Income Tax Appellate Tribunal - Delhi
Shri Dev Kumar Jain vs Income Tax Officer on 14 November, 2002
ORDER
Diva Singh, JM
1. This is an appeal filed by the assessee against the order dated 1/3/2002 of CIT(A)-XXII, New Delhi pertaining to 1998-99 assessment year.
2. The assessee has raised the following grounds before us :-
"1. The Learned Commissioner of Income Tax (Appeals) has grossly erred both on facts and in law in confirming the income of the appellant at Rs. 21.20.632- assessed by the Learned Assessing Officer, without appreciating the detailed submissions in writing filed by the appellant. during appellate proceedings.
2. The Learned Commissioner of Income Tax (Appeals) has grossly erred both on facts and in law, in confirming the action of the Assessing Officer of referring the Plot at Tarun Enclave, Pitam Pura, New Delhi for Valuation. without giving adequate opportunity to the appellant.
3. The Learned Commissioner of Income Tax (Appeals) has grossly erred in upholding the action of the Assessing Officer who adopted the Sale Value of the Plot at Tarun Encalve, Pitam Pura, New Delhi at Rs. 22, 33, 662/- against Rs. 4, 02, 000/- received by the appellant as per Agreement to sell.
4. The Learned Commissioner of Income Tax (Appeals) has grossly erred both on facts and in law in upholding the action of the Assessing Officer who assessed the amount of Long Term Capital Gain on transfer of the Plot at Tarun Encalve, Pitam Pura, New Delhi at Rs. 20, 77, 272/-.
5. The learned Commissioner of Income Tax (Appeals) has grossly erred in confirming levy of interest u/s 234B of the Income Tax Act, which was not leviable at all in accordance to the facts of the case and the provisions of the law.
6. The order of Commissioner of Income Tax (Appeals) is not based on the facts of the case and as per law as he confirmed the amount of income assessed by the Assessing Officer arbitrarily. without appreciating the facts and judicial precedents cited by the appellant and hence the order is liable to be set aside."
3. The relevant facts of the case are that the assessee filed his return declaring a total income of Rs. 2, 30, 930/-. The declared capital gain on sale of property and income from other sources. The capital gain was shown on account of sale of plot No. 99, measuring 173.33 sq.yards. Dera Gaziklour Distt. Refugee House Building Co-operative Society Ltd., Delhi known as Tarun Enclave, Pitam Pura, Delhi for a sum of Rs. 4, 02, 000/- to Shri Chanan Dass S/0 Rewal Dass, r/o AG-26, Shalimar Bagh, Delhi-110052. After indexing, the cost declared was Rs. 1, 87, 570/-. The Assessing Officer considered the sale price of the plot to be low. Accordingly, the Income Tax Inspector of the Ward was deputed to visit the sit and make local enquiries and thereafter submit his report .A perusal of the assessment order bears out that the Inspector of the Ward contacted shop keepers and residents of the area and submitted his report saying that the value of the plot was understated and the prevailing rate was much higher. In view of the same, the matter was referred to the District Valuation officer, Income-tax Department u/s 55A of the Act for determining the fair market value of the plot on the date of the sale i.e. 6/6/97. The Assessing Officer made a reference to the valuation cell invoking Section 55A relying upon Jindal Strips Ltd. v. ITO-116 ITR 825 (P&H)(FB). Reliance was also placed upon William De Noronha v. ACIT-(1997) 227 ITR 27, 28, 29-30 (Allahabad).
