reference to the DVO under Section 55A, arguing that the amendment to Section 55A effective from 01.07.2012 was not applicable to the transaction. The Tribunal considered the decision of the Hon'ble Supreme Court in National Thermal Power Corporation (NTPC) v. CIT and Jute Corporation of India Ltd. v. CIT, admitting the additional ground of appeal. The Tribunal relied on the decisions of the Hon'ble Gujarat High Court in CIT v. Gauranginiben S. Sodhan and the Hon'ble Bombay High Court in CIT v. Pooja Prints, which held that the amended provision of Section 55A is not retrospective. The Tribunal concluded that the amended provision of Section 55A was not applicable to the transaction undertaken by the assessee, and thus, the addition made by the AO and upheld by the CIT(A) was rejected.

4. Condonation of delay in filing the appeal:

The appeal was filed 29 days after the prescribed period of limitation. The assessee filed an application for condonation of delay, supported by an affidavit, explaining that the delay was due to the accountant's fault and casual approach. The Tribunal considered the rival submissions and concluded that the delay was neither intentional nor deliberate. Emphasizing that substantial justice must prevail over technical considerations, the Tribunal condoned the delay in filing the appeal.

Conclusion:

The Tribunal allowed the appeals, setting aside the additions made by the AO and upheld by the CIT(A). The Tribunal held that the amended provision of Section 55A was not applicable to the transaction, and thus, the reference to the DVO was invalid. The Tribunal also condoned the delay in filing the appeal, emphasizing the importance of substantial justice.

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