Smt. Ruchita Gir, Hyderabad vs Department Of Income Tax

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2. Brief facts of the case are that the respondent assessee is an individual and filed her return of income for A.Y 2009-10 on 22.7.2009 declaring an income of Rs.16,64,308. Against the said return of income, assessment was completed by the Income Tax Officer Ward 6-4 Hyderabad vide order dated 30.12.2011 u/s 143(3) at a total income of Rs.68,26,062. While doing so, AO found that the assessee sold plot No.30 at HUDA Enclave, Jubilee Hills, Hyderabad to M/s. Proactive Realtors Pvt. Ltd for a sum of Rs.1,72,50,000 on 28.06.2008. AO further found that the valuation of the property as per SRO is Rs.2,12,41,000, hence invoked the provisions of section 50C, adopted the sale consideration of Rs.2,12,41,000 and accordingly computed capital gains. Assessee objected to the adoption of SR value on the ground that the property sold was anti vastu, rocky and unevenly shaped. Therefore, the AO referred the matter to the valuation cell of the Department. However, since the valuation report was not received by the time of completion of the assessment proceedings, AO adopted the value as per the SRO records for the purpose of computing capital gain u/s 50C of the Act.

3. Aggrieved, assessee filed appeal before the CIT (A). During the course of appellate proceedings before the CIT (A), AO vide letter dated 02.03.2012 forwarded a copy of the DVO's letter dated 15.02.2012 estimating the fair market value at Rs.2,12,41,000. Assessee objected to the method of valuation adopted by the DVO before the CIT (A) and disagreed with the reasoning given by the DVO that bigger plot fetch lesser rate and filed a copy of the sale deed whereby the other half of the plot

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had been sold in June, 2008 by the owner to the same purchaser @ Rs.30,000 per sq. yard. This was filed as an additional evidence before the CIT (A) which was forwarded to the CIT (A) to the AO who in turn submitted that the objections of the assessee were already considered by the DVO in his report.

4. The CIT (A) after considering the submissions of the assessee as well as the additional evidence came to a conclusion that there was no need for adopting the valuation as per SRO and deleted the addition.

5. Aggrieved, Revenue is in appeal before us.

6. The ld DR vehmently argued before us that the ld CIT (A) without hearing the DVO ought not to have deleted the addition in the matters requiring technical advise and such matters should be decided only by the technical experts and vehmently argued that the CIT (A) without hearing the DVO ought not to have deleted the addition.

7. On the other hand the ld Counsel for the assessee placed heavy reliance on the orders of the lower authorities.

8. We heard the rival submissions and perused the material available on record. The grievance of the Revenue in this appeal is that the ld CIT (A) ought not to have deleted the addition in as much as the objections raised by the assessee were already considered by the DVO in his report and without confronting DVO with the objection raised by the assessee the CIT (A) should

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not have deleted the addition. We find considerable merit in the submission of Ld DR. The Hon'ble Bombay High Court involving identical facts of the case in the case of CIT (Central) vs. Prabhu Steel Industries Ltd, 218 Taxman 290 held as follows vide para 8, 9, 10:

8. The Hon'ble Apex Court in Smt. Amiya Bala Paul v. CIT [2003] 262 ITR 407/130 Taxman 511, considered the question of valuation of asset qua the provisions of Income Tax Act, 1961 and Wealth Tax Act, 1957. It has been held that a Valuation Officer can discharge the functions within the limits of statute under which he is appointed, and not otherwise. He cannot be required, nor he has a jurisdiction to give report to the Assessing Officer under the Income Tax Act, except in a reference made under and in terms of Section 55A or to a Competent Authority except under Section 269L of the Income Tax Act. It has been held that the Assessing Officer under Section 16A of the Wealth Tax Act, does not retain the power to enquire and the entire process of inquiry therein is, solely conducted by the Valuation Officer alone, whose responsibility itself is to arrived at a correct valuation of the asset. The said inquiry by the Valuation Officer is distinct from the power of the Assessing Officer, who is otherwise invested with the powers to enquire into the actual wealth of an assessee. For the purpose of present adjudication, it is not necessary to deal with this judgment of Hon'ble Supreme Court in more details. Section 55A, explains 'Valuation Officer' in same words and procedure applicable in reference therein is same as envisaged in Section 50C.

