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Dev Kumar Jain v Income Tax Officer

Income Tax Appellate Tribunal

DELHI ‘B’ BENCH

23 October 2003

Misc. Appln. No. 32/Del/2003 In Ita No. 1650/Del/2002

The Judgment was delivered by : SMT. DIVA SINGH, J. M.

SMT. DIVA SINGH, J.M. : -The assessee has filed the present miscellaneous application unders. 254(2) against the order dt. 14 Nov., 2002, in ITA No.1650/Del/2002 pertaining to 1998-99 assessment year.

2. Before adverting to the specific grievance of the assessee, it would be appropriate to briefly refer to the facts of the case which are discussed in paras 3 to 6 of the impugned order which read asunder:

“3. The/relevant facts of the case are that the assessee filed his return declaring a total income of Rs. 2, 30, 930. The assessee 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 Taruh Enclave, Pitam Pura, Delhi for a sum of Rs. 4, 02, 000 to Shri Chanan Dass S/o Rewal Dass, r/o AG-26, Shalimar Bagh, Delhi-110 052. After indexing, the cost declared was Rs. 187, 570 The AO considered the sale price of the plot to be low. Accordingly, the Income-tax inspector of the ward was deputed to visit the site 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, IT Department under s. 55A of the Act for determining the fair market value of the plot on the date of the sale i.e. 6th June, 1997. The AO made a reference to the valuation cell; invoking s. 55A relying upon Jindal Strips Ltd. vs. ITO 1978 Indlaw PNH 53 : 1978 Indlaw PNH 53 (PandH)(FB). Reliance was also placed upon William De Noronha vs. Asstt. CIT 1996 Indlaw ALL 236 : 1996 Indlaw ALL 236 (All).

4. The Valuation Officer, Unit-Ill; IT Department determined the value of the plot at Rs. 24, 10, 621 on the date of sale. As per the assessment 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 dt. 17th Nov., 2000. On 22nd Nov., 2000, an adjournment request was received on behalf of the assessee. Thereafter, further reminder on 1st Dec., 2000, was sent by the Valuation Officer and inspection notice dt. 8th Dec., 2000, was also sent. The. inspection of the plot on 12th Dec., 2000, was done in the presence of Shri Praveen Garg, CA of the assessee and the Valuation Officer along with R.S. Sharma, JE and S.R. Gupta, JE. Thereafter notice under ss. 55A and 16A(4) for filing objection was issued to the assessee on 15th Jan., 2001, and subsequently objections dt. 23rdJan., 2001 and 24th Jan., 2001, were received by the Valuation Officer and according to the AO, duly taken into account by the Valuation Officer. The AO observed that the Valuation Officer adopted the method of valuation by comparing sale instances in similar localities. The Valuation Officer quoted sale instance dt. 18th Nov., 1996, 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, 527per 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 percent on account of size at 0.10 per cent 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 AO further observed that before determining the aforesaid value, the Valuation Officer duly took into consideration the assessee’s objections mentioned in his letter dt. 23rd Jan., 2001.The justification of the Valuation Officer is reproduced at p. 3 vide paras 2(a) to 3(c) of the assessment order. Accordingly, the AO 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 dt.5th March, 2001 which was also taken into consideration by the AO.

6. Accordingly, relying upon Killick Nixon and Co. vs. CIT 1967 Indlaw SC 232 (SC), 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.”

3. Before the CIT(A), the specific challenge posed to the reference made to the DVO without affording an opportunity to the assessee was dismissed by the CIT(A). This has been discussed in the impugned order in paras 7 and 8. They read as under :-

“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 ; assessee was nothing more than the amount disclosed by the assessee. It was 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 s. 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 s. 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 feet that this case did not fall under that category, the ground and the arguments pertaining to this were rejected.

4. Reliance has been placed upon the decision of the apex Court in the case of K.P. Varghese vs. ITO 1981 Indlaw SC 334 : 1981 Indlaw SC 334 (SC) was distinguished by the CIT(A) and held to be not applicable. This has been brought out in the impugned, order in para9 :”

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. Vaighese (supra). In view of . the fact that s. 52 of the Act which no longer stood on the Statute, hence, is not the subject matter of the present case.