4. The Valuation Officer, Unit-III, I.T. Department determined the value of the plot at Rs. 24, 10, 621/- on the date of sale. As per the assessement order, the Valuation Officer before determining the fair market value of the plot contacted the assessee and asked for the Agreement to Sell and Purchase documents. Referring to Col. 3.2 of the Valuation Report, the AO observed that the assessee did not furnish original allotment/purchase of plot evidence and no other document other than the sale purchase agreement had been submitted by the assessee. The Valuation Officer gave notice to the assessee vide No. VOI/ND/Co-01/2001-01/100 dated 17/11/2000. On 22/11/2000, an adjournment request was received on behalf of the assessee. Thereafter, further reminder on 1/12/2000 was sent by the Valuation Officer and Inspection Notice dated 8/12/2000 was also sent. The inspection of the plot on 12/12/2000 was done in the presence of Shri Praveen Garg, CA of the assessee and the Valuation Officer alongwith R.R. Sharma, JE and S.R. Gupta, JE. Thereafter, notice u/s 55A and 16A(4) for filing objection was issued to the assessee on 15/1/2001 and subsequently objections dated 23/1/2001 and 24/1/2001 were received by the Valuation Officer and according to the AO, duly taken into account by the Valuation Officer. The Assessing Officer observed that the Valuation Officer adopted the method of valuation by comparing sale instances in similar localities. The Valuation Officer quoted sale instance dated 18/11/96 by DDA auction of plot No. E-15, Prashant Vihar, Pitam Pura, Delhi, land area 121.67 sq.mtr. of Rs. 21, 01, 000/- i.e. @ Rs. 17, 527/- per sq.mtr. leasehold residential plot. Commenting upon the adjustments made by the Valuation Officer, the AO observed that the adjustments of situation/location were allowed at the rate of 10% on account of size at 0.10%. The value of the plot as such was taken at Rs. 15, 757/- per sq.mtr. for the said plot at Rs. 22, 83, 662/-.
5. The Assessing Officer further observed that before determining the aforesaid value, the Valuation Officer duly took into consideration the assessee's objections mentioned in his letter dated 23/1/2001. The justification of the Valuation Officer is reproduced at page 3 vide paras 2(a) to 3(c) of the assessment order. Accordingly, the Assessing Officer observed that the decision of the Valuation Officer determining the fair market value of the plot on the said date at Rs. 22, 83, 662/- was communicated to the assessee who, in his reply, submitted letter dated 5th March, 2001 which was also taken into consideration by the AO.
6. Accordingly, relying upon Kallick Nixon & Co. v. CIT-(1967) 66 ITR 714, the AO was of the view that the onus lies upon the assessee to prove that whatever amount mentioned in the sale deed is correct. The AO accepted the valuation report of the Valuation Officer and capital gain was worked out as a result of which addition was made to the extent of Rs. 20, 77, 272/-.
7. In appeal before the first appellate authority, it was contended that the reference was made to the Departmental Valuation Officer without affording an opportunity to the assessee. Accordingly, no addition could be made on the basis of the said report unless it is proved that the actual consideration received by the asessee was nothing more than the amount disclosed by the assessee. It wa further contended that there is no basis on which a notional income was added in the hands of the assessee. The CIT(A) rejected this contention of the assessee stating that the case law relied upon by the assessee related to the now defunct Section 52(2) whereas in the present context, the concept of fair market value for the purpose of capital gains derives its sustenance from the definition contained in Section 2(22B). Accordingly, the reference made to the Departmental Valuation Officer was held to be valid in law.
8. With regard to the contention that the opportunity has to be granted to the assessee before making a reference, he was of the view that the opportunity is required only if the assessment proceeding was proposed to be reopened for this purpose. In view of the fact that this case did not fall under that category, the ground and the arguments pertaining to this were rejected.
9. With regard to the contention of the assessee that the fair market value could not be adopted unless there is a receipt of higher consideration than what was disclosed, the CIT(A) was of the view that the reliance placed upon by the assessee on the decision of the Delhi High Court has placed reliance on the decision of the Supreme Court in the case of K.P.Verghese-131 ITR 597 (SC). In view of the fact that Section 52 of the Act which no longer stood on the Statute, hence, is not the subject matter of the present case.
10. He was further of the view that the AO having once made the reference was bound to adopt the fair market value determined by the DVO.
11. With respect to the adequate opportunity, he was of the view that adequate opportunity has been granted to the assessee and all evidences submitted by him have been considered by the DVO. Accordingly, this ground was also dismissed. Still aggrieved, the assessee is in appeal before us.
12. The learned AR contended that the tax authorities have not appreciated the case in a proper perspective. It was contended that this was not a case of sale but was a case of transfer by power of attorney. It was further contended that the rights acquired by a person by transfer by power of attorney is a limited right. As a result of that, the amount received by the assessee was not much whereas the DVO has considered instances where complete right are acquired by the person who succeeds in its bid in auction. In support of this claim, our attention was invited to paper book page 3 which is the agreement to sell and purchase.
