Lovy Ranka vs. DCIT (ITAT Ahmedabad)

ITA No.: 2107/Ahd/17
Assessment year: 2013-14
Page 1 of 5
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD “C” BENCH, AHMEDABAD
[Coram: Pramod Kumar (Vice President)
and Madhumita Roy (Judicial Member)]
ITA No.: 2107/Ahd/17
Assessment year: 2013-14
Lovy Ranka ………………….……Appellant
B 205, Gala Luxuria
South Bhopal Road, Ahmedabad 380058
[PAN: AAPHJ1831D]
Vs
Deputy Commissioner of Income Tax
Circle 5(2), Ahmedabad ……………..………..Respondent
Appearances by
Chitranajan Bharadia for the appellant
S K Dev for the respondent
Date of concluding the hearing : January 2, 2019
Date of pronouncement : April 1, 2019
O R D E R
Per Pramod Kumar, VP:
1. This is an appeal filed by the assessee and is directed against the order dated 12th June
2017, passed by the CIT(A) in the matter of assessment under section 143(3) of the Income
Tax Act, 1961, for the assessment year 2013-14
2. The short grievance of the assessee is that the impugned addition of Rs 12,12,402 in
the computation of the capital gains be deleted as fair market value of the property is less
than the valuation, as per DVO’s valuation report, adopted for computation of capital gains
under section 50C(2) of the Act. In effect thus, correctness of the DVO’s report has been
assailed before us, but then, as is the settled legal position, when a reference is made to the
DVO, the Assessing Officer has a duty to “so far as the valuation of the asset in question is
concerned, proceed to complete the assessment in conformity with the estimate of the
Valuation Officer”. The question then arises whether we can deal with the question of
correctness of the DVO’s report- particularly when the Assessing Officer apparently has no
say in this regard.
ITA No.: 2107/Ahd/17
Assessment year: 2013-14
Page 2 of 5
3. It was in this backdrop that we put it to the parties whether this Tribunal has any
powers to tinker with the DVO’s valuation of an asset for the purposes of computing capital
gains under section 50 C of the Act. While learned counsel for the assessee pointed out
several decisions in which the coordinate benches have infact altered the valuations made by
the DVOs, learned Departmental Representative submitted that when the valuation of an
asset is referred to the DVO, and the value so arrived at by the DVO is less than the stamp
duty valuation, the Assessing Officer has no option but to adopt DVO’s valuation for the
purpose of computing capital gains. It was submitted that when the Assessing Officer is
under a statutory obligation to adopt such a valuation, no fault can be found is his action of
doing so, and, therefore, appellate authorities cannot question that action either. As for the
stand of the coordinate benches, learned Departmental Representative submitted that what is
important is the legal framework of the relief granted by the coordinate benches and these
orders do not throw any light on existence of such a legal framework enabling adjudication
on correctness of the DVO’s report. Learned counsel for the assessee, in rejoinder, submitted
that the Tribunal has wide powers for advancing the cause of justice and to pass such orders
as it thinks fit. A pedantic view of our powers will result in gross miscarriage of injustice
inasmuch in such a situation no grievance redressal will be available against the DVO’s
report. This report, after all, cannot be treated as the last word on valuation, and there has to
be a grievance redressal mechanism against incorrectness of the DVO’s valuationparticularly
when the DVO has not properly disposed of the objections of the assessee.
4. Let us first take a look at the relevant legal provisions. Section 50 C, as it stood at the
relevant point of time, was as follows:
Special provision for full value of consideration in certain cases.
50C. (1) Where the consideration received or accruing as a result of the transfer
by an assessee of a capital asset, being land or building or both, is less than the
value adopted or assessed or assessable by any authority of a State Government
(hereafter in this section referred to as the “stamp valuation authority”) for the
purpose of payment of stamp duty in respect of such transfer, the value so
adopted or assessed or assessable shall, for the purposes of section 48, be deemed
to be the full value of the consideration received or accruing as a result of such
transfer.
(2) Without prejudice to the provisions of sub-section (1), where—
(a) the assessee claims before any Assessing Officer that the value
adopted or assessed or assessable by the stamp valuation authority under
sub-section (1) exceeds the fair market value of the property as on the
date of transfer;
(b) the value so adopted or assessed or assessable by the stamp valuation
authority under sub-section (1) has not been disputed in any appeal or
revision or no reference has been made before any other authority, court
or the High Court,
the Assessing Officer may refer the valuation of the capital asset to a Valuation
Officer and where any such reference is made, the provisions of sub-sections (2),
ITA No.: 2107/Ahd/17
Assessment year: 2013-14
Page 3 of 5
(3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6)
and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and
section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary
modifications, apply in relation to such reference as they apply in relation to a
reference made by the Assessing Officer under sub-section (1) of section 16A of
that Act.
Explanation 1.—For the purposes of this section, “Valuation Officer” shall have
the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of
1957).
Explanation 2.—For the purposes of this section, the expression “assessable”
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. It is sufficient, for our purposes, to take note of the fact that the provisions of Section
23A(1)(i) of the Wealth Tax Act, 1957, “shall, with necessary modifications, apply in relation
to such reference as they apply in relation to a reference made by the Assessing Officer under
sub-section (1) of section 16A of that Act”. Section 23A(1)(i) of the Wealth Tax Act provides
that “Any person……. objecting to any order of the Valuation Officer under section 35
having the effect of enhancing the valuation of any asset or refusing to allow the claim
made by the assessee under the said section ……………may appeal to the
Commissioner (Appeals) against the assessment or order, as the case may be, in the
prescribed form and verified in the prescribed manner …”. In effect thus, by the virtue of
Section 23A(1)(i) being incorporated, with necessary modifications, in Section 50C, the
correctness of a DVO’s report can indeed be challenged. It is, however, also important to note
that the provisions of Section 23A(6) of the Wealth Tax Act shall, with necessary
modifications, also apply in the present context- as has been provided in Section 50C(2)
itself. Section 23A(6) of the Wealth Tax Act provides as follows:
(6) If the valuation of any asset is objected to in an appeal under clause (a) or
clause (i) of sub-section (1), the Commissioner (Appeals) shall,—
(a) in case where such valuation has been made by a Valuation Officer under
section 16A, give such Valuation Officer an opportunity of being heard;
(b) in any other case on request being made in this behalf by the Assessing
Officer, give an opportunity of being heard to any Valuation Officer nominated
for the purpose by the Assessing Officer.
