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TMI Blog2014 (10) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... time provided that a reference could be made to the DVO only when the value adopted by the assessee was less than the fair market value - the value adopted by the assessee of the property was much more than the fair market value of ₹ 6. 68 lakhs even as determined by the DVO - the AO referred the issue of valuation to the DVO only because in his view the valuation of the property as on 1981 as made by the respondent-assessee was higher than the fair market value - the invocation of section 55A(a) of the Act is not justified - The contention of the Revenue that in view of the amendment to section 55A(a) of the Act in 2012 by which the words "is less than its fair market value" is substituted by the words "is at variance with its fair market value" is clarifactory and should be given retrospective effect - the 2012 amendment was made effective only from July 1, 2012 - Parliament has not given retrospective effect to the amendment - the law to be applied in the present case is section 55A(a) of the Act as existing during the period relevant to the AY 2006-07 - very clearly reference could be made to DVO only if the value declared by the assessee is in the opinion of AO less than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry Costs (Rs. 36, 87, 001-) Common Amenities (Rs. 76, 96, 000/-): a)The learned CIT (A) has erred in confirming that the aforesaid costs should be apportioned / allocated proportionately to Building A in the ratio of Bldg. A i. e. 25, 671 sq. ft. to total saleable area i. e. 1, 15, 000 sq. ft. instead of attributing the entire above expenditure to Building A. 3)Apportionment of Interest cost ₹ 69, 69, 203/-:a)The learned CIT (A) has erred in confirming that the aforesaid interest cost should be apportioned / allocated proportionately to Building A in the ratio of Bldg. A i. e. 25, 671 sq. ft. to total saleable area i. e. 1, 15, 000 sq. ft. instead of attributing the entire above expenditure to Building A. b)Alternatively and without prejudice to the above the learned CIT (A) ought to have accepted the alternative argument of the appellant for allowing the interest cost of ₹ 46, 08543/- incurred up to assessment year 2000-01 against Bldg. A and interest cost for the year under appeal of ₹ 23, 60, 660/-to be apportioned between Bldg. A B equally such that interest cost attributable to and allowable against Bldg. A amounts to ₹ 57, 88, 873/-{Rs. 46, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per completion certificate dt. 11. 10. 2000 of the Pune Municipal Corporation. It was claimed before the AO that the entire project was to be financed by the project manager on which it was to be paid interest, that the assessee was required to pay the project management fees based on the sale price realised on sale of flats. As per the AO, the assessee had offered income by way of capital gain u/s. 45(2) of the Act. For the purpose of calculating capital gain, it had adopted indexed cost at ₹ 51, 99, 000/-with reference to FMV as on 01. 04. 1981. Indexed cost was based on the report of a registered valuer. AO observed that the assessee had disclosed the total saleable area of the entire project at 1, 15, 000 sq. ft, wheresas saleable area of Building A was disclosed at 25, 671 sq. ft. , that he had apportioned the expenses in certain ratio. After considering the facts of the case and arguments of the assessee, the AO estimated the value of the property on 12. 06. 1995 at ₹ 29, 51, 916/- and at ₹ 5, 88, 875/-as on 01. 04. 1981. He was of the opinion that the value of the property, converted into stock-in-trade, during the year was to be taken at ₹ 4, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dt. 27. 09. 1990, of the competent authority under the ULCA, the surplus land in the case of the assessee was determined at 1609. 10 sq. mts. The DVO adopted the said portion of the plot for valuation of the property as on 01. 04. 1981. The assessee objected to the same stating that appeal against the order of the competent authority was pending and finally the matter was decided in his favour and hence ultimately no area was found to as surplus land under the ULCA. The assessee in his further objection dt. 30. 12. 2005 stated that whatever was decided in 1982 by the competent authority should not have been considered final without considering the result of the pending appeal. After considering the objections of the assessee and reply by the DVO, FAA held that area covered by ULCA as non-vacant , as on 01. 04. 1981, was to be taken at 1, 689. 10 sq. mtrs. For the purpose of valuation of the property as on 15. 05. 1995, the DVO had considered the extent of surplus land at 474. 26 sq. mts. The assessee objected to the same stating that appeal filed by him was finally decided in his favour and the entire land was declared non-vacant under the ULCA. The DVO, in his report dt. 29. 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not be allowed to argue the issue of reference made by the AO to the valuation officer, before the Tribunal for the first time. Authorised Representative (AR)submitted that additional ground was vital for deciding the main issue, that it was only a legal ground and new facts were not to be investigated. In his support he placed reliance on the following cases: a)National Thermal Power Co. Ltd. vs. CIT 229 ITR 383 (SC), b)Ahmedabad Electricity v CIT, 199 ITR 351(Bom-FB), 3. 