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TMI Blog2016 (10) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... sale consideration does not reflect the correct rate. In short, he seriously disputed the veracity of the petitioner’s declaration of the prices at which said 3 properties were sold. Merely because from time to time the Assessing Officer referred to wrong provision for exercising powers which he otherwise had, would not vitiate his action. Had this been a case of lack of powers, the issue would certainly rest on different parameters. However, when we find that the Assessing Officer had the powers to call for the DVO’s report, the exercise cannot be struck down for a mere reference of a wrong statutory provision as has been consistently held by the Supreme Court in series of judgments. Merely because the Assessing Officer in one of the communications referred to the sale consideration as business income would not wash away the detailed analysis and materials he referred to in various letters indicating that the sale price shown was abysmally low compared to real market price. At a stage when the assessment is not yet complete, it would simply not be possible or proper in our part to intervene and interfere in the manner in which the assessment should be made. If ultimately the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Annex-A attached herewith. 3. You are requested to send your valuation report to the undersigned in duplicate urgently preferably within 30 days of receipt of this letter. This is time barring matter, as the assessment u/s 143(3) of the IT Act for A.Yr.2008-09 is pending and the same is barred by limitation by 31.12.2010. 1.2 The DVO therefore, on 29.10.2010 wrote to the petitioner calling for certain basic information about the land in question. The petitioner thereupon wrote to the DVO on 8.11.2010 pointing out to him that there is no provision for substituting the fair market value of the property for the purposes of computing capital gains in terms of Section 50C of the Act and the exercise of valuation is wholly redundant. 1.3 On 26.11.2010, the Assessing Officer wrote to the DVO with a copy to the petitioner and conveyed as under : Please refer to this office letter of even No. dated 26.10.2010 for valuation of property for estimating fair market value of the property belonging to Shri Shantilal D. Sopariwala, 2/3710, Main Road, Navsari Bazar, Surat. 2. In the above referred letter, the Section was inadvertently mentioned as u/s 50C(2) instead of correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resh Jantri rates. According to him, the entire appreciation could not have been achieved in last few months. Along with his letter, he had also annexed supporting documents received from SUDA. In this letter, the Assessing Officer also pointed out to the assessee that as on 31.3.2008 he was holding 9 different immovable properties, majority of them being agricultural lands. According to him therefore, it would appear that the sale transactions in question were done only with a motive of earning profit. In the earlier years, no agricultural activities were carried out by the petitioner and he was holding the properties only with an intention of making profit. These lands were acquired only in recent times and were within the periphery of municipal limits of city of Surat. Such lands were surrounded by developed industrial zone. Thus, the intention of holding the property was to book the profit and not to carry out any agricultural activities. He therefore formed a prima facie belief that looking to the frequency of property transactions, holding period of these plots of land, history of transactions in properties and absence of any agricultural activity on these properties, would i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, it is not open for the Assessing Officer to call for the DVO s report. In this context, learned counsel relied on a decision of the Division Bench of this Court in case of Me Mummy Hospital V/s. Assistant Commissioner of Income-Tax , reported in 45 Taxmann.com 248 . Learned counsel lastly contended that the Assessing Officer had under a letter dated 9.12.2010 called upon the assessee to show cause why the entire sale consideration of ₹ 1.57 crores towards the sale of the lands in question should not be treated as business receipts. In that view of the matter, the DVO s report would be wholly inconsequential. 3. On the other hand, learned counsel, Mr.Sudhir Mehta for the department opposed the petition contending that the assessment proceedings are on-going. The Assessing Officer has ample power to call for the DVO s report. Section 55A of the Act would not be confined to computation of capital gain and can be utilized for other purposes. The Assessing Officer has formed a prima facie belief that the sale of land would not qualify for capital gain but, the receipts thereof can be taxed as business income. At this stage even before completion of the assessment, such i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essable means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty.] (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted [or assessed or assessable] by the stamp valuation authority referred to in sub-section (1), the value so adopted [or assessed or assessable] by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.] 5. In terms of sub-section (1) of Section 50C of the Act, where the consideration received or accruing as a result of transfer of a capital asset, being land or building or both, is less than the value adopted, assessed or assessable by the State Stamp Valuation Authority in respect of transfer of such property, such value would be by deeming fiction considered to be a full value of consideration received or accruing as a result of such capital asset. Under sub-section (2) of Section 50C of the Act, however, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey had been held by the assessee as stock-intrade and not as investment with primary motive of making profit. He therefore proposed to tax the receipts out of the sale of said properties as assessee s business income. 