9. Section 16A of Wealth Tax Act, 1957 is about reference to Valuation Officer. Sub-section (2) onwards thereof, apply mutatis mutandis to reference made by the assessing officer under Section 50C of the Income Tax Act. Sub-section (2) enables the Valuation Officer to serve on assessee a notice requiring him to produce accounts, records or other documents. Sub-section (3) obliges the Valuation Officer to pass an order in writing if, he is of the opinion that the return contained a correct declaration of valuation of the asset. Copy of this order is required to be sent to the assessing officer and to the assessee. Under sub-section (4), when his opinion is otherwise, the Valuation Officer has to serve a notice on the assessee intimating him the value which he proposes to estimate and giving assessee an opportunity. Sub-section (5) contemplates hearing of evidence produced by the assessee, its consideration by the Valuation Officer and passing of an order in writing by him estimating the value of asset. Again copy of such order is required to be sent by him to the assessing officer and to the assessee. Sub-section (6) stipulates that on receipt of such order of Valuation Officer, the assessing Officer has to proceed to complete the assessment in conformity with the assessment of the Valuation Officer.

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It is therefore, apparent that these provisions mandate that after the assessing officer receives report of Valuation Officer under Section 50C, he has to act in conformity with the valuation of the capital asset worked out therein.

10. Section 23A of the Wealth Tax Act appears in Chapter-VI dealing with Appeal, Revision and Reference. Section 23 speaks of Appeals to the Deputy Commissioner (Appeals) from orders of Assessing Officer under Wealth Tax Act. Section 23A gives list of appealable orders. Clause (i) of sub-section (1) thereof, is about objection to any order of the Valuation Officer enhancing the valuation of an asset. Section 50C makes this provision applicable even to valuation of capital asset worked out by the Valuation Officer in it. Thus, an order of Valuation Officer determining the market value of the asset on the date of transfer under Section 50C(2) is made appealable even for the purpose of Income Tax Act, 1961 as per scheme therein. Sub-section (6) of Section 23A stipulates that when the valuation of any asset is objected to in an appeal, the Commissioner (Appeals) has to extend an opportunity of hearing to the Valuation Officer, who has made order under Section 16A. Sub-section (7) enables such Commissioner to direct further inquiry to be made by the assessing officer or by the Valuation Officer.

Section 50C makes both these sub-sections applicable even to determination of market value of a capital asset by the Valuation Officer. It therefore, follows that when in an appeal, such exercise of valuation officer is disputed, the Appellate Authority has to extend an opportunity of hearing to the Valuation Officer. Section 24 speaks of further appeals to the Appellate Tribunal and its sub-section (5) had been made applicable even for the purpose of Section 50C proceedings. As per Section 24(5) of the Wealth Tax Act, 1957; the Appellate Tribunal has to extend opportunity of hearing to the Valuation Officer, and this provision is pari materia with Section 23(6) above. Therefore, when order of CIT (Appeal), is questioned in further appeal before the ITAT, the ITAT has to keep in mind the provisions of Section 24(5) of Wealth Tax Act, 1957 and has to extend an opportunity of hearing to the Valuation Officer. Section 34AA is in Chapter VII-B of the Wealth Tax Act, 1957 and it deals with appearance by the Registered Valuers. Section 35 is about rectification of mistakes. Section 37 of Wealth Tax Act is made applicable to valuation proceedings before the Valuation Officer under Section 50C of the Income Tax Act & it clothes him with the power to take evidence on oath etc. This provision declares that for the purpose of Wealth Tax Act, the Valuation Officer also has same powers, as are vested in a Court under Code of Civil Procedure when trying a suit in respect of following matters.