13. Page 5 of the paperbook and internal page 3 of the documents was also specifically referred to in order to contend that the unearned increase was also to be paid and borne by Shri Chanan Dass and the assessee would have no liability for the same. It was further contended that the comparison was made by the DVO with a plot of land which was a kilometer away. Accordingly, the valuation of the two could not be the same. it was vehemently contended that in view of the fact that the assessee has received an amount of Rs. 4 lakhs odd and in the absence of any evidence with the department that the assessee had, in fact, received a higher amount, there was no reason to take a notional value. it was further contended that there was no provision for that matter on account of which notional value of the said plot could be taken and addition be made on this count. For this contention, reliance was placed upon the decision of the Apex Court in the case of K.P. Verghese v. ITO-131 ITR 597. Our attention was also invited to CIT v. Late Gulshan Kumar. Reliance was also placed upon Section 50C which was introduced by the Finance Act, 2001 for the proposition that on a reading of it, the Legislature thought in necessary to law down that the circle rates could be taken into consideration. It was further contended that this was introduced as after the removal of Section 52(2)(1), there was no provision under the Act under which the authorities could proceed. Reliance was placed upon Brittania Industries Ltd. v. DCIT & Others - 238 ITR 57. Reliance was also placed upon CIT v. Godavari Corporation Ltd. - 200 ITR 567 (SC).
14. With respect to ground No. 2 raised by the assessee, it was specifically put to the learned AR whether he wanted to cite any authority for his claim that before a reference could be made by the Assessing Officer to the DVO, an opportunity should be granted to the assessee. The learned AR reiterated the facts of the case and stated that the reference was made purely relying upon the report of the Inspector based on some local enquiry that the amount was understated by the assessee and contended that it is not necessary to rely upon any decision for this purpose. His argument was that the report of the Inspector was not confronted to him. As such, the action of the Assessing Officer was bad in law.
15. The learned DR, on the other hand, placed reliance on the orders of tax authorities. On the issue of reference to the DVO, it was his contention that it was a valid reference and all conditions laid in the Act were fulfilled and there is no provision under the Act or any such requirement that before a reference is to be made, the assesseer has to be given an opportunity. thereafter, a reference has been made to the DVO and full and proper opportunity has been given to the assessee at all stages. Notices thereof have gone to the assessee. Inspection of the said plot has been done after notice and in the presence of the assessee's representatives. The DVO's report has been confronted to the assessee and the objections of the assessee have also been considered and apart from this, the DVO has made an effort to give reasons for not accepting the contentions of the assessee. Accordingly, full and proper opportunity at all stages has been afforded to the assessee. For the proposition that before a reference has to be made. no opportunity is to be granted to the assessee, reliance was placed upon 227 ITR 27 (Allahabad) at page 29. It was further contended by him that the Id. AR himself has stated that the comparison is with a land which is sold within a radius of one kilometer away. As such, the assessee could have no grievance.
16. With regard to the judgments relied upon by the learned AR, it was stated that the issue decided by the Hon'ble Supreme Court in K.P. Verghese's case pertained to Section 52 of the Act which no longer stands on the Statute. As such, the decisions of the High courts and Supreme Court which have been relied upon by the assessee are where Section 52 of the Act stood on the Statute, thus, they do not advance the case of the assessee. It was stated that the reference has been made under Section 55A. Learned DR placed reliance upon ITO v. Pradeep Kumar Badjatiya & Co. - 61 ITD 75. Reliance was also placed upon Jindal Strips Ltd. v. ITO-116 ITR 825 (P&H).
17. It was further stated that learned AR has placed reliance on CIT v. Late Gulshan Kumar through the legal heir which, according to the learned Dr, had no applicability as therein also, the issue pertained to the applicability of Section 52 of the Income Tax Act and reliance has been placed upon K.P.Verghese's case. In view of the fact that the said Section was not invoked in the present case and was not on the Statute at the relevant point of time, the said decision is not relevant to the issue at hand.
18. It was further contended that the DVO's report has been confronted to the assessee, the AR of the assessee was present at the time when the property was inspected. his objections had been noted by the DVO and taken into consideration and thereafter only, the AO has relied upon the only report of an expert. It was further stated that in support of his case, the assessee has not cared to get the property valued by any expert. His objections to the only report of an expert have been noted and taken care of. In the circumstances, the action of the AO was fully justified.
