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TMI Blog2012 (7) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... g deduction under section 80IB of the Income-tax Act, 1961 of Rs. 22,20,17,423. Learned Assessing Officer has passed an assessment order under section 143(3) of the Act on 26.4.2011. The assessee company had purchased a leasehold plot. Measuring 302.90 sq.mtr. in an open auction held by the DDA on 19.1.2005 for a consideration of Rs.700,85,000. The FAR allowed to the assessee on this plot was 1160.125 sq. mtr. in four stories. The assessee has constructed the building and shown the assets as a capital asset. The assessee had rented out the property to ICICI Prudential Life Insurance Company for a sum of Rs. 23.40 lacs per month vide leasehold agreement dated 28.6.2007. The lease was for nine years w.e.f. 28.6.2007 with monthly rental increase @ 15% every three year's term. The lease was terminated by ICICI Prudential Life Insurance Co. vide letter dated Ist of October 2009. The assessee company had valued the property after construction at Rs. 11,58,81,000 through an independent valuer's report dated 20.6.2007. It had entered into an agreement for sale with Smt. Asha Bajaj, mother of Managing Director of the Co. on 31.7.2007. The sales consideration was settled at Rs. 11.70 crores. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he DVO. It also pointed out that once a reference has been made to the V.O. under sec. 16A(1) of the Wealth-tax Act, the valuation made by the V.O. is binding on the WTO, implying that it is binding under the Income-tax Act, 1961 also upon the Assessing Officer. There was no scope for the Assessing Officer to deviate from the FMV estimated by the V.O. and, therefore, the Assessing Officer cannot be said to have committed an error. The exercise of valuation is subjective and any valuation carried out by the expert cannot be said to be erroneous. Apparent consideration agreed and negotiated between the two parties cannot be substituted with the fair market value of the property. Learned Commissioner rejected all the contentions of the assessee and pointed out that fair market value of the property would be computed by adopting the rate at which Vasant Kunj plot was sold, it comes out to Rs.33,47,66,257. He modified the assessment order directed the Assessing Officer to adopt this fair market value in place of full consideration received by the assessee and shown for the computation of capital gain under section 48 of the Income-tax Act, 1961. In other words, Learned Commissioner has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. reported in 131 ITD 1 wherein ITAT has considered the scope and interpretation of section 50C, 55A for the purpose of computing capital gain under sec. 48 of the Act, on transfer of a capital assets. In his next fold of submissions, he submitted that the Assessing Officer cannot adopt F.M.V. which is higher than the stamp duty valuation as provided in sec. 50C of the Act. The learned counsel for the assessee while elaborating his arguments pointed out that in section 50C, a deeming fiction has been created which authorized the Assessing Officer to deem full sales consideration received by an assessee or accrued to an assessee as a result of the transfer of a capital assets, equivalent to the amount adopted by the stamp valuation authority for the purpose of payment of stamp duty while registering the sales deed on such transfer. The learned counsel for the assessee submitted that the Assessing Officer can only adopt the valuation determined by the stamp valuation authority for the purpose of payment of the stamp duty. If an assessee has an objection about adoption of a higher valuation for the purpose of stamp duty then under sub-section(2) a mechanism has been provided for mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the action committed at the end of the V.O. would come within the ambit of expression, "the record of any proceedings" employed in section 263 and the Learned Commissioner has rightly taken cognizance of section 263 of the Act. He further pointed out that Hon'ble Delhi High Court in the case of Gee Vee Enterprises reported in 99 ITR 373 propounded the role required to be played by an Assessing Officer. In this case, Assessing Officer failed to conduct a proper inquiry while computing the capital gain shown by the assessee. 7. We have duly considered the rival contentions and gone through the record carefully. The ITAT in the case of Mrs. Khatiza S. Oomerbhoy v. ITO, Mumbai, 101 TTJ 1095, has analyzed in detail various authoritative pronouncements including the decision of Hon'ble Supreme Court in the case of Malabar Industries 243 ITR 83 as well as Hon'ble Bombay High Court rendered in the case of Gabriel India Ltd. reported in 203 ITR 108 and has propounded the following broader principle to judge the action of CIT taken under section 263. (i) The CIT must record satisfaction that the order of the A.O is erroneous and prejudicial to the interest of the Revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order. The observations of the Hon'ble High Court read as under:- "It is not necessary for the Commissioner to make further inquiries before canceling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. The reason is obvious. The position and function of the Income-tax Officer is very different from that of a civil court. The statement made in a pleading proved by the minimum amount of evidence may be adopted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of the return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on the ITO to further investi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income tax under the head "Capital gains", and shall be deemed to be the income of the previous year in which the transfer took place". ** ** ** "48. The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely:- (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto". ** ** ** Special provision for full value of consideration in certain cases. 50C. (1) where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed [or assessable] by any authority of a State Government (hereinafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed [or assessable] shall, for the purposes of section 48, be deemed to be the full value of the consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he light of short compilation filed before us as also the case laws cited. A question has time and again cropped up before us being raised from the side of the Revenue that what are the implications of deletion of section 52 from I. T. Act. From the side of the Revenue, it has always been challenged, that too fervently, that in case of understatement of consideration whether the A.O. is powerless in not substituting the sale consideration for the purpose of computation of capital gain. In addition to this basic apprehension as also contention, as far as this appeal is concerned, few other points on merits have also been contested before us. We shall first take up the legal aspect as strongly contested before us by both the sides. 