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TMI Blog2014 (10) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 a 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, 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 – thus, the order of the FAA is set aside – Decided in favour of assessee. Benefit of set off of unabsorbed depreciation – Held that:- The AO and FAA had decided the issue against the assessee, as it was not carrying out business activities during the year under appeal – following the decision in Commissioner of Income-tax, Hisar Versus G. TM Synthetics Ltd., Sirsa [2011 (2) TMI 150 - PUNJAB AND HARYANA HIGH COURT] - Section 32(2) of the Act relates to carry forward of unabsorbed depreciation - the unabsorbed depreciation allowance could be set off against the income under any other head even where the business was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the same. 1. 3The Ld. CIT (Appeals) erred in holding that the ITO could not do anything further as the assessment was getting barred by limitation of time. 2. The Ld. CIT (Appeals) erred in holding that no unabsorbed depreciation was available to the appellant for being set off 2. 1In so doing she did not appreciate the material placed on record. 2. 2The Ld. CIT (Appeals) also did not appreciate that no opportunity was afforded by ITO to substantiate the claim made in the return of income in this regard. Your appellant, therefore, submits that due relief be allowed. Your appellant craves leave to add to delete, alter or amend all or any of the grounds of appeal at or before the date of hearing. Brief facts of the case: 2. In this case assessment u/s. 143(3) of the Act was completed by the Assessing Officer(AO) on 18/2/2002 determining the total income of the assessee at ₹ 95, 70, 800/-against the returned loss of ₹ 7, 07, 259/. The main reason for the difference between the returned income and assessed income was that during the assessment proceedings the AO had noticed that the assessee had sold 19400. 04 meters freehold plot of land situated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2006 after giving an opportunity of being heard to the assessee. The issue pertaining to set-off of unabsorbed depreciation of earlier years was also restored to the file of the AO for fresh adjudication. The AO took up the case of the assessee and after giving opportunity to it. He calculated the LTCG at ₹ 84, 95, 945/-While doing so the AO had requested the Joint Sub-Registrar, Class-II, Thane to provide a registered copy of Sale Agreement of any plot of industrial land in the surrounding area of the property in question was situated. In reply, the Joint-Sub-Registrar had requested someone be deputed to his office to take a photo copy of the relevant sale deed. Accordingly, the Ward Inspector was deputed and he obtained a copy of a sale deed dated 3/11/1981. The sale deed pertained to plot of freehold land bearing Survey No. 258 situated at Gram Panchayat Majiwade, Mouje-Majiwade, District-Thane. The sale deed showed that 1558. 4 meter square had been sold for a consideration of ₹ 5000/- which worked out to ₹ 3. 20 per square metre. The AO proceeded to bring the same to the notice of the AR of the assessee telephonically and to requested him to attend the of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicially, that the FAA did not deal with all the grounds of appeal filed and had confirmed the order of the AO, that AR of the assessee had appeared before the AO and explained it to him that as per the directions of the ITAT, it was for the Department to collect information and confront the same to the assessee after giving reasonable opportunity, that the AO had not communicated any factual findings regarding the rate of the land to the AR of the assessee, that in spite of the fact that the case was fixed for 29/12/2011 it was assessed on 27/12/2011, that no reasonable opportunity was offered, that the AO had again adopted the market value as determined by the DVO. 3. 1. After considering the submission of the assessee and assessment order the FAA held that the contention of the assessee could not be accepted, that from the directions of the ITAT, it was clear that the it was not in agreement with the estimated value of ₹ 25 as adopted by the AO while assessing the case of the assessee u/s 143 (3) by order dated 18/2/2002 and noticing that there was a vast difference between the value as adopted by the AO and as determined by the registered valuer of the assessee, tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the contention of the assessee was accepted that the claim of the assessee was supported by the registered valuer s valuation the AO could not refer the valuation to the DVO then in such cases there would be no inquiry and examination by the AO even if the valuation report of the registered valuer was prima-facie not correct, that there is no need to write any elaborate reason for expressing the opinion by the AO for the purpose of making the reference of valuation to the DVO because the reference as well as the valuation report of the DVO were only a part of the assessment proceedings and could not be taken as a decision of the AO or of DVO, that there was no requirement of any long-drawn reasoning for expressing the opinion by the AO to initiate the reference of the valuation of the capital asset to the DVO, that the AO had jurisdiction over the concerned property i. e. valuation of the capital asset and as the DVO also held authority and jurisdiction to value the property and submit the valuation report the reference made by the AO could not be held to be incorrect, the valuation report of the DVO was regarded a good piece of evidence on the issue of FMV of a capital asset a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rightly rejected if it is established that it is not a genuine report. Otherwise his report deserves to be considered while evaluating the other evidence available on record. The absence of the Registered Valuer can be one circumstance which can persuade a quasi judicial authority to draw an adverse inference against the report. The ld. CIT(A) instead of disbelieving the report ought to have pointed out the specific defect in the report. It appears that the ld. first appellate authority emphasized on the fact that failure of the assessee to produce the registered valuer along with supporting material considered by him in arriving at the valuation made at ₹ 155/- per sq. met. is sufficient for discarding this valuation report. In our opinion ld. first appellate authority has not appreciated the facts and circumstances in proper way. Had there not been any material then he ought to have called for a remand report from the A. O. Against this valuation report there is no documentary evidence in the possession of A. O. which can exhibit the fair valuation as on 1/4/1981 of the disputed land. Therefore, taking into consideration all the facts and circumstances we deem it appropria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference made by the AO the DVO u/s. 55A of the Act. The provisions of the section were introduced , w. e. f. 01. 