Gujarat High Court
Kiritbhai Jayantilal Kundalia (Huf) vs Income Tax Officer Ward No. 2(4) on 8 August, 2016
Author: Ks Jhaveri
Bench: Ks Jhaveri, G.R.Udhwani
O/TAXAP/1187/2008 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 1187 of 2008
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE KS JHAVERI
and
HONOURABLE MR.JUSTICE G.R.UDHWANI
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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KIRITBHAI JAYANTILAL KUNDALIA (HUF)....Appellant(s)
Versus
INCOME TAX OFFICER WARD NO. 2(4),....Opponent(s)
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Appearance:
MR. B.S. SOPARKAR, ADVOCATE FOR MRS. SWATI SOPARKAR,
ADVOCATE for the Appellant(s) No. 1
MR PRANAV G DESAI, ADVOCATE for the Opponent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE KS JHAVERI
and
HONOURABLE MR.JUSTICE G.R.UDHWANI
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Date : 08/08/2016
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE KS JHAVERI) By way of this appeal under section 260A of the Income-tax Act, 1961, the appellant-assessee has challenged the order of the Income-tax Appellate Tribunal (hereinafter referred to as "the Tribunal") whereby the Tribunal has dismissed the appeal preferred by the assessee by confirming the orders passed by the Assessing Officer and the Commissioner of Income-tax (Appeals).
2. This court, while admitting the appeal, has framed the following substantial questions of law:
"1. Whether, in the facts and circumstances of the case, Income-tax Appellate Tribunal has erred in law by not appreciating the contention that the action of assessing officer referring the matter to the Valuation Officer under section 55A of the Act is illegal?
2. Whether, in the facts and circumstances of the case, Income-tax Appellate Tribunal has erred in upholding the order of CIT(A) directing Assessing Officer to recalculate capital gain by increasing cost of acquisition as on 1.4.1981 as per the valuation report of Asst. Valuation Officer (i.e. Rs. 1,68,468/- and Rs. 1,98,428/-) by 50% instead of rejecting the said valuation report and accepting cost as per the claim of assessee in his return (i.e. Page 2 of 13 HC-NIC Page 2 of 13 Created On Fri Aug 12 00:48:15 IST 2016 O/TAXAP/1187/2008 JUDGMENT Rs. 5,08,170/- and Rs. 6,60,225/-)?
3. Whether in the facts and circumstances of the case, Income-tax Appellate Tribunal has erred in law in upholding action of Assessing Officer in making reference to the valuation officer u/s. 55A of the Act by Assessing Officer and in putting reliance on the said valuation report for calculating capital gain when the value claimed by assessee is higher than the FMV as determined by the said valuation report?"
3. The facts of the case are that the assessee filed return of income for assessment year 2000-01 on 7.3.2001 along with valuation report of the registered valuer. Original assessment under section 143(3) of the Act was completed on 13.3.2003. Thereafter, the Assessing Officer reopened the assessment by issue of notice under section 148 of the Act. The Assessing Officer completed the assessment under section 143(3) read with section 147 of the Income-tax Act by determining total income at Rs. 20,04,554/- on 31.3.2006.
3.1 Being aggrieved by the order of the Assessing Officer, the assessee preferred appeal before the Commissioner of Income-tax (Appeals). The Commissioner (Appeals) confirmed the action of the Assessing Officer in reopening the assessment. The relevant observations of the order of Commissioner (Appeals) are as under:
"I have considered the lands of the case and have considered the submissions made by the appellant. In this case, the Assessing Officer reopened the Page 3 of 13 HC-NIC Page 3 of 13 Created On Fri Aug 12 00:48:15 IST 2016 O/TAXAP/1187/2008 JUDGMENT assessment only after receiving the valuation report which clearly mentioned the discrepancies in respect of cost of acquisition as on 1.4.1981. Therefore, in the present case, it cannot be said that the appellant has disclosed all the facts during the course of original assessment proceedings. Under the circumstances, I hold that the action of the Assessing Officer in reopening the assessment is correct and no interference is call for."