9.1. Section 52 of the Act was an empowering section through which the ITO had been enshrined with the powers to substitute the amount of consideration by the fair market value in respect of transfer of a capital asset if in his opinion the consideration for such transfer was under-stated. It was very wide and effective section through which the A.O. used to make reference to DVO to ascertain the fair market value of the property. This section was conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsections (2), (3), (4), (5), and (6) of section 16A, clauses (ha) and (i) of sub-section (3A) and (4) of section 23, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall with the necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. Explanation.-In this section, "Valuation Officer" has the same meaning, as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957)." 10. This section is meant only to ascertain the "fair market value of a capital asset". This section is operative on Chapter IV of I. T. Act, i.e. for the purpose of computation of capital gains. Charging section for Capital gain is section 45 which prescribes that any profits and gains shall be chargeable to Income-tax under the head capital gains for the purpose of section 48. For the purposes of section 48, whatsoever, either value of any money or the fair market value of the asset on the date of such receipt shall be deemed to be full value of the consideration received or accruing as a result of transfer of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... takes place, the capital gains arising out of such a transfer has to be computed by taking into account the full value of the consideration received or accruing as a result of such transfer. From the full value of the consideration, the amount of expenditure incurred wholly and exclusively in connection with such transfer as also the cost of acquisition of the asset and the cost of any improvement thereto have to be deducted. The expression "full value of consideration" cannot be construed as having reference to the market value of the asset transferred but only means the full value of consideration received by the transferor in exchange of the capital asset transferred by him. In the case of a sale the full value of consideration is the full sale price actually paid. "Full value" means the whole price without any deduction, whatsoever, and it cannot refer to the adequacy or inadequacy of the price bargained for. Nor does it have any necessary reference to the market value of the capital asset which is the subject matter of the transfer. The full value of consideration does not have any reference to the market value but only to the consideration referred to in the sale deeds as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ambits of reference prescribe u/s. 55A of the Act. In the light of the above discussion as also following the case law cited supra, we hereby reject the Ground No. 1 of the Revenue. 12.1 The expression 'fair market value' has also been used in respect of 'cost of acquisition' where a capital asset became the property of the assessee before 1st day of April 1981 as per Section 55(2)(b) of the Act. For the purpose of computation of Capital Gain U/s 48 the fair market value can be taken into consideration in place of cost of acquisition and for that purpose the valuation can be referred to a Valuation Office. Therefore, this provision further strengthen the argument that the Legislature has provided in the statute to determine the fair market value of the cost of acquisition but it has not been provided to disturb the sale price with the fair market value. 13. Scope of reference u/s.55A vis-a-vis section 50C of I.T. Act. As discussed hereinabove section 50C of the Act is titled as "Special provision for full value of consideration in certain cases". Meaning thereby this section is not applicable to each and every case of sale but this is to be applied in respect of those sales inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer in certain cases". This section prescribes that for the purpose for making an assessment where an Estimate of the value of any investment referred to in section 69, 69B, 69A is required to be made the AO may require the Valuation Officer to make an estimate of such value and report the same to AO. Therefore, the area of operation and the scope of section 142A is limited in its span i.e. only to determine the value of investment in respect of certain assets, such as, bullion, jewellery, valuable articles etc. In this section as well there is no power vest with AO to seek the help of Valuation Officer in respect of determination of capital gain prescribed u/s.48 of the Act. 14.1 It is very interesting, as also important, to note that with effect from 01/07/2010 a clause has been inserted by the Finance Act, 2010 which says, quote, "of fair market value of any property referred to in sub-section (2) of section 56", unquote. By the insertion of this clause, the scope of valuation U/s 142A has been enlarged by including the property referred in section 56(2) to determine its fair market value. Section 56(2) is in respect of certain assets, the income from which is subject to tax u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a transfer has to be computed by looking at the full value of the consideration received or accruing as a result of such transfer. The expression "full value of sale consideration" is not the same as "fair market value" as appearing in section 55A. It was held that for the purposes of computing capital gains, there is no necessity for computing the "fair market value". 16. The summum bonum of above legal and factual discussion is that section 45 talks about substitution of fair market value with the full value of consideration only in certain special circumstances, such as, determination of value of damage as a result of flood, riot, accident, fire, etc (Sec. 45(1A). Section 45(4) also prescribes that the fair market value be deemed to the full value of the consideration in respect of distribution of capital asset on the dissolution of a firm. Certain specific instances have been prescribed under the Act and only under those circumstances the fair market value can be substituted with the amount of full value of consideration. But as per above discussion, there is no such clause of substitution while computing the capital gain u/s. 48 of the Act and the gain has to be computed on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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