19. Referring to the objections of the assessee to the only expert's valuation report, it was pointed out that the only challenge which the assessee has made to the DVO's report is that it pertains to an instance of sale which is about 1 Km. away which, it was argued, in fact, supports the case of the Revenue.
20. Referring to paperbook page 4 internal page 2 which is an agreement to sell and purchase, it was contended that this document bears out that the assessee agreed to sell the property and Mr. Chanan Dass agreed to purchase the same for an amount of Rs. 4 lakhs odd. Thus, the argument of the learned AR could not be accepted that it was merely contemplated to be a case of transfer by way of power of attorney and not an outright sale. Referring to internal page 2 of the agreement, the following paragraph was further highlighted :-
"That the actual physical possession of the said plot has been delivered to the second party on the sport in vacant condition and the second party has taken possession thereof and is fully entitled to sell and transfer the same in the manner he may like, to construct any construction and the first party, his heirs, successors and assigns shall have no claim, title and interests whatsoever in the said property."
21. The learned DR, referring to page 5, stated that the assessee had appointed Shri Pawan Kumar Gupta, nominee of the purchaser as his general/special attorney regarding the said property who was t perform all acts, deeds and things in connection with the transfer of the said property in favour of the purchaser and get his name registered. It was also contended that the fact that expenses pertaining to stamp and registration of the sale deed were to be borne by the purchaser further supports the case of the Revenue. It was also contended that, in fact, reliance placed by the learned AR on internal page 3 of agreement to sell and purchase whereby it was pointed out that the unearned increase amount shall also be paid and borne by the second party i.e. purchase and the first party shall have no liability negates the claim of the assessee and clearly bears out that it was a case of agreement to sell and not transfer by way of power of attorney as has been contended by the learned AR before the Tribunal.
22. Referring to pages 7 to 17 of the paperbook filed by the assessee, the learned DR pointed out that it contains the valuation report and is an order u/s 55A dated 25/1/2001 which at internal pages 4 and 12 of the paperbook clearly states that the method of valuation is by comparing with sale instance of land of similar status and same and similar locality. It wa further stated that therein, it is recorded in reasons in support of the method adopted that this is the most appropriate method for determination of F.M.V. of plot/land.
Referring to internal page 5 peperbook page 13 in the column 'Rates adopted for Valuation', it was pointed out that it was recorded that "DDA auction Rate for same locality with some adjustment factors". Our attention was invited to Annexure 'A' at paperbook page 16 to the said order so as to point out that while making a comparison with DDA auction, the land rate per sq.mtr. was Rs. 17, 268/- and on account of time gap i.e. 18.11.96, the date on which the DDA auction took place and 31/12/96 which is the date of valuation, an addition of Rs. 259/- was made thereby resulting in land rate on 6.6.97 at Rs. 17, 527/-. Thereupon, adjustments had been made on account of which the amount was reduced by situation/location (i\-) 10% and on account of size (-) 0.10%. Thus, the amount of Rs. 17, 527/- was reduced by Rs. 1, 770/- as a result of which, the net rate per sq.mtr. as on 6.6.97 was taken at Rs. 15, 757/- giving a figure of Rs. 22, 83, 662/- on account of the size of the plot. Our attention was invited to paperbook page 17 which is Annexure 'B' which brings out the comments on objections filed by the assessee, the first paragraph of which reads as under :-
"The parawise comments on objections filed by the assessee vide his letter dated 23.1.2001 to the preliminary estimate prepared by this office for Rs. 24, 10, 621/-."
23. It was further contended that in the said objections. no fault has been pointed out in the report of the DVO apart from situational and size criteria which had been taken into account by the DVO. It was also contended that it has been successfully demonstrated by him that adequate opportunity was given to the assessee at all stages. In the ultimate analysis, reliance was placed upon the impugned order.
24. We have heard the rival submissions and perused the material placed on our files. We are of the view that it would be appropriate to briefly discuss the cases relied upon by both the sides. First and foremost, reliance has been placed upon K.P. Verghese's case by the learned AR. We have taken ito consideration the fact that Section 52 has been deleted by the Legislature from the Statute by the Finance Act, 1987 w.e.f. 1/4/1988. The decision rendered by the Apex Court in the cases of K.P.Verghese has been considered at length which is on the applicability of Sub-Section 2 of Section 52 of the Act. As such, we are of the view that in deciding the issue at hand for the assessment year in consideration, it has no role to play. The decision rendered by the Calcutta High Court in the cases of Brittania Industries has also been referred to .In this, the Assessing Officer had assumed jurisdiction u/s 148 of the Act to issue notice for escaped capital gins. Thus, the facts as appreciated by their Lordships of the Calcutta High Court are diametrically different.