3.2 In further appeal by the assessee, the Tribunal vide its order dated 26.3.2008 has upheld the view taken by the Commissioner (Appeals). The relevant observations of the Tribunal are as under:
"We have heard the rival contention of both the parties. We find that the A.O. while framing the assessment order has referred the matter to Valuation Cell for determining the cost of acquisition of property as on 1.4.1981. The A.O. could not get the report of the registered valuer within time so A.O. has completed the assessment without report the A.O. has obtained the report on 25.9.2003 and determined the fair market value of the property atRs. 1,68,468/- and Rs. 1,98,428/- shown by the assessee on that valuation report capital gain on sale of land is worked out. The assessment was reopened on that ground, therefore, the A.O. has made reference to the valuation officer. The ld. A.R. has taken the contention that while making the reference to the valuation officer there was no pendency of assessment order, therefore the pre-condition for making a reference to Page 4 of 13 HC-NIC Page 4 of 13 Created On Fri Aug 12 00:48:15 IST 2016 O/TAXAP/1187/2008 JUDGMENT the valuation officer is not satisfied but that controversy is settled by the decision of Madhya Pradesh High Court in case of Union of India vs. Kumari Vijyaraja 235 ITR 380 and held that reference to valuation officer is only an aid, an instrument and too to the A.O. for use in case of needed and his discretion for making good and fair assessment at his option there is no bar to use this power for reassessment. We also have taken the note of section 50C has been introduced and the scope of section 55A is enlarged for ascertaining the market value which is possible sale value the use of section for ascerting the cost. We find that A.O. And C.I.T. (A) is justified in his action. Looking into0 the facts and circumstances of the case, the original assessment was completed u/s. 143 on 13.3.03 determining the total income at Rs. 59,996/-. The AO has referred the matter to the valuation cell and after obtaining the report from the valuation cell, i.e. the DVO, and AO found difference between the valuation shown by the registered valuer and the value determined by the DVO. In the instant case the assessee filed the return on 7.3.01 and same was processed u/s. 143(1) on 30.3.01. The matter was referred to the Valuation Officer on 27.12.2000, therefore at the time of original assessment the matter was referred to Valuation Cell and on the basis of the report, the assessment was reopened u/s. 140A, therefore reopening is justified. The ld. A.R. has relied upon the decision of Hon'ble Gujarat High Court 147 ITR 67 and 209 ITR 568 but in both the cases facts are different Page 5 of 13 HC-NIC Page 5 of 13 Created On Fri Aug 12 00:48:15 IST 2016 O/TAXAP/1187/2008 JUDGMENT therefore this will not help to the assessee. Therefore, we are of the view that CIT(A) is justified in upholding the action of AO in respect of reopening of the assessment. "
3.3 So far as the second question regarding direction to the Assessing Officer to recalculate capital gain by increasing cost of acquisition as on 1.4.1981 as per the valuation report of the Asst. Valuation Officer by 50% instead of rejecting the said valuation report and accepting the cost as per the claim of the assessee in his return is concerned, the Tribunal has given its findings in paragraph Nos. 10 and 11 which are reproduced as under:
"para 10 - We have heard the rival contention of both the parties. Looking to the facts of the case, we find from the copy of the registered valuer's report which is submitted along with the return on 7.3.2001, the valuer has determined the value as on 1.4.1981 at Rs. 6,60,225/- and assessee's share was 66.67%. Thus the Fair Market Value as on 1.4.1981 is taken at Rs. 4,40,200/-. The valuer in his report has submitted that there was no comparative instance of sale on open agriculture land in this area and in the absence of comparative sale instance fair and reasonable value of the land is fixed at 75/- per sq. mtr. After that the Asst. Valuation Officer of the department has determined the FMV with comparative sale instance in that locality which is at page 18 of the paper book. While valuing the property, the assessee did not file any objection to proposed valuation which was communicated to him.
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Moreover, valuation officer has considering all other factors have determined the FMV as on 1.4.81. It is also found from the record that the ITO has referred the matter to him on 27.12.02 and thereafter, he has reported on 25.1.03. We find that the CIT(A) in his order has held all the issue in detail in his order which reads as under:
`I have gone through the facts of the case and have considered the submissions made by the AR. As per the details filed, a copy of which was also supplied to the Assessing Officer, the appellant has pointed out the plots under the same survey were sold at a much higher rate. Some of the sale instances contain in the details are as under:
Sale Rs. Date of sale Survey No. Sq. mtr.