“5. The CIT(A) further held that the AO having once made the reference was bound to adopt the fair market value determined by the DVO which has been considered in para 10 of the order.

6. The ground raised by the assessee challenging that adequate opportunity had not been granted and the evidences submitted by him have not been considered by the DVO was also not accepted by the CIT(A) which fact has been discussed in para 11 of the impugned order.

7. Aggrieved by this, in appeal before the Tribunal, the contentions raised are discussed in paras 12 and 13 which read asunder:”

12. The learned authorised representative 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 rights are acquired by the person who succeeds in its bids in auction. In support of this claim, our attention was invited to paper book p. 3 which is the agreement to sell and purchase.

13. Page 5 of the paper book and internal p. 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 Dassand 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. Vaighese vs. ITO 1981 Indlaw SC 334 : 1981 Indlaw SC 334 (SC). Our attention was also invited to CIT vs. Late Gulshan Kumar 2000 (175) CTR(Del) 416. Reliance was also placed upons. 50C which was introduced by the Finance Act, 2001 for the proposition that on a reading of it, the legislature thought it necessary to lay down that the circle rates could be taken into consideration. It was further contended that this was introduced as after the removal of s. 52(2)(1), there was no provision under the Act under which the authorities could proceed. Reliance was placed upon Brittania Industries Ltd. vs. Dy. CIT and Ors. 2000 (162) CTR(Cal) 152 : 2000 (238) ITR 57 (Cal). Reliance was also placed upon CIT vs. Godavari Corpn. Ltd. 1992 Indlaw SC 1160 : 1992 Indlaw SC 1160 (SC)-

“8. With respect to ground No. 2, which was raised by the assessee, the Bench required the assessee to cite the authority for his claim that before a reference could be made by the AO to the DVO, an opportunity, should be granted to the assessee. The facts of the case were reiterated and it was stated that no authority is required to rely for the proposition. The argument put forth was that the AO has relied upon the report of the inspector based on some local enquiry that the amount was understated and this report of the inspector had not been confronted to him. As such, the reference made to the DVO by the AO is bad in law. These submissions have been reproduced in para14 of the impugned order.

9. In paras 15 to 23, the submissions of the Revenue have been recorded which are as under :”

15. The learned Departmental Representative, on the other hand, placed reliance on the orders of the 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 assessee 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 alter 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 WMam De Noronha and Ois. vs. Asstt. CIT and Ors. 1996 Indlaw ALL 236 : 1996 Indlaw ALL 236 (All) at p. 29. It was further contended by him that the learned authorised representative 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 authorised representative, it was stated that the issue decided by the Hon’ble Supreme Court in K.P. Varghese’s case (supra) pertained to s. 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 s. 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 s. 55A. Learned Departmental Representative placed reliance upon ITO vs. Pradeep Kumar Badjatiya and Co. 1997 (57) TTJ(Ind) 727 : (1997) 61ITD 75(Ind). Reliance was also placed upon Jindal Strips Ltd. vs. ITO 1978 Indlaw PNH 53 : 1978 Indlaw PNH 53 (PandH)(FB).

17. It was further stated that the learned authorised representative has placed reliance on CIT vs. Late Gulshan Kumar2002 Indlaw DEL 223 : 2002 Indlaw DEL 223 (Del) through the legal heir which, according to the learned Departmental Representative, had no applicability; as therein also, the issue pertained to the applicability of s. 52 of the IT Act and reliance has been placed upon K.P. Varghese’s case (supra). 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 authorised representative 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 paper book p. 4 internal p. 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 authorised representative 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 p. 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 spot 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, or construct any construction and the first party, his heirs, successors and assigns shall have no claim, title and interests whatsoever in the paid property.’

21. The learned Departmental Representative, referring to p. 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 to 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 authorised representative on internal p. 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 authorised representative before the Tribunal.