7. In this very communication, in the context of the variance between reflected sale consideration in the sale deeds and the prima facie indication of the prevailing market rates, he pointed out that the agricultural lands at Bhimrad was sold at a rate of ₹ 654/- per sq. mtrs., whereas the SUDA conducted auction of the land in the same area during the same period, had fetched sale price in the range of ₹ 750/- to ₹ 2300/- per sq. mtrs. In case of agricultural lands at Khadsad village, this comparative figures worked out at ₹ 39.47 per sq. mtrs. of sale price versus ₹ 1000/- to ₹ 1500/- per sq. mtrs. during SUDA auction. In case of Segva land, the comparison was ₹ 22.81 per sq. mtrs. of sale price versus ₹ 500/- to ₹ 750/- per sq. mtrs. during SUDA auction. He further pointed out that Jantri rates, to which the assessee was referring to were not revised since the year 1999. The same came to be revised only after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income-Tax , reported in 262 ITR 407 . The facts in the said case were that the assessee built up a house in a suburb of Calcutta during the years 1981 to 1983. In the return for the Assessment Year 1982-83, she disclosed that she had invested an amount of ₹ 1.75 lacs for the construction of the house. In the return for the subsequent year 1983-84, she disclosed that she had invested further amount of ₹ 1.70 lacs in construction of the house. The Assessing Officer did not accept such declaration and referred the question of construction cost to the DVO under Section 55A of the Act. On the basis of the report of the DVO, the Assessing Officer made additions in the Assessment Year 1983-84 and also reopened the assessment for the Assessment Year 1982-83. In this context, the question came up before the Supreme Court, could the Assessing Officer have referred the question of cost of construction to the Valuation Officer? Referring to the provisions contained in Section 55A of the Act as also sub-section (3) of Section 133 and sub-section (2) of Section 142 of the Act, the Supreme Court held that in the case on hand, the reference under Section 55A of the Act was not comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r investment to the best of his judgment, if the assessee does not co-operate or comply with his directions. (6) The Valuation Officer shall send a copy of the report of the estimate made under sub-section (4) or subsection (5), as the case may be, to the Assessing Officer and the assessee, within a period of six months from the end of the month in which a reference is made under sub-section (1). (7) The Assessing Officer may, on receipt of the report from the Valuation Officer, and after giving the assessee an opportunity of being heard, take into account such report in making the assessment or reassessment. Explanation.--In this section, Valuation Officer has the same meaning as in clause (r) of section 2 of the Wealthtax Act, 1957(27 of 1957).] 15. In sub-section (1) of Section 142A of the Act itself, the Assessing Officer has the power, for the purposes of assessment or reassessment, to make a reference to the Valuation Officer to estimate the value, including fair market value, of any asset, property or investment, who would submit such a report to him. Sub-section (2) of Section 142A of the Act further clarifies that the Assessing Officer may make a reference t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscal administration. 17. The Statute thus recognizes the power of the revenue authorities to call for information in certain cases subject to safeguards, even in cases where the assessment may not be pending. Such powers as observed by the Kerala High Court in case of Pattambi Service Co-operative Bank Ltd. (Supra), have been invested bearing in mind the larger public and economic interest and in furtherance to the right of the revenue to gather information under fiscal administration. 18. Reverting back to the facts of the case, as noted, as held and observed by the Supreme Court in case of Smt.Amiya Bala Paul (Supra), it may be that the reference to the DVO in terms of Section 55A of the Act if strictly seen, for the purpose of valuation in the context of the capital gain may not be competent. However, post the said decision of the Supreme Court, Section 142A of the Act was inserted with retrospective effect substantially nullifying its effect and vesting the competent revenue authorities with the power to obtain valuation reports in the context of issues other than of capital gains computation also. In the present form, sub-section (2) of Section 142A of the Act provides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re that the assessee had transferred shares held by it to its subsidiary not at market price but on book value. The Assessing Officer did not hold that the assessee company had made any secret profits out of the transaction or that the transaction was not bonafide. Despite which he taxed the assessee on the basis of market price on the basis that though the company had not made any profit, it must be deemed to have made profit and should be taxed accordingly. In this background, the Supreme Court has held as under : It is a well accepted principle of law that an assessee can so arrange his affairs as to minimise his tax burden. Hence, if the assessee in this case has arranged its affairs in such a manner as to reduce its tax liability by starting a subsidiary company and transferring its shares to that subsidiary company and thus forgoing part of its own profits and at the same time enabling its subsidiary to earn some profits, such a course is not impermissible under law. 21. Facts of our case are different. The Assessing Officer strongly disputes the correctness of the sale considerations reflected in the sale deeds. The assessment is yet to be made. The Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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