2019 (11) TMI 76 - AT - Income Tax

Reference to the valuation officer under sub-section 142A - HELD THAT - We find that the relevant A.Y before us is A.Y 2013-14 and the return of income was filed on 30.09.2013. Therefore, 21 months from such date would expire on 31.3.2016. Thus, the assessment order u/s 143(3) was required to be passed by 31.03.2016 but since the AO has made a reference to the valuation officer u/s 142A of the Act, vide letter dated 19.02.2016, and the valuation report was filed on 20.7.2017, the said period will have to be excluded for determining the time limit. Is the period allowed to the DVO to submit the report. u/s 142A of the Act, the valuation report has to be submitted within six months from the date of the receipt of the reference. Admittedly, in the case before us, the valuation officer has submitted the report beyond a period of 15 months. Whether this period can be enlarged or condoned is to be seen. As rightly pointed by the learned Counsel for the assessee, the word used in sub-section 6 of section 142A is shall and in other sub sections, the word used is may . The Hon'ble Delhi High Court in the case of B.K. Khanna Co. vs Union Of India And Others on 1984 (9) TMI 31 - DELHI HIGH COURT has clearly held that where the words may and shall are used in various provisions of same sections, then both of them contain different meaning and the word shall shall mean mandatory . As argued assessee, the AO was required to call for a report from the valuation officer within six months from the date of the reference and the valuation officer was bound to give such a report with such prescribed period. As seen from the assessment order, the AO had directed the valuation officer to give the valuation of the property as on 8.2.2010, whereas the valuation officer has given the report as on the date of the execution of the sale deed. DVO has clearly not followed the directions of the AO and also not followed the timeline fixed under the Act. When it is mandatory for an officer to follow the timeline prescribed under the Act, such delay cannot be condoned. Therefore, we agree with the contentions the assessee that the report of the Valuation Officer has to be filed within the time given u/s 142A(vi) and therefore, the assessment order passed on the basis of such report of Valuation Officer beyond the time limit is not sustainable. Therefore, we allow the assessee s appeal and the assessment order is set aside. Assessee s appeal is allowed.

Summary

Issues:
1. Assessment of long term capital gain based on SRO value discrepancy.
2. Timeliness of valuation report submission by the DVO under section 142A.
3. Interpretation of mandatory vs discretionary language in tax statutes.

Analysis:

1. Assessment of Long Term Capital Gain: The appellant contested the adoption of the SRO value as on the date of sale deed in 2012 for computing capital gains, arguing that the agreement of sale in 2010 should be considered. The AO referred the matter to the Valuation Officer, who submitted a report in 2017. The appellant relied on ITAT decisions and challenged the CIT (A)'s dismissal. The appellant's contention was that the valuation should be based on the agreement date. The Tribunal agreed, setting aside the assessment order due to the DVO's failure to submit the report within the prescribed time, holding that the assessment based on the delayed report was unsustainable.

2. Timeliness of Valuation Report Submission: The appellant argued that the DVO's report was submitted beyond the six-month period stipulated under section 142A(vi). The Tribunal concurred, emphasizing the mandatory nature of the word "shall" in the statute. Citing legal precedents, the Tribunal held that the DVO's delay in submitting the report could not be condoned, as it did not comply with the statutory timeline. Consequently, the assessment order based on the belated report was set aside, supporting the appellant's plea.

3. Interpretation of Mandatory vs Discretionary Language: The Tribunal analyzed the language used in tax statutes, highlighting the distinction between "shall" and "may." Referring to legal authorities, the Tribunal affirmed that "shall" denotes a mandatory requirement. By applying this principle to the case, the Tribunal concluded that the DVO was obligated to adhere to the statutory timeline for submitting the valuation report. As the DVO's non-compliance with the timeline rendered the assessment unsustainable, the Tribunal ruled in favor of the appellant, emphasizing the importance of strict adherence to statutory provisions.

In conclusion, the Tribunal allowed the appellant's appeal, setting aside the assessment order due to the DVO's delayed submission of the valuation report, which violated the mandatory timeline stipulated under section 142A(vi). The judgment underscored the significance of statutory compliance and upheld the appellant's position regarding the valuation date for computing capital gains.