22. Referring to pp. 7 to 17 of the paper book filed by the assessee, the learned Departmental Representative pointed out that it contains the valuation report and is an order under s. 55A dt. 25thJan., 2001, which at internal pp. 4 and 12 of the paper book clearly states that the method of valuation is by comparing with sale instance of land of similar status and same and similar locality. It was 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.Y. of plot/land. Referring to internal p. 5paper book p. 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 Annex. ‘A1 at paper book p. 16 of the said order so as to point out that while making a comparison with DDA auction, the land rates per sq. rntr. was Rs. 17.268. I and on account of time gap i.e.18th Nov., 1996, the date on which the DDA auction took place and31st Dec., 1996, which is the date of valuation, an addition of Rs.259 was made thereby resulting in land rate on 6th June, 1997, at Rs.17, 527. Thereupon, adjustments had been made on account of which the amount was reduced by situation/location (-) 10 per cent and on account of size (-) 0.10 per cent 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 6th June, 1997 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 paper book p. 17 which is Annexure ‘B’ which brings out the comments on objections filed by the assesses, the first paragraph of which reads as under: The para wise comments on objections filed by the assessee vide his letter dt. 23rd Jan., 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.”

10. Accordingly, the submissions made before us by either side have been brought out in detail which have been reproduced in the earlier part of this order. The issue of ascertaining the fair market value of the property for the purpose of capital gain under s. 55A of the Act has been adjudicated by us in the following manner vide paras24 to 32:

“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. Varghese’s case (supra) by the learned authorised representative. We have taken into consideration the fact that s. 52 has been deleted by the legislature from the statute by the; Finance Act, 1987 w.e.f. 1stApril, 1988. The decision rendered by the apex Court in the case of K.P. Varghese has been considered at length which is on the applicability of sub-s. 2 of s. 52 of the Act. As such, we are of the view that in deciding the; issue at hand for the assessment year inconsideration, it has no role to play, The decision rendered by the Calcutta High Court in the case of Brittania Industries (supra) has also been referred to. In this, the AO had assumed jurisdiction unders. 148 of the Act to issue notice for escaped capital gains, 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 authorised representative on the decision of the apex Court in the case of CIT vs. Godavari Corporation Ltd. (supra) which is again on the applicability of s. 52 and therein, the decision in the case of K.P. Varghese (supra) 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 Departmental Representative has placed reliance on the decision of the Punjab and Haryana High Court in the case of Jindal Strips (supra) which has, in fact, been followed by the AO. Their Lordships of the Punjab and Haryana High Court have held that s. 55A occurring under Chapter IV in Part E capital gains, appears to apply to capital gains alone. They, however, at p. 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 Chapter 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 AO under s. 55Ain 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 the learned Departmental Representative on the order of the Indore; Bench of the Tribunal in the case of 1TO vs. Pradeep Kumar Badjjatiya and Co. (supra) where, in fact, the Indore Bench of the Tribunal had considered the powers of the AO to make; a reference to the DVO for determining the constructing cost of the property under s. 55A. The Co-ordinate Bench of the Tribunal held : ‘As regards the power of the AO to make a reference to DVO for determining the cost of construction of property, a bare reading of s. 55A shows that by inserting this provision the legislature intended to empower the AO to 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. Nowherein this section it is mentioned that the AO 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 s. 55A falls under Sub-Chapter ‘E1, 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 Chapter1 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 IT Act; s. 55A empowers ‘the AO 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 vs. ITO 1988 Indlaw AP 148 : 1988 Indlaw AP 148 (AP)(FB) and Madras High Court in C.T. Laxmandas vs. Asstt CIT1994 Indlaw MAD 209 (Mad), in the instant case, it was to be held that the AO was fully empowered to make a reference for the purpose; of computation of total income under Chapter IV. These powers’: of the AO 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 vs. ITO (supra).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: ‘Sec. 55A was inserted in the IT Act. 1961, w.e.f. 1st Jan., 1973, with the deliberate object of empowering the ITO to find out the market value of capital assets for the purpose of Chapter IV which is titled “Computation of total income”;. Though s. 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 ITO can ascertain it through the agency of the Valuation Officer. On such reference, the provisions, inter alia, of sub-ss. (2) to (6) of s. 16A and sub-ss. (3A) and (4)of s. 23 of the WT Act, 1957, are ipso facto applicable by extension, as laid down under s. 55A of the Act itself- So also, the “Valuation Officer” in s. 55A of the Act has the same meaning as in cl. (r)of s. 2 of the WT Act. The power to do an act requires that the actis done properly, correctly and legally. Hence, if a first reference to the Valuation Officer is not valid, the ITO can make a second reference. There is nothing in the provisions either under s. 55A or under the Rules made under the WT Act forbidding the ITO from taking recourse to such a process. The power of second reference could also be traceable to s. 142(2) which, empowers the ITO 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 Departmental Representative has also taken into consideration the decision of the Madras High Court in the case of C.T. Laxmandas (supra). Their Lordships of the Madras High Court dissented upon the judgment of the Punjab and Haryana High Court in the case of Jindal Strips (supra) which has narrowed the scope of s.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 Ors. vs. ITO (supra) and held as under: ‘I arn 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 s. 55A could be availed of cannot conform to either the language or the objection of the said provision or to reason or logic. Even de hois 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 was 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 s. 55A of the Act; assigning a restrictive meaning or limiting the operation of the section to assessment only ot 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 petitioner 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 (supra) the AO has placed reliance on the decision of the Allahabad High Court in the case of William De Noronha and Ors. vs. Asstt. CIT and Ors. (supra). 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 under s. 45 did not suffer from any legal infirmity and s. 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 its counter-affidavit had contended that in case of one of the five partners Sri Terrance De Noronha was a partner in Gurg Noron has against which proceedings under s. 148 of the IT 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, under s. 55A, the said issue has been held against the assessee.