25. Reliance has been placed upon by the learned AR on the decision of the Apex Court in the case of CIT v. Godavari Corporation Ltd. which is again on the applicability of Section 52 and therein, the decision in the case of K.P.Verghese had been followed. Thus, on account of the fact that the said Section no longer stands on the Statute, the said case does not advance the case of the assessee.
26. On the other hand, learned DR has placed reliance on the decision of the Punjab & Haryana High Court in the case of Jindal Strips which has, in fact, been followed by the Assessing Officer. Their Lordships of the Punjab & Haryana High Court have held that section 55A occurring under Chapter IV in Part E- capital gains, appears to capital gains alone. They, however, at page 831 observed "In any case, our attention has not been drawn to any such terms of s. 55A or to any of the provisions of the other parts of Chap. IV, so as to show that s. 55A, wherein the words "under this Chapter" occur, has relevance to any transaction other than "capital gains". Thus, as far as the issue at hand is concerned, the reference made by the Assessing Officer u/s 55A in order to ascertain the fair market value for the purpose of capital gain has been decided against the assessee and the reference made as such can be stated to be on a perusal of this judgment to be a valid reference.
27. Reliance has also been placed upon by learned DR on the order of the Indore Bench of the Tribunal in the case of Income Tax Officer v. Pradeepkumar Badjatiya & Co. where, in fact, the Indore Bench of the Tribunal had considered the powers of the Assessing Officer to make a reference to the DVO for determining the constructing cost of the property u/s 55A. The Coordinate Bench of the Tribunal held:-
"As regards the power of the Assessing Officer to make a reference to DVO for determining the cost of construction of property, a bare reading of section 55A shows that by inserting this provision the Legislature intended to empower the Assessing Officer o make a reference to DVO for arriving at the correct valuation of property including the cost of construction for the purpose of computing the total income of the assessee as envisaged under Chapter IV. Nowhere in this section it is mentioned that the Assessing Officer is to make a reference for ascertaining the fair market value of the capital asset for the purpose of capital gains only. This inference cannot be drawn only because of the reason that section 55A falls under Sub-Chapter 'E', i.e. Capital gains, of Chapter IV. Had it been the intention of the Legislature, the Legislature would have mentioned the word 'for the purpose of this Sub-Chapter 'E' in place of the word 'for the purpose of this Chapter'. But this was not done by the Legislature. Moreover, as per the Indian Evidence Act, a Presiding Officer may seek expert opinion in a particular field for arriving at correct conclusion, if he feels that expert opinion is necessary. Similarly, in the Income-tax Act, section 55A empowers the Assessing Officer who cannot be called to have specialized knowledge in various fields, to make reference for valuation of capital assets to a Valuation Officer for the purpose of Chapter IV. In these circumstances, following the observations of the Andhra Pradesh High Court in Daulat Ram v. ITO [1990] 181 ITR 119 (FB) and Madras High Court in C.T.Laxmandas v. Asstt. CIT [1994] 208 ITR 859, in the instant case, it was to be held that the Assessing Officer was fully empowered to make a reference for the purpose of computation of total income under Chapter IV. These powers of the Assessing Officer are not restricted only for ascertaining a fair market value of the capital asset for the purpose of capital gains. Hence, on this ground, the assessee could not succeed."
