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TMI Blog2017 (7) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... tvam Villa, Gurgaon, in which the assessee had 50% interest, the balance 50% being that of her husband, The said property had been purchased on 24.9.2007 for Rs. 5,18,75,776/- and sold on 31.3.2010 for Rs. 5,00,00,000/-. The assessee had also taken a loan for the purchase of the said property and had claimed interest paid on the said loan as an expense and added it to the loss from the sale of property. Thus the total business loss returned by the assessee was Rs. 26,34,781/-. The Assessing Officer became suspicious of the sale price of the property considering the general trend in the real state market and in Gurgaon particularly which according to him was in a boom during those years. He, therefore, issued commission u/s 131(1)(d) of the Income Tax Act, 1961 (in short 'the Act') to the Valuation Officer (hereinafter referred to as DVO) to determine the fair market value ( hereinafter referred to as FMV) of the property as on 31.3.2010. The DVO determined the value of the property at Rs. 7,38,78,923/-, much higher than Rs. 5 crores at which the assessee had sold the property. The same was confronted to the assessee. The assessee responded by stating that there were glaring mistake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of property U/s Sec 55 A and on objection by the assessee, issued commission U/s 131(1)(d) of the I.T. Act 1961 to the Deptt valuation Officer. The Deptt. Valuation officer after obtaining the requisite details from the assessee and taking into account the relevant facts, prepared the valuation report. Which was duly confronted to the assessee during assessment proceedings. The assessing officer has based on the report of the DVO drawn the inference that value of the property sold was higher than as declared by the assessee and accordingly determined the tax liability of the assessee. The appellant during appeal has given instance of other property which was sold at tower rate than the appellant. It is noticed that size of plot of both the villas is different. The villa sold by the appellant is of much larger size, therefore, the rates are not comparable. The assessing officer has not based his estimate on general observations rather on the basis of expert i.e D.V.O. He has assessed the correct value of sale of the property and accordingly assessed the gain on sale of the residential property. As for as reference to the Deptt. Valuation officer is concerned the assessing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Income Tax Department; 2.3. That further, reference to DVO for valuation u/s. 55A and/or S.131(1)(d) has no application to sale of property constituting stock-in-trade, being the settled position till assessment year 2013-14 [70 DTR 169(AII.) and 320 ITR 345 (Mad)}, thereafter S.43CA being inserted in the Act w.e.f. 1-4-2014 to provide for reference to DVO for valuation of property constituting stock-in-trade 3. That in any case and without prejudice to the above, it is settled law that re-determining sale value by certain notional means is not permitted while computing Income under the head Business and Profession; 4. Notwithstanding and without prejudice to the above, on the facts and circumstances of the case, and in law, the Ld. CIT(A) erred in not considering the alternative prayer of the Appellant challenging the valuation report of the DVO on merits. The appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal." 6. All the ground raised by the assessee are against the action of the Ld. CIT (Appeals) in upholding the addition made by the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e generally high, no material or evidence has been placed on record to controvert the submissions of the assessee that it wasn't the case - The actual sale value has been re-determined by the Ld AO, and as upheld by the Ld CIT(A), solely on the basis of the report of the DVO, without placing any material or evidence on record that an amount other than the actual sale consideration was received by the assessees. - For the relevant year, i.e., there were no specific and/or Special Provisions governing the transfer of immoveable property being stock in trade. The amendment by way of insertion of S.43CA is effective 1.4.2014, and such provisions are pari materia with S.50C that applies to transfer of immoveable assets being "capital assets". Further, as the cost of construction of the property was not in question, the reference to DVO by invoking S.131(l)(d) of the Act is bad in law in view of SC in 262 ITR 407 and the 2009 Guidelines on Valuation of Immoveable Property of the Deptt of Revenue. - Accordingly, it is respectfully submitted that for the year under consideration, i.e., AY 2010-11, the established principles and settled law would apply to the impugned sale of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the gist of which is that as per the settled law on the issue by the Hon'ble Apex Court in Amiya Bala Paul Vs. CIT (2003) 262 ITR 407 (SC), the Assessing Officer is empowered to refer a matter for valuation only where specific powers are contained in the Act. Reference u/s 131(1)(d) of the Act being a general power could not have been made and even assuming that reference was made u/s 142A under the said section reference could have been made only for the purpose of determining cost of construction and not sale value of the property. The Ld. counsel for the assessee placed reliance on the following case laws in support of its above contentions: i) Amiya Bala Paul Vs. CIT (2003) 262 ITR 407 SC). ii) Memorandum explaining reasons and objects for introducing section 142A. iii) 2009 Guidelines on valuation of immovable property, Department of Revenue explaining the scope of reference to DVO u/s 142A of the Act. iv) Namita Singh, New Delhi Vs. Department of Income Tax, ITA No.2256/Del/2008. 