31. Learned Departmental Representative has also placed reliance on the Third Member order of Patna Bench of the Tribunal in the case of Shanti Complex vs. ITO (1997) 63ITD 181 (Pat)(TM) for the contention that the reference made to the DVO is valid in law. Learned authorised representative has vehemently stated that this decision is on the applicability of s. 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 home out that as far as the position of law is concerned, till the action was contemplated unders. 52, the decision of the apex Court in the case of K.P. Varghese(supra) held the field and the subsequent decision of the Supreme Court in the case of Godavari Corpn. Ltd (supra) and the decision of the Delhi High Court in the case of CIT vs. Late Gulshan Kumar(supra) as such are no longer good law as the said section does not stand on the statute and has. been deleted w.e.f. 1st April, 1988.Thereafter, it is seen that although their Lordships of the A.P. High Court dissented from the Full Bench decision of the Punjab and Haryana High Court and followed the decision of the Madhya Pradesh High Court and have enlarged the scope of applicability of s. 55Avis-a-vis the scope laid down by the Punjab and 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 under s, 55A of the Act.

“11. While reproducing the arguments advanced on behalf of the assessee, we have considered the specific grievance of the assessee that the inspector’s report has not been confronted to it and that the reference has been made to the DVO without affording an opportunity of being heard to the assessee. After due consideration, we have rejected the assessee’s contention by paras 33 and 34 of the impugned order giving specific reasons for not agreeing with them. They are being reproduced for ready reference :”

33. With regard to the submissions and arguments of the learned authorised representative that the opportunity was not granted to the assessee before a reference was made, we have considered the arguments at length of the learned authorised representative and taken into consideration that apart from the submission, no authority or 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 AO 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 decision relied upon by the learned authorised representative as well as the learned Departmental Representative 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 grounds against the said reference are also rejected.

“12. The DVO’s report has also been considered by us and the finding arrived at therein has been arrived at after careful consideration. We have taken note of the fact that the assessee has made submissions in response to the DVO’s report and has participated before him. Thus, the undisputed fact is that the DVO’s report has been confronted to the assessee and in fact, he has given due consideration to the contentions raised before him. In the impugned order, we have also taken note of the fact that in the course of the hearing before us, no infirmity has been pointed in the DVO’s report which fact has been discussed by us in paras 35 to 39. We have also taken note of the fact that apart from not pointing out any defects in the DVO’s report before us or arguing that despite taking assessee’s submissions into consideration, the DVO’s report still suffered from some other defect the assessee has, unfortunately sought to rely only upon decisions and not considered it necessary to counter the report of an expert by a valuation report of some other recognized expert and has merely contested the issue on legal principles without referring to facts.