28. The Indore Bench of the Tribunal has relied upon the decision of the A.P.High Court in the case of Daulat Ram v. ITO - 181 ITR 119. Their Lordships of the A.P.High Court, while examining the question that whether the AO was competent to make a second reference in the facts of that case, have observed:-
"Section 55A was inserted in the Income-tax Act, 1961, with effect from January 1, 1973, with the deliberate object of empowering the Income-tax Officer to find out the market value of capital assets for the purpose of Chapter IV which is titled "Computation of total income". Though section 55A falls under the sub-chapter titled "Capital gains" the intention of the Legislature is obvious as the words that have been employed are "for the purpose of this Chapter" denoting thereby that while computing the income, various factors might fall for determination and, therefore, whenever such contingency does arise, the Income-tax Officer can ascertain it through the agency of the Valuation Officer. On such reference, the provisions, inter alia, of sub-section (2) to (6) of section 16A and sub-section (3A) and (4) of section 23 of the Wealth-tax Act, 1957, are ipso facto applicable by extension. as laid down under section 55A of the Act itself. So also, the same meaning as in claus (r) of section 2 of the Wealth-tax Act. The power to do an ac requires that the act is done properly, correctly and legally. Hence, if a firs reference to the Valuation Officer is not valid, the Income-tax Officer can make a second reference. There is nothing in the provisions either under section 55A or under the Rules made the Wealth-tax Act forbidding the Income-tax Officer from taking recourse to such a process. The power of second reference could also be traceable to section 142(2) which empowers the Income-tax Officer to make inquiries which he considers proper for the purpose of obtaining full information in respect of the income of any persons. "
29. The order of the Indore Bench of the Tribunal which has been relied upon by the learned DR has also taken into consideration the decision of the Madras High Court in the case of C.T. Laxmandas - 208 ITR 859. Their Lordships of the Madras High Court dissented from the judgment of the Punjab & Haryana High Court in the case of Jindal Strips which has narrowed the scope of Section 55A only to 'capital gains'. Their Lordships of the Madras High Court had relied upon the decision of the A.P. High Court in the case of Daulatram and Others v. ITO - 181 ITR 119 and held as under :-
"I am in entire agreement with the view taken by the Division Bench of the Andhra Pradesh High Court, referred to supra, and prefer to follow the same in preference to the decision of the Full Bench of the Punjab and Haryana High Court, referred to above. The plea on behalf of the petitioner that except for the purpose of capital gains for no other purpose section 55A could be availed of cannot conform to either the language of the objection of the said provision or to reason or logic. Even de hors the question of assessment on capital gains, the valuation of a particular capital asset acquired by the petitioner/assessee in a particular year or more than one year would go a long way to show whether the same wa acquired by utilizing known means and resources of disclosed income and would help the assessing authorities to effectively prevent generally the evasion of tax due to the State. When that seems to be the main object and purport of the introduction of section 55A of the Act, assigning a restrictive meaning of limiting the operation of the section to assessment only of a particular category of income alone would amount to rewriting the provision and defeat the very object of enacting such a provision. Consequently, I am not satisfied that the grievance of the petitioner in this case can be sustained by this court as having any basis in law. The writ petition, therefore, fails and shall stand dismissed. No costs. The dismissal of this writ petition, of the observations made, if any, in this order for the limited purpose of this writ petition, shall not stand in the way of the petition independently challenging at the appropriate stage any orders that may be passed against the petitioner, if the petitioner so desires."
30. In the facts of the present case, apart from relying upon Jindal Strips. the Assessing Officer has placed reliance on the decision of the Allahabad High Court in the case of William De Noronha and others v. ACIT. A perusal of this judgment shows that the writ petition filed by the assessee was dismissed and it was held that the reference to the Valuation Officer made by the AO to determine capital gains liability u/s 45 did not suffer from any legal infirmity and Section 55A applied for determination of the fair market value of the property. In this case, the contention of the assessee was that neither any assessment proceedings were pending nor any other proceedings were pending. The Department, through tits counter affidavit had contended that in case of one of the five partners sri Terrance De Noronha was a partner in Garg Noronhas against which proceedings under Section 148 of the Income-tax Act were pending. Thus, it could not be stated that no assessment or reassessment proceedings were pending. Thus, without going into the elaborate issue which was before their Lordships of the Allahabad High Court, it is seen that as far as the reference to the Valuation Officer is concerned u/s 55A the said issued has been held against the assessee.
31. Learned DR has also placed reliance on the Third Member order of Patna Bench of the Tribunal in the case of Shanti Complex v. Income Tax Officer - 63 ITD 181 for the contention that the reference made to the DVO is valid in law. Learned AR has vehemently stated that this decision is on the applicability of Section 69 and addition made is on the basis of unexplained investments and does not pertain to capital gains.