01. 1973, by the Taxation Laws(Amendment) Act 1972. Section reads as under 55A. Reference to Valuation Officer. - With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the AO may refer the valuation of the capital asset to a Valuation Officer- (a) in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the AO is of opinion that the value so claimed is less than its fair market value ; (b) in any other case, if the AO is of opinion (i) that the fair market value of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases mentioned at clause (b) above. In the cases mentioned as (i) above, the AO assumes jurisdiction, when there is a valuation report in respect of the asset and the assessee adoptes the value of the asset in accordance with such estimation and also if the AO is of the opinion that the value claimed by the assessee is less than the FMV. In other cases mentioned as (ii) above and which are covered by the provisions of clause (b) of section 55A, the AO is empowered to 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 exis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. We would also like to discuss the recent decision of the Hon ble jurisdictional High Court, delivered in the case of Puja Prints(360ITR697). In that case, assessee had claimed value of the property as on 01. 04. 1981 at ₹ 35. 99 lakhs on the basis of the report of a government valuer. The AO referred the issue of valuation to the DVO, who valued the property at ₹ 6. 68 lakhs as on 01. 04. 1981. Consequently, the AO enhanced the capital gains of the assessee. In the appellate proceedings, FAA decided the issue against the it. Order of the FAA was challenged before the Tribunal. Deciding the issue of FMV, Tribunal held that in view of section 55A it was not permissible for the AO to make a reference to the DVO for the purpose of valuation, as the value of the property declared by the assessee was not less than its FMV. Department agitated the issue before the Hon ble High Court. Upholding the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(ii) of the Act, and paragraphs 26 to 28 of Circular No. 96, dated November 25, 1972, of the Central Board of Direct Taxes (see [1973] 91 ITR (St. ) 1) ? (b) Whether, on the facts and in the circumstances of the case and in law, the Income-tax Appellate Tribunal was right in directing the AO to accept the valuation given by the respondent as the fair market value on the basis of the registered valuer's report and workout capital gains ? (c)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 ownership of the property is required to be examined vis-avis the various partnership deeds entered into by the firm and to that limited extent restoring the issue to the file of the AO for deter-mining the date of acquisition by the firm for the purpose of indexation, particularly when this issue was not raised either before the AO or the Commissioner of Income-tax (Appeals) and, hence, did not arise from the order of the Commissioner of Incometax (Appeals) ? We have considered the rival submissions. We find that the impugned order dated 18. 02. 2011, allowing the respondent-assessee's appeal ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. e. , a case not covered by section 55A(a) of the Act. In this case, it is an undisputable position that the issue is covered by section 55A(a) of the Act. Therefore, resort cannot be had to the residuary clause provided in section 55A(b)(ii) of the Act. In view of the above, the Central Board of Direct Taxes Circular dated November 25, 1972, can have no application in the face of the clear position in law. This is so as the understanding of the statutory provisions by the Revenue as found in Circular issued by the Central of Direct Taxes is not binding upon the assessee and it is open to an assessee to contend to the contrary. The contention of the Revenue that the AO is entitled to refer the issue of valuation of the property to the Departmental VO in exercise of its power under sections 131, 133(6) and 142(2) of the Act is entirely based upon the decision of the Guwahati High Court in Smt. Amiya Bala Paul (supra). However, the apex court in Smt. Amiya Bala Paul(supra) has reversed the decision of the Guwahati High Court and held that if the power to refer any dispute with regard to the valuation of the property was already available under sections 131(1), 136(6) and 142(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had stopped its manufacturing activities since 10/10/1991, that the assessee had shown only LTCG as its income for the year under consideration, that the unabsorbed depreciation had not been allowed to be carried forward in the intervening period, that the unabsorbed depreciation against the long term capital gains could not be set off. 7. The assessee preferred an appeal before the FAA. After considering the assessment order and the submissions of the assessee, he held that the submission of the assessee was silent on the fact that there was no business activity of the assessee since 1991 and it had not been allowed to carry forward the unabsorbed depreciation as there was no business activit, that it had not denied the statement as made by the AO, that there would be no unabsorbed depreciation available to the assessee for setting-off against the capital gains in the year under consideration. Accordingly, the action of the AO was upheld. 8. Before us, AR stated that as per the provisions of the Act, the assessee was entitled to carry forward the unabsorbed depreciation, that continuation of business was not a pre-condition for allowing the carrying forward. He relied upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 94, dated August 9, 2000 ([2000] 245 ITR (St. ) 21, 40) that the unabsorbed depreciation allowance could be set off against the income under any other head even where the business was not carried on. Clause 22 of the said circular which is relevant is as under : 22. Requirement of continuance of the same business for set-off of unabsorbed depreciation dispensed with : 22. 1 Under the existing provisions of sub-section (2) of section 32 of the Income-tax Act, carried forward unabsorbed depreciation is allowed to be set off against profits and gains of business or profes-sion of the subsequent year, subject to the condition that the business or profession for which depreciation allowance was originally computed continued to be carried on in that year. A similar condition in section 72 for the purpose of carry forward and set off of unabsorbed business loss was removed last year. 22. 2 With a view to harmonise the provisions relating carry forward and set off of unabsorbed depreciation and unabsorbed loss, the Act has dispensed with the condition of continuance of the same business for the purposes of carry forward and set off of unabsorbed depreciation. 22. 3 This ame ..... X X X X Extracts X X X X X X X X Extracts X X X X
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