Those powers are - (a) discovery and inspection; (b) enforcing the attendance of any person, including any officer of a Banking company and examining him on both; (c) compelling the production of books of account and other documents; and (d) issuing commissions. Sub-section (3) enables the Valuation Officer to impound and retain in its custody any books of

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account or other documents . Under sub-section (4) proceedings before Wealth Tax Authority or any Tribunal are deemed to be judicial proceedings within the meaning of Section 193 and Section 228, and for the purpose of Section 196 of Indian Penal Code.

11. When these provisions are looked into in the background of the judgment of Hon'ble Apex Court in case of Amiya Bala Paul (supra), it follows that such valuation officer is constituted as an independent & distinct statutory forum for resolving the controversy regarding determination of the market value of the property with all necessary powers. Its order or report is made binding on the assessing officer and thus he enjoys equivalent status. As per the statutory scheme when the report /order of Valuation Officer under Section 50C(2) is objected to by assessee, the CIT (Appeals) or ITAT are obliged to extend an opportunity of hearing to such Valuation Officer. Perusal of order of ITAT, particularly paragraph no.5 reveals contention of the assessee that the assessing officer was not bound to accept the value decided by the District Valuation Officer i.e. Valuation Officer. In paragraph no.6, the ITAT has noted the contention that in facts and circumstances, addition by the assessing officer was not warranted. There is a reference to report of registered valuer furnished by the assessee to counter the order of Valuation Officer. The ITAT has allowed the appeal of the assessee against the order of CIT (A), and that order of CIT (A) was in favour of the present appellant- department. The ITAT has in paragraph no.8 found faults with the report/order of District Valuation Officer. Admittedly the said Valuation Officer has not been heard and no opportunity was extended to him. This is contrary to obligation cast upon it by the proviso of S.24(5) of the Wealth Tax Act,1957 as attracted by S. 50C(2) of the Income Tax Act .

12. In this situation, we find that a mandatory requirement of law has been violated in present matter. The question framed above is answered in favour of the appellant-department. Hence, the impugned order of ITAT dated 03.07.2009 is, hereby quashed and set aside and the proceedings in ITSSA No. 41/Nag/2009 are restored back to the file of ITAT, Nagpur for taking decision a fresh therein, in accordance with law. Parties are directed to appear before the ITAT on 29.07.2013 and to abide by its further instructions in the matter".

The ratio laid down in the above case was followed by the Coordinate Bench in the case of Rupakula Srinivas vs. Income Tax, Ward-1(1) Hyderabad (13-08-2014) (2014) 51 Taxmann.com 567 (Hyderabad-Trib)(2014) 35 ITR (T) 245 )Hyderabad - Trib.)/(2015)67 SOT 58 (Hyderabad-Trib.)(URO).

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9. Therefore, respectfully following the ratio in the above cases, we are of the considered opinion that the interest of justice would be served, if the matter is restored to the file of AO with a direction that the AO shall confront the DVO with the objections raised by the assessee and the assessee shall also be given an opportunity of being heard on the report submitted by the DVO. And accordingly the matter is remitted back to the file of the AO for de novo assessment.

In the result, appeal is partly allowed for statistical purposes.

Order pronounced in the Open Court on 1st July, 2015.

Sd/- Sd/- (Asha Vijayaraghavan) (Inturi Rama Rao) Judicial Member Accountant Member

Hyderabad, dated 1st July, 2015.

Vnodan/sps Copy to:

1. Income Tax Officer Ward 6(4) 7th Floor, IT Towers, Masab Tank, Hyderabad

2. Smt.Ruchita Gir, 6-3-596/A/13 Anand Nagar Extension, Khairatabad, Hyderabad

3. CIT(A) - IV Hyderabad

4. CIT -III Hyderabad

5. The DR, ITAT, Hyderabad

6. Guard File

By Order

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