ITA No.: 2107/Ahd/17
Assessment year: 2013-14
Page 4 of 5
6. Section 24(5) of the Wealth Tax Act, 1957, the scheme of which also stands
incorporated in Section 50C as is specifically stated therein, provides as follows:
(5) The Appellate Tribunal may, after giving both parties to the appeal an
opportunity of being heard, pass such orders thereon as it thinks fit, and any
such orders may include an order enhancing the assessment or penalty :
Provided that if the valuation of any asset is objected to, the Appellate Tribunal
shall,—
(a) in a case where such valuation has been made by a Valuation Officer
under section 16A, also give such Valuation Officer an opportunity of being
heard;
(b) in any other case, on a request being made in this behalf by the
51[Assessing Officer], give an opportunity of being heard also to any Valuation
Officer nominated for the purpose by the Assessing Officer
7. What essentially follows from the above provision is that in the event of the
correctness of the DVO’s report is called into question in an appeal before the Commissioner
(Appeals), the DVO is required to be given an opportunity of hearing. While the above
provision refers to valuation under section 16A of the Wealth Tax Act, 1957, the provisions
of Section 50 C of the Income Tax Act, 1961, specifically refer to the provisions of Section
16A of the Wealth Tax Act, 1957. Accordingly, a valuation under section 50C(2) is also
covered by the requirements of Section 23A(6) which are, as specifically stated in Section
50C, applicable in the present context. The same is the position with respect to the
proceedings before this Tribunal. While the correctness of the DVO report can indeed be
challenged before us as well, as a corollary to the powers of the CIT(A) which comes up for
examination before us, once again the rider is that the Valuation Officer is to be given an
opportunity of hearing. This opportunity of hearing to the DVO is a mandatory requirement
of law. That is the unambiguous scheme of the law.
8. With this clarity on the scheme of the law, let us revert to the facts of this case.
9. The assessee before us is an individual. During the course of scrutiny assessment
proceedings, the Assessing Officer noticed that the assessee has sold a bungalow for Rs
1,15,00,000 but the stamp duty valuation of the said bungalow, as evident from the sale deed,
was Rs 1,40,00,000. The assessee, however, contended that the fair market price of the
property was much less than the stamp duty valuation, and, accordingly, a reference was
made to the Departmental Valuation Officer under section 50C(2). The valuation as per DVO
was Rs 1,27,12,402. The assessee made elaborate submissions on incorrectness of this
valuation, and submitted that the objections taken by him before the DVO were not properly
dealt with. The Assessing Officer was of the view that the valuation done by the DVO binds
him and it is his duty to pass an order in conformity with the DVO’s report. He referred to,
and relied upon, various judicial precedents in support of this proposition. Aggrieved,
assessee carried the matter in appeal before the CIT(A) but without any success. Learned
CIT(A) observed that “Section 50C of the Act is a deeming provision” and “a deeming
ITA No.: 2107/Ahd/17
Assessment year: 2013-14
Page 5 of 5
provision is to be strictly applied without enlarging its scope”. Learned CIT(A) was of the
view that “considering the provisions of Section 50C, the value taken by the AO is correct”
and no interference is thus called for. The assessee is not satisfied and is in further appeal
before us. He is once again challenging the correctness of the DVO’s report, is pointing out,
what he perceives as, glaring errors in the methodology adopted by the DVO and is
submitting that the CIT(A) fell in error in not adjudicating upon the same on merits.
10. In view of our analysis of the legal provisions earlier in this order, the assessee is
indeed correct, even though somewhat serendipitously. that the CIT(A) ought to have
examined the matter on merits. Of course, before doing so, the CIT(A) was under a statutory
obligation to serve notice of hearing to the DVO and thus afford him an opportunity of
hearing. Clearly, learned CIT(A) took too narrow and somewhat superficial a view of his
powers under the scheme of the law, and the assessee did not point out the specific legal
provisions to him either. Be that as it may, the fact remains that correctness of the DVO’s
report is to be examined on merits and there is no adjudication, on that aspect, by the CIT(A).
In view of these discussions, as also bearing in mind entirety of the case, we deem it fit and
proper to remit the matter to the file of the CIT(A) for adjudication on merits in accordance
with the scheme of the law, after giving a due and reasonable opportunity of hearing to the
assessee as also to the DVO, and by way of a speaking order. We further direct the CIT(A) to
dispose of the remanded proceedings within three months of receiving this order, and, in case
the DVO does not avail the opportunity of hearing, on the basis of material on record and
submissions of the assessee. Ordered, accordingly.
11. In the result, the appeal is allowed for statistical purposes in the terms indicated
above. Pronounced in the open court today on the 1st day of April, 2019
Sd/- Sd/-
Madhumita Roy Pramod Kumar
(Judicial Member) (Vice President)
Ahmedabad, dated the 1st day of April, 2019
Copies to: (1) The Applicant (2) The respondent
(3) CIT (4) CIT(A)
(5) DR (6) Guard File
By order
True Copy
Assistant Registrar
Income Tax Appellate Tribunal
Ahmedabad benches, Ahmedabad