13. We have even in the impugned order taken ourselves through the DVO’s report and although arguments challenging the same were not made, but in our concern to deal with the issue in all fairness we observed and noted in the impugned order that the objections of the assessee to the DVO’s report were considered and as a result, the initial valuation confronted to the assessee was reduced after considering the assessee’s objections. Thereafter as we have observed, it has not been argued or pleaded that the valuation arrived at by the only expert in line suffers from excessiveness due to certain inaccuracies. Thus, the fact that apart from not pointing out any error in the DVO’s report after the assessee’s representation, the Tribunal took note of the fact that the assessee has not placed any valuation report in support of its claim by any registered valuer. This finding has been arrived at in the matrix that apart from challenging; the action of the AO for making a reference to the DVO, the assessee has not pointed out any infirmity in the DVO’s report. We have observed in our order that the location and situation aspects which had been pointed out by the assessee have been considered by the DVO/AO on account of which relief to the extent of initially 5 per cent increased to 10 per cent has been given to the assessee which has been observed after taking into account the submissions of the assessee before the DVO and the corrected DVO’s report which has been placed in the paper book by the assessee. As we have observed unfortunately even before us, the DVO’s report has not been challenged as excessive nor has the assessee placed any other report in support of its contentions. These issues and our constraints in the circumstances have been elaborately addressed by us in paras 35 to 39 which read as under:”

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 tact 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 Departmental Representative, 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 authorised representative 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 paper book pp. 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, videp. 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 is18th Nov., 1996 whereas the plot was sold on 6th June, 1997. A perusal of paper book p. 16 which is Annex. ‘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 p. 22, reliance has been placed upon the decision of the apex Court in the case of K.P. Varghese (supra) and at p. 23, it has been stated that the assessee’s plot had locational disadvantage since plot is situated near a cremation ground and the AO was not even aware of these facts. Earlier, he arbitrarily applied5 per cent as the situation factor which was later increased to 10per cent 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 per cent as given by the DVO should have been given, then no efforts have been made either to place any report of any registered valuer before any of the authorities nor 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 per cent deduction on account of situation. Similarly, at p. 23 of the paper book 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 paper book p. 16 shows that on account of size, deduction has been given to the extent of 0.10 per cent Thus the objection of the assessee to the DVO’s report has been considered. Vide para (e) at p. 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 p. 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 incase 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 Departmental Representative has invited our attention to again p. 16 which is Annex. ‘A1 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 good.

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 and 4 raised by the assessee due to the detailed reasons given in the earlier part of this order deserve to be dismissed.

“14. The other issue decided by us in the impugned order is the applicability of s. 234B which has been restored to the C1T(A) vide paras 40 to 42 in the following manner:”

40. Ground No.5 raised by the assessee pertains to the levy of interest under s. 234B of the Act. Learned authorised representative has placed reliance on the decision of the apex Court in the case of CIT vs. Ranchi Club 2000 Indlaw SC 645 :2000 Indlaw SC 645 (SC). Our attention was also invited to the unreported order of the Delhi High Court in the case of CIT vs. Multi Chemical, a copy of which was placed on our files, wherein while disposing 1TANo. 126 of 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 CIT vs. Ranchi Club Ltd. 2000 Indlaw SC 645 : 2000 Indlaw SC 645 (SC).

This appeal is accordingly dismissed.

41. Learned Departmental Representative, on the other hand, placed reliance on the decision of the Punjab and Haryana High Court in the case of Vinod Khurana vs. CIT 2001 Indlaw PNH 145 : 2001 Indlaw PNH 145 (PandH) for the contention that their Lordships of the Punjab and Haryana High Court had relied upon another decision of the apex Court in the case of Kalyan Kumar Ray vs. CIT 1991 Indlaw SC 926 : 1991 Indlaw SC 926 (SC) and also taken into consideration the decision of the apex Court relied upon by the assessee, namely, CIT vs. Ranchi Club (supra). Accordingly, on 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 under s. 271(l)(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 Katyan Kumar Ray (supra) has put the assessee to notice that interest under s. 234B is also been charged, is not available before us. Thus, the test as laid down in the case of U day Mistanna Bhandar /Ranchi Club Ltd. 1996 Indlaw BIH 110 : 1996 Indlaw PAT 110 (Pat) 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 Katyan Kumar Ray/Ranchi Club (supra) 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.