1. First we would like to take up the issue of admission of Additional ground. Income-tax Appellate Tribunal(Tribunal), the last fact finding authority, is supposed to decide the disputes between the Sovereign and the citizens, so that correct tax liabilities can be determined. For that purpose it adjudicates the grounds of appeal filed before it. It may happen that the assessee or the AO may raise an Additional Ground (AG)of appeal and Tribunal has to decide it. The case before us, is one of such cases, where AG has been raised. As stated earlier, AR and DR had argued in favour of and against the admission of AG. Considering the contentions of both the sides, we are of the opinion that it would be u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Second important case about the AG is the case of Byramji Co. In that matter Hon ble Nagpur High Court had deliberated upon rule 21 of the Appellate Tribunal Rules, 1946. Hon ble Court (11 ITR 286)held as under: The Appellate Tribunal may grant leave to urge an additional ground of appeal even though it has not been added to the memorandum of appeal by means of a proper amendment. There is also nothing in the rules which provides that an application for leave to urge an additional ground should be stamped or verified. Though it is for the Appellate Tribunal to exercise its discretion in granting leave to urge an additional ground of appeal, this discretion has to be exercised judicially and not arbitrarily, and if it is found that it has been exercised arbitrarily, such exercise of discretion can be interfered with by the High Court. Where the additional ground of appeal sought to be urged was a question of law which did not involve any further investigation into facts upon which the Appellate Tribunal refused to grant leave to urge it was that this new ground was not added to the memorandum of appeal by a proper amendment and the application for leave was neither stam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diction of the Tribunal to the subjectmatter of the appeal. There is nothing in the Act which restricts the Tribunal to the determination of questions raised before the departmental authorities. All questions, whether of law or fact, which relates to the assessment of income, might be raised before the Tribunal. It has the power to pass any order it thought fit after giving the parties appropriate opportunity. But, such orders must be passed on the subject-matter of the appeal. The subject-matter of the appeal must be viewed in the context and the background of the facts and circumstances of each case. 3. 2. Certain principles regarding raising and admission of an AG by the Tribuanl;culled out from the above discussion and various other decisions of the Hon ble Courts;can be summarised as under: i). Normally, an assessee;who has not put forward a particular claim or ground before the AO or the FAA;cannot seek to urge the same before the Tribunal except with its permission. ii). Tribunal cannot refuse to entertain an AG arbitrarily, but has to consider the reasons given by the appellant for not urging the new ground before the initial authorities. An order to admit or not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation for permission to raise additional grounds of appeal in relation to the subject-matter which is already before the Tribunal by way of an appeal, the matter will merely rest on the discretion of the Tribunal. But, where an assessee seeks to bring in new items which had not been questioned by him before the assessing and appellate authorities and which had nothing to do with the subject-matter of the appeal before the Tribunal as originally filed by way of additional grounds of appeal, the question will arise as to whether the Tribunal will have jurisdiction to entertain the additional grounds without excusing the delay in filing the appeal and hence the Tribunal will be justified in refusing to excuse the delay in filing such additional grounds of appeal dealing with a new subject-matter. viii). An assessee is entitled to the claim for further depreciation on the enhanced value of the assets or other deduction or exemption or relief, as a result of the appeal effect of the decision of the Supreme Court, in form of an AG. ix). AG must, relate to the subject-matter of the appeal and in the guise of raising an AG a new item or subject-matter cannot be allowed to be introdu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nobody else had handled it before or because it had not occurred either to the assessee or to the Department to raise and urge that point at earlier stages of the proceedings. In the matter under appeal it is not the case of the DR that necessary facts for deciding the controversy involved in the additional plea are not available on record. It is also not a case where facts are to be investiga -tedrather it is a pure legal issue that has been raised before us. So, in our opinion, merely because the plea in the AG was not taken by the assessee before the FAA, it could not be a ground to refuse the application for permission to raise an AG. So, AG raised by the assessee, is admitted. 