32. Thus, after fully analyzing the position of law and the facts of the present case, it is eminently borne out that as far as the position of law is concerned, till the action was contemplated u/s 52 the decision of the Apex Court in the case of K.P.Verghese held the field and the subsequent decision of the Supreme Court in the case of Godavari Corporation Ltd. and the decision of the Delhi High Court in the case of CIT v. Late Gulshan Kumar are no longer goods law as the said Section does not stand on the Statute and has been deleted w.e.f. 1/4/88. Thereafter, it is seen that although their Lordships of the A.P. High Court dissented from the Full Bench decision of the Punjab & Haryana High Court and followed the decision of the Madhya Pradesh High Court and have enlarged the scope of applicability of Section 55A vis-a-vis the scope laid down by the Punjab & Haryana High Court but as far as the facts of the present case are concerned, all the Courts are unanimously of the view that the reference could be made to the DVO for the purpose of ascertaining the fair market value of a property for the purposes of capital gains u/s 55A of the Act.
33. With regard to the submissions and arguments of the learned AR that the opportunity was not granted to the assessee before a reference was made we have considered that arguments at length of the learned AR and taken into consideration that apart from the submission, no authority of provision of the Act could be relied upon in support of his contention that in the facts of the case, an opportunity was to be afforded to the assessee before the AO made a reference to the DVO. Thus, after giving our due consideration to the submissions made, we are of the view that as per law, no such opportunity is contemplated by the Act that the Assessing Officer must give the assessee an opportunity of being heard before a reference is made to the DVO. Accordingly, the said argument and the ground are rejected.
34. With respect to the argument that the reference made to the DVO is bad in law, we have already dealt with at length on the decisions relied upon by the learned DR and have concluded that the reference made to the DVO, on the facts of the case, is a valid reference. Accordingly, the arguments and the ground against the said reference are also rejected.
35. It may be pertinent to state that in the course of the arguments, at no point of time, the assessee has pointed out to any infirmity in the DVO's report before the tax authorities. Only legal arguments have been taken challenging the reference made. We have also taken into consideration the fact that apart from the sale value which the assessee has contended he has actually received on account of this property, he has also before us sought to argue that the amount received by the assessee was less on account of the fact that it is a case of transfer by power of attorney and not a case of sale. After due consideration, we are of the view that the said argument deserves to be dismissed. While discussing the submissions of the learned DR, we have reproduced at length from the Agreement to Sell and Purchase entered into by the assessee. A perusal of this document eminently bears out that it is a case of sale and not transfer by power of attorney irrespective of the fact that at this stage, the assessee wants to ascribe to it the nomenclature of transfer by power of attorney. Without repeating or reproducing from the text of the said document which has already been done in the earlier part of this order, we are of the view that these arguments of the assessee deserve to be dismissed.
36. We have also taken into consideration the fact that apart from the value which the assessee has returned, no valuation report by any registered valuer has either been placed on record by the assessee before any of the tax authorities nor any effort has been made to show that any such valuation has been made by the assessee in support of his contention that the correct value is the returned value by the assessee and not the value as taken by the DVO.
37. We have also taken into consideration the fact that it is not the case of the learned AR that inspection was done at the back of the assessee or that the assessee has not been given an opportunity to rebut the valuation report of the DVO. The detailed written submissions filed by the assessee before the CIT(A) appended at paperbook pages 18 to 30 have also been considered at length, a perusal of which shows, that apart from the arguments which have been addressed in the first appellate order, the assessee, vide page 21, has contended that the fair market value as determined by the DVO is erroneous on account of the fact that the date of auction is 18th November, 1996 whereas the plot was sold on 6th June, 1997. A perusal of paperbook page 16 which is Annexure 'A' of the DVO's report shows that on account of the time gap, an addition has been made to the extent of Rs. 259 and no effort has been made by the assessee to show that in fact prices have come down and not gone up within the span of seven months. At page 22. reliance has been placed upon the decision of the Apex court in the case of K.P. Verghese and at page 23, it has been stated that the assessee's plot had locational disadvantage since plot is situated near a cremation ground and the Assessing Officer was not even aware of these facts. Earlier, he arbitrarily applied 5% as the situation factor which was later increased to 10%. Thus, a perusal of this shows that whatever objection assessee had, the DVO had fully incorporated the same in his report and if on account of the situational factor the case of the assessee was that a deduction more than 10% as given by the DVO should have been given, then no efforts have been made either to place any report of any registered value before any of the authorities not any such claim has been made before us. Be that as it may, the fact remains that the objections of the assessee have been taken into consideration by the DVO who has given 10% deduction on account of situation. Similary, at page 23 of the paperbook filed before us which is the written submissions before the CIT(A), vide para (d), it is stated that the valuer should have given due recognition to the fact that the smaller plots are bound to be costly than the larger plot and this fact has not been considered by the DVO. A perusal of paperbook page 16 shows that on account of size deduction has been given to the extent of 0.10%. Thus, the objection of the assessee to the DVO's report has been considered. Vide para (e) at page 24 it has been stated by the assessee that no consideration was given to the fact that there was a dispute of ownership of the said plot between the assessee and his brothers and the matter was ultimately mutually settled between the brotheRs. Thus, it was stated that it is a known fact that the history of the ownership and disputes attached thereto always have a far reaching impact on the valuation of properties. However, in the course of arguments before us, nothing has been stated in reference to this and even in the written submissions, the said submission has not been supported by any dispute pending before any Forum. As such, nothing turns on this bald statement.