“15. Aggrieved by this, by way of the present miscellaneous application, the assessee has sought to argue that in the order of the Tribunal there is a mistake apparent on record. Reliance has been placed upon K.P. Varghese (supra) on the basis of which, it was contended that the concept of fair market value has no application in the sale of immovable properties in view of s. 48 of the Act- In this context, it was also slated that amendments to the provisions governing capital gains as effected by the Finance Act, 2002 substituting s. 50C to provide for assessment at circle rates. The argument put forward is that even today, the fair market value has no place in the scheme of assessment of capital gains with regard to immovable property Reliance has been placed upon Brittania Industries(Calcutta High Court) on the basis of which, it is stated that sinces. 52(2) had been omitted from the statute, the fact still remains that in case of transfer of assets, no capital gain tax can be taxed over and above the capital gain disclosed by the assessee unless there is material that there is an understatement by the assessee and, in fact, more consideration has been passed than has been disclosed. In the MA, the assessee places reliance upon CIT vs. Gulshan Kumar 2002 Indlaw DEL 223 : 2003 (257) ITR 703 (Del). It has also been stated that the Tribunal fell in error in view of the fact that s. 52(2) stood eliminated which fully took away the powers of the Department to substitute any valuer in place of the actual consideration as shown. It has been stated that the cases have been relied upon where it has been held that there has to be evidence with regard to the transaction been not on file and it was stated that in the facts of the case, no evidence has been brought on record at any stage of the proceedings. Attention of the Bench by way of this MA has also been invited to the order of the Tribunal dt. 1st Oct., 2002, in the case of ITA No. 2163/Del/97 wherein the following observation has been made :”

We must also specifically observe that on behalf of the Revenue m the present proceedings before the Tribunal there is no challenge to the factual finding recorded by the CIT(A) that no evidence has been brought on record by the Revenue, which would show that consideration over and above the apparent amount has passed. It is also not the Revenue’s case before us that the return of the flat to the company by the assessee was a sham transaction or a transaction with a motive for tax avoidance. During the course of the present; hearing, nothing has been brought to our notice, which would show any adverse action having been taken in the case of the transferee and it must be appreciated that this is the Revenue’s appeal and any evidence which they want to rely on must be filed by them. In the final analysis, we uphold the action of the CFT(A).

“16. Reliance has also been invited to the order dt. 3rdyJan., 2003in ITA No. 1428/Del/2002 of a co-ordinate Bench. The decisions considered in paras 26, 27, 28 and 29 of the impugned order, namely, Jindal Strips (Punjab and Haryana High Court), ITO vs. Pradeep Kumar Badjatiya and Co. (supra); Daulat Ram vs. ITO (supra)and C.T. Laxmandas (supra) have also been referred to. Referring to these paragraphs and judgments, if was argued that they pertained to unexplained investment in the cost of construction and property, the ratio of which should not have been, applied to the facts of the case. Reliance placed upon the order of the Allahabad High Court in William De Noronha and Ois. vs. Asstt. CIT (supra), it is stated, was also not meant for adjudicating the issue under s. 45. By para 17of the MA, the assessee is aggrieved by the fact that the decisions have been considered before the facts of the case.

17. On the date of hearing, on behalf of the assessee, order dt.31st March, 2003 in ITA Nos. 2418, 2419 and 2438/Del/2002 in the case of Smt. Mamta Mahajan vs. ITO was also placed before the Benchso as to contend that the said issue in fact is .covered in favour of the assessee. Attention was also invited to order dt. 3rd Jan., 2003, in ITA No. 1428/Del/97 in the case of Shri Sankta Prasad Gupta and6th Jan., 2002, in ITA No. 2148/Del/2002 in the case of Shri Naveen Kumar Gaulechha. Reliance has also been placed upon Seth Madan LaiModi vs. CIT 2002 Indlaw DEL 301 : 2002 Indlaw DEL 301 (Del) for the proposition that in case of a reliance on a wrong provision of law. rectification under s. 254(2) is justified.