4. Now, we would take up the controversy with regard to reference made by the AO for valuation of the property owned by the assessee at Pune. District valuation officer (DVO) determined the FMV of the plot as on 01. 04. 1981 and 12. 06. 1995 at ₹ 45, 97, 600/- and ₹ 12, 82, 41, 000/- respectively, whereas the AO took the value of the plot at ₹ 29, 51, 916/-as on the date of conversion. Before us, AR stated that assessee had raised objection before the FAA about the report submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the asset exceeds the value of the asset as claimed by the assessee by more than such percentage of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf ; or (ii)that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do. By an amendment, w. e. f. 01. 07. 2012 , words is less than its fair market value were substituted by the words is at variance with its fair market value . For better understanding of the purpose of introducing it in the Act, we one has to take note of the Explanatory Notes to the section. Circular No. 96 of 25. 11. 1972 is relevant in this regard. We would like to reproduce a portion of the circular and same reads as under: Under the new provisions, an Income Tax Officer may refer the valuation of any capital asset to a VO in a case where the assessee has got the assets valued by a registered valuer and the Income Tax Officer is of the opinion that the value as estimated by the registered valuer (i. e. , a person registered as a valuer under section 34AB of the Wealth-tax Act)is less than the fair market value of the asset. Other cases in which a referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o make a reference to the Valuation Officer, where the AO is of the opinion that the fair market value of the asset exceeds the value of the assets as claimed by more than 15 % of the value claimed or by more than ₹ 25, 000, wherever is less or where, having regard to the nature of the asset and other relevant circumstance, the AO considers it necessary to do so. In other words, section deals with cases where the basis for FMV of the asset is the valuation report itself and the assessee fails to adopt the value of the asset in accordance with the estimate of such valuation report and cases where the basis for such FMV of the asset is other than the valuation report. The other situation envisages the existence of such circumstances, that make reference necessary. In such a case, nature of the assets and other relevant factors also play a decisive role. 4. 1. We would like to mention the broad principles emerging out of various judicial decisions of the Hon ble Courts with regard to reference to be made by the AO to the DVO u/s. 55A of the Act: i). The power of the AO in the course of making an assessment under the Act is wide and, for obtaining full information, he ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding out materials for reopening or revising a completed assessment. Pendency of an assessment including reassessment is a sine qua non for giving jurisdiction to the AO to make a reference under the said section of the Act. It has no relevance and cannot be applied after the assessment is completed and before the reassessment has commenced, that is, to consider the question whether the completed assessment is based on undervaluation. vi). A valuation report is only an opinion of a valuer. The same does not amount to information within the meaning of section 147 nor can it form a ground for reason to believe that the assessee had failed to disclose his income fully and truly within the meaning of section 147 of the Act. The reason to believe of an AO cannot be substituted by an opinion of a valuer. In other words, the valuation report could, at best, be considered as a mere reason, but could not be a reason to be believed by the assessing authority vii). The scope of section 55A of the Act is confined to ascertaining the fair market value of a capital asset which is the subject matter of transfer. Though the expression under this Chapter is referred to in section 55A, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taining the FMV of an asset, is necessary having regard to the nature of the asset and other relevant circumstances(242 ITR 478). Hon ble Gujarat High Court in the case of Hiaben Jayantilal Shah(310ITR31)has held that as per the clause(b) of section 55A of the Act, the AO has to record an opinion that (i) the FMV of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage or by more than such an amount as may be prescribed ;or (ii) having regard to the nature of the asset and other relevant circumstances, it is necessary to make such a reference. Clause (b) of section 55A of the Act can be invoked only when the value of the asset claimed by the assessee is not supported by the valuation report of a registered valuer. xii). The assessee can be said to be effectively prejudiced only when action is taken by the incometax authorities on the basis of the report submitted by the DVO. Even otherwise there is no provision in the Act which deals with the