20999.7 05/02/81 456 195-10
60000 19/06/1981 456 121-8
60000 09/07/91 456 101-91
25000 18/8/1981 461/27 205-00
12000 28/9/1981 456/27-B 144-60
56625 22/1/1982 456-41-B 126-43
90000 24/9/1982 456/20A 124-19
60000 15/10/1982 456/5 508-18
49500 12/11/82 461/5 200-00
55000 30/12/1982 456 131-5
As per the appellant, these details were obtained by the appellant from the Sub-Registrar, Rajkot Unit 1, Rajkot as per the Receipt No. 5236, dated 20.07.2006 for Rs. 20/- (search 1981 to 1982). The appellant has Page 7 of 13 HC-NIC Page 7 of 13 Created On Fri Aug 12 00:48:15 IST 2016 O/TAXAP/1187/2008 JUDGMENT given Gen. Board Resolution No. 126 dated 4.10.1991 of Rajkot Municipal Corporation also and this resolution contains the details of area-wise revised dates for the said period which are on the higher side but for the same survey no. incidentally, these rates are for the property developed urban land situated in the municipal limits and therefore are not comparable.
Incidentally, these details were forwarded to the Assessing Officer also. A perusal of the details show that the rate at which the property was sold was much higher than the rate at which the appellant's valuer had valued the property. However, we have to keep in mind that this cannot be the sole indicator for determining the value. It has been admitted by the government approved valuer (whose report was filed by the appellant) that no comparative instances in respect of agricultural land were available. Even a perusal of the report submitted by the Asst. Valuation Officer will show that transaction pertains to earlier period and these transactions were for the different survey numbers. Therefore, in the instant case, it will be seen that the departmental valuer, i.e. Asstt. Valuation Officer has taken the cost for earlier period and that too for the land situated in different sector albeit for very smaller plots in urban area. No doubt the rates of the properties are very high but these cannot be adopted as these are for small plots in well defined areas connected by roads with infrastructural facilities which is not so in the case of sale transaction under consideration which are for agricultural land. Not only this, the land is agricultural but falls within Page 8 of 13 HC-NIC Page 8 of 13 Created On Fri Aug 12 00:48:15 IST 2016 O/TAXAP/1187/2008 JUDGMENT the Rajkot Municipal Corporation. At best, these can be one of the indicators of rates to be applied for agricultural plots. Incidentally, we have to keep in mind that the land is agricultural land, the area of plot of land was running into acres and on comparative instances for the same period in the same sector and also same kind of land is available. Thus, on the one hand transactions are for different sectors and for the earlier period (given by the Asstt. Valuation Officer) and on the other hand are the transaction which are for smaller urban plots in the same sector. Keeping in view these factors, a reasonable view will have to be adopted in the present case. In my opinion, it will be in the fitness of things if the valuation adopted by the departmental valuer at Rs. 164468/- and Rs. 198428/- respectively is increased by 50% . The Assessing Officer is directed to recalculate the value after increasing the cost of acquisition given by the departmental valuer in respect of both the land by 50% and then recalculate the capital gains. The Assessing Officer has also to keep in mind that as per original order, the appellant's share was 62.5% in respect of Survey No. 461/4 and 66.67% in respect of Survey No. 156 respectively. The working should be done keeping in view this aspect also. To this extent, the appellant gets relief.' para - 11 We find that while valuing the property the valuation officer has written letter to assessee to file objection to proposed valuation but the assessee did not file the the proposed valuation on 12.9.03, the Page 9 of 13 HC-NIC Page 9 of 13 Created On Fri Aug 12 00:48:15 IST 2016 O/TAXAP/1187/2008 JUDGMENT assessee has filed his registered valuer's report on 7.3.01, which was not given to the valuation officer.
The valuation officer has finalized the valuation by taking the objection and by comparing the sale instance in that area, the assessee has not given any evidence before valuation officer therefore, the CIT(A) has considered all the objections of the assessee and given the relief to the assessee, therefore, in our opinion our interference is not required. Thus we uphold the order of CIT(A). We order accordingly."
