(Per : HONOURABLE MS JUSTICE SONIA GOKANI) Revenue has preferred the present Tax Appeal proposing the following questions of law for Court's determination :-
[A] "Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by CIT (A) and thereby holding that Section 55A does not empower the Assessing Officer to make a reference to the valuation officer for determining the full value of consideration and that only under Section 50C the Assessing Officer would be empowered to disturb the value of consideration ?"
[B] "Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by CIT (A) and thereby directing the Assessing Officer to accept the full value of consideration at Rs. 55,00,000/= as against the fair market value of Rs. 1,17,58,000/= arrived at by the Assessing Officer invoking section 55A of the Act ?"
Briefly to state the facts : the assessee-respondent purchased a building for a consideration of Rs. 83.90 lakhs on 25th January 1999 which had been sold on 17th January 2004 for a consideration of Rs. 55,00,000/=. The assessee had 50% share in the said property. The Assessing Officer, apparently from the facts, was not convinced with regard to the sale consideration claimed to have been received and resultantly, a reference was made under Section 55A of the Act to the District Valuation Officer for determining the value which was determined to be Rs. 1,17,58,000/=. Accordingly, the sale price was considered.
Dissatisfied, the assessee preferred Appeal before the CIT [A] which dismissed the appeal of the assessee.
The Appellate Tribunal when was approached by the assessee, it allowed the same and directed the Assessing Officer to recompute the capital gain by taking the full value of consideration at Rs. 55,00,000/=. This order of the Tribunal dated 17th September 2009 is in challenge by proposing the aforementioned questions of law.
Although, there are two issues raised, centrally it revolves round eligibility of the reference to the District Valuation Officer.
Heard learned counsel Mr. Manish Bhatt for the Revenue who has fervently argued assailing the order of the Tribunal. The order of the Tribunal, when is examined in light of the submissions made, it grasps the dispute by saying that the said relates to the full value of consideration. The question was whether Section 55A of the Act empowers the Assessing Officer to refer to the Valuation Officer for determining the full value of consideration. The Tribunal held that the said section empowers the Assessing Officer to make a reference for determining the fair market value of the capital asset for the purpose of computation of the capital gain and fair market value is different than full value of consideration and both have completely different connotation. Reference made by the Assessing Officer for full value of consideration was considered ineligible and illegal. It was only Section 50C of the Act, as held by the Tribunal, which authorizes and empowers the Assessing Officer to disturb the full value of consideration in certain cases. Proviso to Section 50C of the Act was not held applicable in the instant case and the action of both the authorities below of disallowances of long term capital gain/loss was not sustainable, by observing :-
"..The dispute in this case relates to the full value of the consideration. The assessee has taken the apparent consideration stated in the sale deed to be the full value of the consideration. While the A.O. did not accept the same but made a reference u/s. 55A of the Act. The question arises whether Section 55A empowers the Assessing Officer to refer to the Valuation Officer for determining the full value of the consideration. We have gone through the provisions of Section 55A. This section empowers the A.O to make a reference to the Valuation Officer for determining the Fair Market Value of a capital asset for the purpose of computation of the capital gain. Full value of the consideration and Fair Market Value both are different terms and are having different meanings. Section 55A does not empower the A.O., in our opinion, to make a reference to the Valuation Officer for determining the full value of consideration. Therefore, in our opinion, the reference made by the Assessing Officer to the Valuation Officer is illegal and void ab initio. It is only Section 50C which empower the Assessing Officer to disturb the full value of consideration in certain cases. It is not the case of the Revenue that the provisions of Section 50C are applicable in the case of the assessee. Under these facts and circumstances of the case, we are of the view that the authorities below were not correct in law in disallowing Long Term Capital Gain/Loss as has been determined by the assessee by taking the full value of the consideration at Rs. 55 Lakhs. We accordingly set aside the order of the CIT (A) and direct the Assessing Officer to recompute the capital gain by taking the full value of consideration at Rs. 55 Lakhs."