situation as to what would happen to a reference made to the DVO u/s. 55A which is pending completion at the time of passing the assessment order. Obviously, the assessment order cannot be deferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partmental VO only if the value declared by the assessee was in the opinion of AO less than its fair market value. (iii)That section 55A(b) states that it would apply in any other case, i. e. , a case not covered by section 55A(a). There was no dispute that the issue was covered by section 55 A(a). Therefore, recourse could not be had to the residuary clause provided in section 55 A(b)(ii). Therefore, the Central Board of Direct Taxes Circular dated November 25 1972 (see [1973] 91 ITR (St. ) 1), could have no application in the face of the clear position in law. Hence, the reference to the Departmental VO by the AO , was not sustainable in view of section 55A(a)(ii). The following questions of law have been formulated by the Revenue for consideration by this court : (a)Whether, on the facts and in the circumstances of the case and in law, the Income-tax Appellate Tribunal was right in holding that the reference made by the AO to the VO per se is bad in law ? Further, whether the Income-tax Appellate Tribunal was justified in observing that the reference to the DVO under section 55A of the Act is to be made when the value of the property disclosed by the assessee is less than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because in his view the valuation of the property as on 1981 as made by the respondent-assessee was higher than the fair market value. In the aforesaid circumstances, the invocation of section 55A(a) of the Act is not justified. The contention of the Revenue that in view of the amendment to section 55A(a) of the Act in 2012 by which the words is less than its fair market value is substituted by the words is at variance with its fair market value is clarifactory and should be given retrospective effect. This submission is in face of the fact that the 2012 amendment was made effective only from July 1, 2012. Parliament has not given retrospective effect to the amendment. Therefore, the law to be applied in the present case is section 55A(a) of the Act as existing during the period relevant to the assessment year 2006-07. At the relevant time, very clearly reference could be made to Departmental VO only if the value declared by the assessee is in the opinion of AO less than its fair market value. The contention of the Revenue that the reference to the Departmental VO by the AO is sustainable in view of section 55A(a)(ii) of the Act is not acceptable. This is for the reason tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de under clause 55A(a) or 55A(b)(ii) of the Act and if it was made under section 55A(b)(ii) then what were the relevant circumstances for making such reference. Recording of reasons for invoking a particular section of the Act and justification for invoking the specific clause are not available and nor were they brought to our notice. As the value shown by the assessee was not less than the FVM, so, in our opinion, there was no justification for making any reference to the DVO, by the AO in the year under consideration. Amendment to the section 55A of the Act is effective from 01. 07. 2012. So, reversing the order of the FAA, we decide the additional ground in favour of the assessee. As we have held that the additional ground is to be decided in favour of the assessee, so, we hold that Ground no. 1 is academic in nature. Same is allowed for statistical purose. As far as decision of Chaturbhj Vallabhdas HUF, relied upon by the DR, is concerned we are of the opinion that same stands reversed by the judgments of Hon ble jurisdictional High Court delivered in the cases of Daulat Mohta(HUF) and Puja Prints(supra). 5. Ground no. 2 is about Allocation of preliminary cost (Rs. 36, 87, 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fees was paid separately for other buildings, that the entire Management Fees of ₹ 46. 20 lakhs allotted to building A. Dismissing the appeal filed by the assessee, FAA held that the breakup of cost of construction and land showed that interest was paid to the project manager, that interest payment related to entire project. 5. 2. Before us, AR submitted that as per agreement with buyers of the flat the assessee was under an obligation to provide the facilities like swimming pool, health club etc. which were for the common use of all the flat owners of the entire project and expenses have therefore been rightly allocated to Phase 1 viz. Bldg. A of the project. He relied upon page 157(para12) of the paper book and page 206 (para 2)of Supplementary PB. DR supported the order of the FAA. 5. 3. We have heard the rival submissions and perused the material before us. We find that while adjudicating the issue FAA has not passed a speaking order. He has not considered the alternative argument raised by the assessee, he has endorsed the order of the AO without assigning any reason. In these circumstances, we are of the opinion that matter should be restored back to the file of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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