38. Similarly, at page 24 para (f) it is stated by the assessee that the purchaser of the properties sold in an auction derives a clear title over the property without any further obligation whereas in case of a purchaser of a leasehold plot in normal sale, the unearned increase is to be paid which affects the value. In the course of the arguments, the learned DR has invited our attention to again page 16 which is Annexure 'A' wherein in the same instance comparison of DDA auction in the remarks column, it has been entered by the Valuation Officer that it pertains to 'leasehold residential'. Thus, the said objection does not hold goods.
39. Accordingly, it is seen that whatever objections the assessee had with reference to the DVO's report, they have already been incorporated. In the aforementioned facts and circumstances, after giving our utmost consideration to the entire gamut of facts and circumstances and position of law as well as the submissions made before us, we are of the view that ground Nos. 1, 2, 3 & 4 raised by the assessee due to the detailed reasons given in the earlier part of this order deserve to be dismissed.
40. Ground No. 5 raised by the assessee pertains to the levy of interest under Section 234B of the Act. Learned AR has placed reliance on the decision of the Apex Court in the case of CIT v. Ranchi Club - 247 ITR 209. Our attention was also invited to the unreported order of the Delhi High Court in the case of CIT v. Multi Chemical, a copy of which was placed on our files, wherein while disposing ITA No. 126/2000. their Lordships of the Delhi High Court dismissed the appeal of the Revenue in the following terms :-
"We have issued notice on the question of admission and the notice is not yet served. But we think no useful purpose will be served by keeping the matter pending, in view of the decision of the Apex court in commissioner of Income-tax v. Ranchi Club Limited [2001] 247 ITR 209.
This appeal is accordingly dismissed."
41. Learned DR, on the other hand, placed reliance on the division of the Punjab & Haryana High court in the case of Vinod Khurana v. CIT - 253 ITR 578 for the contention that their Lordships of the Punjab & Haryana High court had relied upon another decision of the Apex Court in the case of Kalyan Kumar Ray - 191 ITR 634 and also taken into consideration the decision of the Apex court relied upon by the assessee, namely, CIT v. Ranchi Club. Accordingly, ont the basis of this, it was contended that the matter may be restored for necessary verification.
42. We have heard the rival submissions and perused the material placed on our files and taken note of the decisions relied upon before us. It is seen that no doubt in the assessment order, the observation of the learned AO is "Charge interest as per rules. Penalty proceedings u/s 271(1)(c) have been initiated separately". But, whether the computation which is a part of the assessment order as per the decision of the Apex court in the case of Kalyan Kumar Ray has put the assessee to notice that interest u/s 234B is also been charged, is not available before us. Thus, the test as laid down in the case of Uday Mistanna Bhandar/Ranchi Club Ltd. -222 ITR 44 (Patna) which has been upheld by the Apex court still needs to be verified and it is to be seen whether the facts of the present case are in conformity with the decision of the Apex Court in the case of Kalyan Kumar Ray/Ranchi Club or not. Accordingly, for necessary verification, the said ground is restored to the file of the CIT(A) to decide the same in accordance with law by way of a speaking order. Needless to say that the assessee will be afforded an opportunity of being heard.
43. Ground No. 6 raised before us is general in nature and, in fact, is covered by ground Nos. 1 to 4 which have been dealt with by us and, as such, requires no adjudication.
44. In the result, the appeal filed by the assessee is partly allowed for statistical purposes.