This Court had an occasion to deal with these provisions in somewhat similar facts in Tax Appeal No. 1016 of 2009 and connected appeals. Following are the findings and observations made therein :-
"14. From the record, as already noted, the Assessing Officer, doubting the disclosure of the sale consideration in a sale deed of the lands sold by the assessee, referred the issue to the departmental valuer and relying upon such report, replaced the sale consideration indicated in the sale deed for arriving at fair market value of the land in question. CIT (A) on the other hand, however, discarded such report by noting that indisputably lands were agricultural lands and were also covered under the Land Ceiling Act at the relevant time. The value declared in the sale deed was accepted by the Valuation Department. Valuation Officer of the Department compared the sale instances of different survey numbers which were non agricultural lands and which were divided into smaller plots. These aspects were ignored by the Assessing Officer. In short, CIT (A) on facts found that the report of the valuation Officer could not have been relied upon and the Assessing Officer committed an error in relying on such report.
15. With the assistance of the learned counsel for the parties, we have perused the statutory provisions applicable in the case, as obtaining, at the relevant time. Present case relates to Assessment year 2000-01, it is undisputed position that Section 50C was not in the statute book, at the relevant time. CIT (A), therefore, erred in adopting principles contained thereunder to accept the Stamp Valuation Authority's assessment for the purpose of computing the capital gain.
16. Despite above error, we do not find that in the ultimate analysis, the CIT (A) committed an error. Firstly, we find that in Section 48 of the Act, the Income Tax Authority has to compute the capital gains by deducting from the full value of the consideration received (or accruing in given case) of transferred capital asset in the manner provided therein. Section 48 of the Act does not refer to fair market value and only reference is to expenditure incurred in such transfer and in the case of acquisition of asset, cost of improvement for deducting from the full value of the consideration received by the transfer of a capital asset.
17. Section 45(2) reliance upon which is placed for referring the question of fair market value to the Departmental Valuation Officer reads as under:-
"45(2) Notwithstanding anything contained in sub- section (1), the profits or gains arising from the transfer by way of conversion by the owner of a capital asset into, or its treatment by him as stock-in-trade of a business carried on by him shall be chargeable to income-tax as his income of the previous year in which such stock-in-trade is sold or otherwise transferred by him and, for the purposes of section 48, the fair market value of the asset on the date of such conversion or treatment shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset".
18. Bare perusal of the provisions contained in sub-section (2) of Section 45 would convince us that the present case is not covered thereunder. Sub-Section (2) of Section 45 envisages the concept of fair market value of the asset where transfer of an asset by conversion by the owner of a capital asset into, or its treatment by him as stock-in-trade of a business carried on by him. For obvious reasons, the said provision would not govern the present case.
19. Counsel for the revenue was unable to point out any other provision in which in a situation like the present one, the Assessing Officer could have made a reference to a value for ascertaining the fair market value of the assets in question as on date of its transfer.
20. Quite apart from the CIT (A) discarding the very Valuer's Report, we find that the reference itself was not competent insofar as he wanted to ascertain fair market value of the land on the date of sale. In absence of any material on record before us by which Assessing Officer could have concluded that the consideration indicated in the sale-deed did not reflect the full consideration received by the assessee, it was not possible to assess the capital gain by estimating what would be the fair market value of the land through valuer's report.
21. Decision of the Delhi High Court in the case of Commissioner of Income-Tax V/s. Smt.Nilofer I.Singh reported in (2009) 309 ITR 233 was also brought to our notice; wherein, relying on the decision of George Henderson & Co. Ltd. (supra) and Gillanders Arbuthnot & Co.(supra), the Division Bench observed that expression "full value of consideration" used in Section 48 of the Act does not have reference to the market value but only to the consideration referred to in the sale deed as sale particulars of the assets which have been transferred.
22. In short, we do not find any error in the ultimate conclusion arrived at by CIT (A) as well as the Tribunal. No question of law arises. Tax Appeals are, therefore, dismissed."
Since this Court finds no illegality in the order passed by the Tribunal and as the reasonings given for setting aside the orders of both the Adjudicating Authorities are legally found sustainable, this Appeal is dismissed.
{Akil Kureshi, J.} {Ms.
Sonia Gokani, J.} Prakash* Top