3.4 The learned counsel for the appellant has relied on the decision of this court in the case of Commissioner of Income-tax v. Gauranginiben S. Shodhan Indl. reported in (2014) ITR 238 (Gujarat) where this court has observed at paragraph No. 15 as follows:
"Coming to the question of reference to DVO for ascertaining the fair market value as on 1.4.1981 also, we find that such reference was not competent. We have noticed that prior to the amendment in section 55A with effect from 1.7.2012 in a case, the value of the asset claimed by the assessee is in accordance with the estimate made by the Registered Valuer, if the Assessing Officer was of the opinion that the value so claimed was less than its fair market value as on 1.4.1981. It would not be the case of the Assessing Officer that the value of the asset shown as on 1.4.1981 was less than the fair market value. Such clause, therefore, as it stood at the relevant time, had no application to the valuation Page 10 of 13 HC-NIC Page 10 of 13 Created On Fri Aug 12 00:48:15 IST 2016 O/TAXAP/1187/2008 JUDGMENT as on 1.4.1981. We are conscious that with effect from 1.7.2012, the expression now used in clause (a) of section 55A is is at variance with its fair market value. The situation may, therefore, be different after 1.7.2012. We are, however, concerned with the period prior thereto. Clause (b) of section 55A is in two parts and permits a reference to DVO if the Assessing Officer is of the opinion that (i) the fair market value of the asset exceeds the value of the asset so claimed by the assessee by more than such percentage of the value of the asset 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. Sub-clause(i) of clause (b) also for the same reasons recorded above, would have no bearing on the fair market value as on 1.4.1981. The Assessing Officer had not resorted to sub-clause(ii) of clause (b). In any case, clause(b) would apply where clause(a) does not apply since it starts with the expression in any other case. In other words if assessee has relied upon a Registered Valuers Report, Assessing Officer can proceed only under clause (a) and clause(b) would not be applicable."
3.5 He has further relied on the decision of this court in the case of Commissioner of Income-tax v. Manjulaben M. Unadkat reported in (2015) 55 taxmann.com 62 (Gujarat) and also decision in writ petition being Special Civil Application No. 9293 of 1997 in Hiaben Jayantilal Shah v. Income-tax Officer delivered on 21.4.2008 (reported in 310 ITR 31) and submitted that the Tribunal has committed error in confirming Page 11 of 13 HC-NIC Page 11 of 13 Created On Fri Aug 12 00:48:15 IST 2016 O/TAXAP/1187/2008 JUDGMENT the order of Assessing Officer and the Commissioner of Income-tax (Appeals) and the same is required to be reversed.
4. Learned counsel appearing for the revenue Mr. Desai has taken us to the order of the Tribunal and contended that the view taken by the Tribunal is just and proper and no interference is called for with the same.
5. We have heard learned counsel for the parties. While passing the original assessment order, there was no finding of the Assessing Officer that there was variation in the valuation report given by the government approved valuer. The original assessment order was passed. Thereafter, the case was reopened and while reopening the assessment, the Assessing Officer observed that since there were discrepancies in the valuation report of the government approved valuer, the matter was referred to the Valuation Cell. Since the matter was getting time barred, on the basis of the report of Asst. Valuation Officer, the Assessing Officer determined capital gain and added the same to the total income of the assessee. However, taking into account the observations of this court in the case of Commissioner of Income-tax v.
Gauranginiben S. Shodhan Indl. (supra), the subsequent ascertainment of fair market value by the Asstt. Valuation Officer will not apply in the present case since the valuation of the property as per the valuation report of the government approved valuer is on the higher side. Had the valuation of the Asst. Valuation Officer been on the lower side, the matter would have been standing on a different foot. In that view of the matter, the authority ought not to have referred the matter Page 12 of 13 HC-NIC Page 12 of 13 Created On Fri Aug 12 00:48:15 IST 2016 O/TAXAP/1187/2008 JUDGMENT to the Valuation Officer by applying provisions of section 55 A of the Income-tax Act by reopening of the assessment. Thus, in view of the decision of this court in Commissioner of Income-tax v. Gauranginiben S. Shodhan Indl. (supra) and keeping in mind the above facts, the reopening of the assessment is not permissible. Therefore, the issues are required to be answered in favour of the assessee and against the revenue. Accordingly, we answer the questions in favour of the assessee and against the revenue.
6. In the result, the appeal is allowed. No order as to costs.
(K.S.JHAVERI, J.) (G.R.UDHWANI, J.) (pkn) Page 13 of 13 HC-NIC Page 13 of 13 Created On Fri Aug 12 00:48:15 IST 2016