12. The Ld. counsel for the assessee also contended that specific provision for substituting sale consideration of immovable property held as stock-in-trade was brought on the Statute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his opinion on the basis of the facts as found on an enquiry conducted by himself which results in the assessment order. A report by the Valuation Officer under s. 55A is, on the other hand, the outcome of an inquiry held by the Valuation Officer himself and reflects his opinion on the evidence before him. Such a report would not be the result of an inquiry by the AO under the provisions of s. 133(6) or s. 142(2). It is true that the AO is not bound by strict rules of evidence and a report of a Valuation Officer under s. 55A may be considered by the AO as a piece of evidence if it is relevant [See CIT vs. East Commercial Co. Ltd. (1967) 63 ITR 449 (SC), 457]. However, the power of inquiry granted to an AO under ss. 133(6) and 142(2) does not include the power to refer the matter to the Valuation Officer for an enquiry by him." 16. The reference in the present case having been made under general provision u/s 131(1)(d) is, therefore, illegal and invalid and beyond the powers of the Assessing Officer. Further, even for a moment if we assume that reference was made u/s 142A and the mentioning of section 131(1)(d) was wrong, the reference, we hold, is still not valid since, as right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of s. 142A are applicable where the value of investment is to be determined. Provisions of s. 142A are not applicable for the purpose of determination of full value of consideration. Therefore, in our considered opinion, in the absence of any contrary evidence, full value of consideration cannot be estimated under s. 142A." 18. This view is further fortified by the memorandum, explaining the reasons and objects for including provisions 142A and which states that the said provisions has been introduced to remove doubts whether the Assessing Officer can make reference to Valuation Officer for estimating the cost of construction. The relevant portion of the memorandum is reproduced hereunder: 36. Clarificatory amendments regarding estimates by Valuation Officer in certain cases The existing provisions of section 131 provide that the Assessing Officer shall have the same powers as are vested in a Court under the Code of Civil Procedure, 1908, when trying a suit. One such power which has been provided in clause (d) of subsection (1) of section 131, is the power to issue commissions. Section 75 of CPC and order XXVI of the Schedule thereto lays down the power of issuing c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessee further argued that by substituting sale consideration by FMV in the absence of the Act any evidence of the assessee having acquired any sum over and above the stated consideration, the Assessing Officer has attempted to bring to tax the notional profits of the assessee which is impermissible under the law. The Ld. counsel for the assessee has relied upon the following judgments in this regard: 1) Poona Electric Supply Co. Ltd. Vs. CIT (1965) 57 ITR 521 (SC) 2) CIT Vs. Prafulla Kr Mallick (1969) 73 ITR 119 (Orissa) 3) K.P. Varghese Vs. ITO (1981) 131 ITR 597 (SC) 4) CIT Vs. Shakuntala Devi (2009) 224 CTR 79 (Delhi) 5) Principal CIT-2, Chd. Vs. Quark Media House India (P) Ltd. (2017) 77 Taxmann.com 301 (P&H) 22. The Ld. counsel for the assessee relied upon the decision of the Hon'ble Jurisdictional High Court in the case of Paramjit Singh Vs. ITO (2010) 195 Taxman 273 (P&H) and stated that the sale consideration disclosed in sale deed has to be accepted and cannot be contradicted merely on the basis of oral evidence. The Ld. counsel for the assessee submitted that the actual sale consideration cannot be substituted by fair market value and relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... residential and had a much lower circle rate. Detailed submissions were made to the AO vide letter dated 07-3-2013 alongwith copy of expert opinion of a Govt. Approved Valuer pointing out discrepancies in the DVO's report placed at paper book page no 143-163.but the same we find were not considered by the lower authorities . 25. Therefore, considering the fact that the assessee has established the sale consideration received by virtue of the sale deed, coupled with the fact that no shred of evidence, of the assessee having earned more than the stated consideration, has been brought on record by the Revenue, we unhesitantingly hold that the Assessing Officer has erred in taking the fair market value as the sale consideration received by the assessee and by doing so has sought to tax the notional profits of the assessee, which is not permissible under the Act. The reliance placed by the assessee on the decision of the Hon'ble Apex Court in the case of K.P. Varghese (supra) is apt, wherein it has been categorically held that the onus is on the revenue to prove understatement in the document and establish a condition of taxability. There has to be evidence that consideration actu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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