Income Tax Appellate Tribunal - Mumbai
Sajjankumar M. Harlalka vs Joint Commissioner Of Income-Tax, ... on 19 May, 2005
Equivalent citations: [2006]100ITD418(MUM), [2006]284ITR156(MUM), (2006)102TTJ(MUM)974
ORDER
1. These are two appeals filed by the assessee relating to the assessment year 1996-97 against the order of the learned CIT(A) XVIII, Mumbai dated 22-9-2000. The proceedings arise out of the assessments completed under Section 143(3).
2. The assessee had co-ownership in flat No. 9, 2nd floor, Laxmi Bhavan, D-Road, Churchgate, Mumbai and this property was sold for Rs. 3,25,00,000 to Smt. Veena Vasant on 29-11-1995. The property was constructed in 1961 and assessee opted to adopt the value as on 1 -4-1981 for computation of capital gain. The assessee filed the report of registered valuer Barve Suresh R. & Associates dated 1-3-1996 who worked out the value at Rs. 24,36,400 as on 1-4-1981. The Assessing Officer however, referred the matter to the valuation cell of the Income-tax Department who worked out the value at Rs. 15.74 lakhs as on 1-4-1981. One appeal has been filed against the report of the departmental valuer Sub-section 55 A of the Income-tax Act read with provisions of Wealth-tax Act. The other appeal has been filed against the assessment Sub-section 143(3) in which the long-term capital gain has been calculated on the basis of the report of the departmental valuer. One common ground in both the appeals taken by the assessee is that references made to the valuation made by the Assessing Officer was beyond the scope of Section 55A and as such, it is void ab initio.
3. This ground was also raised before the learned CIT(A) who has dismissed the appeal of the assessee and held that the Assessing Officer could make the references if he was of the opinion that it was necessary in view of the nature of asset and other circumstances. He further stated that in the present case it was a flat and there was a sudden increase in the cost of the flats at Marine Lines and the report of the registered valuer is vague and incomplete and no comparable case for nearby sale are mentioned in the report. As such, there were sufficient reasons to refer to the valuation cell.
4. Before us, it is stated by the learned Counsel of the assessee Shri K.S. Kejriwal stated that the references made to the valuation cell Sub-section 55A is not valid and he further stated that as per the provisions of Section 55A(a) the references can only be made if the Assessing Officer was of the opinion that the estimate by the registered valuer is less than its fair market value and the Assessing Officer could not have formed such opinion as the case of the Assessing Officer is that the fair market value as estimated by the registered valuer as on 1-4-1981 is on the higher side and not on the lower side. He further stated that even if it assumed that the Assessing Officer had made the said references Sub-section 55A, Clause (b) Sub-clause (ii) then it was necessary for him to record the reasons, stating the relevant circumstances on the basis of which he forms such opinion. He also referred to the decisions of the Hon'ble Rajasthan High Court in the case of CIT v. Hotel Joshi and the decision of the Hon'ble Gujarat High Court in the case of M. V. Shah, Official Liquidator, Anant Mills Ltd v. U.J. Matain .
5. On the other hand, the learned Departmental Representative Shri B.R. Uitsey pleaded with the help of case law, as the Assessing Officer was competent to make the references Sub-section 55A.
6. After hearing both the parties and pursuing the case law we are of the opinion that the matter before us to be adjudicated is not as to whether the Assessing Officer was competent to refer the matter to Valuation Officer or not. In our view the matter which requires to be adjudicated is that whether the references made Sub-section 55A of the Income-tax Act by the Assessing Officer was valid a reference or not. As per the provisions of Section 55A(a) the reference can only be made by the Assessing Officer to the valuation cell if he is of the opinion that the fair market value as estimated by the registered valuer is less than the fair market value. The Assessing Officer could not have form such an opinion in this case as the whole basis of the references is that the fair market value estimated by the registered valuer is on 1-4-1981 is higher than its actual fair market value. The reference can be made Sub-section 55A, Clause (b), Sub-clause (ii) by the Assessing Officer if he is of the opinion having regard to the nature of asset and other relevant circumstances that it is necessary to do so. We are of the considered view that it is obligatory on the part of the Assessing Officer to record such other relevant circumstances on the basis of which he forms such opinion in order to refer the matter to the valuation cell under said clause. The Hon'ble Rajasthan High Court in the case of Hotel Joshi (supra) has held that for invoking Sub-clause (ii) of Clause (b) of Section 55A the Assessing Officer is required to form an opinion on the basis of the material on record that reference to the District Valuation Officer for ascertaining the fair market value of the asset is necessary having regard to the nature of the asset and other relevant circumstances. It is also necessary to record as to why it is necessary to adopt such a course.
7. Nothing has been shown to us by the Revenue to state that the reference was made under Clause 55A(a) or 55A(b)(ii) and if it was made Sub-section 55A(b)(ii) then what circumstances were in existence on the basis of which the Assessing Officer had formed his opinion to make such reference. In the absence of the same we hold that the references made to the Valuation Officer was invalid.
8. Since we are deciding the legal issue in favour of the assessee we do not find any need to go into the merits of the case and as such, the other grounds of the assessee's appeals are allowed for statistical purposes.
9. In the result, the appeals of the assessee are allowed.