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TMI Blog2011 (5) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... ura, Ahmedabad. The assessee Shri Nitin J. Shah inherited the property and as 'karta' of HUF he sold it for Rs. 1,30,41,000/- vide sale deed dated 14.11.2005. This was also the valuation done by stamp valuation authorities. For the purpose of working out capital gains assessee obtained the report from approved valuer on 31.4.2004 who determined the fair market value of the property as on 1.4.1981 as Rs. 26,24,269/-. The indexed cost of acquisition of Rs. 26,24,269/- for Asst. Year 2005-06 was shown at Rs. 1,30,42,617/-resulting into a long term capital loss. The AO was not satisfied. He observed that the property in question is in joint name of four persons. It is situated in one of the posh locality of Ahmedabad on C.G. Road. He believed that assessee had under-estimated the value of sale consideration by adopting lower rates thus claimed capital loss. He referred the property to the District Valuation Officer (DVO) (Valuation Cell of the Department) who valued the sale value as on 14.11.2005 at Rs. 3,05,66,700/- as against declared sale value of Rs. 1,30,41,000/- by the assessee. Similarly, the AO required the DVO to value the property as on 1.4.1981 which was determined by him a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital gains claim as admitted." 3. The ld. DR submitted that the order of the ld. CIT(A) is cryptic and does not give the reasons for deleting the addition. He has simply reproduced the submissions of assessee. There is no evidence that he has applied his mind over the facts found by the AO or submissions by the assessee except accepting whatever assessee has said. He submitted that in addition to application of section 50C, AO has power to refer the property for valuation u/s 55A for determining not only the cost of acquisition as on 1.4.81 but also fair market value of the property as on the date of sale and in case sale consideration is less than fair market value of the property then fair market value can be substituted in place of declared sale consideration. Further once AO has made up his mind that fair market value of the property as on 1.4.81 as determined by the approved valuer is not correct then he can refer the same u/s 55(2). It is not necessary that for finding the cost of acquisition as on 1.4.81, the value declared by the assessee should be at lower side as compared to fair market value. 4. On the other hand, ld. AR for the assessee submitted that once provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08] 22 SOT 156/[2009] 116 ITD 388 (Delhi) (7) Rupee Finance & Management (P.) Ltd. v. Asstt. CIT [2008] 22 SOT 174 (Mum.) (8) CIT v. S. K. Construction Co. [2008] 167 Taxman 171 (Delhi) (9) CIT v. Rajiv Mehta [2008] 171 Taxman 198 (Delhi) (10) CIT v. Lake Palace Hotels & Motels [2008] 171 Taxman 286 (Raj.). In respect of valuation as on 1.4.81 ld. AR submitted that once the valuation has been determined by approved valuer then provisions of section 55A would not be applicable. A reference to DVO can be made only when in the opinion of the AO fair market value is less than the valuation done by approved valuer/registered valuer. Since in the present case valuation done by the registered valuer is more than fair market value as estimated by DVO the AO could not have made the reference by invoking of clause (a) of section 55A. Clause (b) can be invoked only when a case is not covered by clause (a) of section 55A. 5. We have considered the rival submissions and perused the material on record. In our considered view the assessee deserves to succeed even though order of ld. CIT(A) is cryptic and, apparently it is clear that ld. CIT(A) has not app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer the same to the DVO u/s 50C. The ld. DR has been fair enough in admitting that there is no dispute on the applicability of section 50C. The only issue is whether the AO can other than applicability of section 50C refer the valuation for determining FMV by invoking section 55A. We have already held above that in case of immovable property reference to DVO can be made only u/s 50C under sub-section (2) thereon and not under section 55A which can be invoked in respect of transfer of capital asset as provided under subsection (1) of section 45-A, sub-section (2) of section 45 or sub-section (4) of section 45 where there is no concept of full value consideration. Where capital gains is determined by adopting fair market value and law provides to determine capital gains by adopting fair market value of the asset as sale consideration then AO can invoke section 55A subject to the condition laid down in that section. 7. In CIT v. Hotel Joshi [2000] 242 ITR 478/108 Taxman 199 (Raj) Hon. Rajasthan High Court held as under :- "A plain reading of the provision shows that an AO with a view to ascertain the fair market value of a capital asset, has a discretion to refer to the Valuation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said property in excess of that which was shown in the agreement to sell. That being the case the decision in the case of Smt. Niloffer I. Singh [2009] 309 ITR 233 (Delhi) would bind the Revenue. The Tribunal, in our view erred in accepting the stand of the Revenue that actual sale consideration recorded in the agreement to sell would be substituted by the vale arrived at by the DVO under section 55A of the Act. The question of law as framed is answered in favour of the assessee and against the Revenue."(on Page 243 - Para 2) The judgments referred to by the ld. AR are to the points that provisions of section 55A can be invoked only when there is evidence of some of under-hand dealing and more than stated consideration has passed to the assessee. These above authorities clearly support the view that for the purpose of determining capital gains u/s 45(1) in respect of immovable property reference u/s 55A cannot be made except as provided u/s 50C. Thus such reference cannot be said to be u/s 55A but will be under section 50C(2). 9. As a result, we hold that reference to DVO for determining FMV as on the date of sale was not valid. Accordingly adoption of fair market value in place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed valuer has not been filed. The opening phrase is clause (b) is 'in any other case if the AO is of the opinion'. In other words, a case which does not fall in clause (a) can only be considered under clause (b). Where a case falls under clause (a) i.e. the registered valuer has determined the value as on 1.4.81 and which is not less than the fair market value of the property as on 1.4.81 then sub-clause (b) can not be invoked. In any case clause (b)(i) can be invoked only if FMV of the asset exceeds the value as claimed by the assessee by such percentage as may be prescribed; and clause (b)(ii) can be invoked in residuary cases and the AO can refer the property to the DVO having regard to the nature of the asset and other relevant circumstances. Our view is supported by the decision of Hon. Gujarat High Court in the case of Hiaben Jayantilal Shah v. ITO [2009] 310 ITR 31/181 Taxman 191 (Guj). The head notes from that decision are as under :- "Capital gains -Computation - Reference to Valuation Officer -Value estimated by Valuation Officer less than fair market value shown by assessee as on 1.4.81 -estimate by registered valuer -Reference under section 55A not valid -Reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO is lower than the value claimed by the assessee. Clause (b)(i), therefore, cannot be invoked. In invoking clause (b)(ii) AO has to show the nature of the asset and other relevant circumstances. What we find from the reference made by the AO as per AO's letter dated 5.11.00 annexed on pages 1 & 2 of assessee's paper book that AO has only expressed opinion about the determining of FMV as on the date of sale and not as on 1.4.81. For the sake of convenience we reproduce para 6 & 12 from that reference letter as under :- 6. Fair market value of the asset value returned by the assessee Rs. 1,30,41,000/- (sale consideration Value as on 1981 Rs. 26,24,269/- 12. Ground on which the opinion of Assessing Officer is based The area of Municipal Market being a posh area, the rate adopted by the assessee seems to be at a lower rate. Moreover, the assessee is also claiming capital loss on sale of this property, hence the same is required to be verified before finalizing the assessment. Thus the condition laid down in clause (b)(ii) is not fulfilled. The AO has not expressed any opinion about the nature of the asset and other relevant circumstances as to why it is necessary to refer th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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