18. In the course of hearing, in response to reliance placed upon ITA No. 2163/ Del/97, ITA No. 1428/Del/97, ITA No. 2148/Del/2002 and ITA No. 2438/Del/2002 .and others, it was put by the Bench to the learned authorised representative that the assessee could refer to orders and decisions which were relied upon by him in the course of the hearing, the relevance of relying upon orders which were never placed before the Bench would not serve any purpose.

19. Learned Departmental Representative, in response, placed reliance on the impugned order. Inviting attention to various paragraphs and pages, it was argued that the submissions of the assessee have been considered at length and in the present MA, no mistake has been pointed out by the assessee. With regard to the reliance placed upon various decisions, it was argued that they are not relevant as each decision is on facts peculiar to the case.

20. We have heard the rival submissions and taken ourselves through the various orders and judgments relied upon. After giving our utmost consideration to the MA filed by the assesses and the arguments advanced and after duly deliberating thereon, we are of the view that no error worth its name has been pointed out by the. assessee either in the MA filed or in the arguments raised by the assessee. In fact, by way of the present MA. The assessee has attempted to re-argue its appeal and obtain a review of the order which is not permissible under the provisions of the Act. In the course of the hearing, it was stated on behalf of the assessee that the impugned order can be recalled in view of the fact that the Tribunal had recalled its order in the case of Friends Overseas in IT(SS) No. 49/Del/96. It was put to the learned authorised representative that in view of the fact that one of us (JM) is the author of MA No. 23.4/Del/2002 in IT(SS) No. 49/Del/96 of Friends Overseas and, as such, the Bench was in a position to emphatically state that the said order had not been recalled, the learned authorised representative conceded that he is basing his submissions on what he was told by some counsel. At this juncture, it was also indicated by the Bench that in case some order has been recalled, this fact by itself does not lay down the proposition that orders can be recalled at the drop of a hat An order in case it suffers from some mistake apparent from the record can be recalled. Thus, in case this act of recall is warranted in a particular situation, it does not lay down a blanket law that recalling of orders is a frivolous exercise and a necessary outcome of filing a MA. We are pained to observe that this casual and irresponsible submission in the course of the serious deliberations to find out whether the impugned order suffers from some mistake on the face of the record reduces this onerous and serious exercise to a farce. Without elaborating further on this, an attempt was made to verify from the Registry whether the order in the case of Friends Overseas against which the MA had been dismissed had been recalled as per the submission of the learned member of the Bar or had it been dismissed as per the recollection of the Bench it was confirmed that MA No. 234/Del/2003 had been dismissed.

21. Having given our utmost consideration as we have observed earlier, we are unable to allow the present miscellaneous application as no mistake worth its name has been pointed out by the assessee. The MA. as such has no merit. Having thus observed, we would briefly like to address the various orders on which the assessee has placed reliance. Although the said orders, were not cited in the course of hearing, however, at the close of the arguments in the MA proceedings, the said orders were placed before the Bench.

22. The order in Dy. CIT vs. Ashok Verma in ITA No. 2163/Del/97was relied upon which is the order dt. 1st Oct., 2002, to which the present Bench is a party (authored by learned AM). A perusal of the said order shows that at p. 4 of this order, the facts of the case have been reproduced as appreciated by the learned CIT(A). The peculiar facts were that therein, the assessee first purchased a flat from a company closely held by him and his wife and thereafter, the flat was retained as a personal property of the assessee for a few years and ultimately returned back to the company at the original purchase price. In this case, reliance was placed upon the fact that in the case of the co-owner, namely, Smt. Meenakshi Verma, no action had been taken by the tax authorities and the factual finding on record as brought in the order of the CIT(A) which was not challenged. Further, taking note of the fact that no evidence was there on record on behalf of the Revenue to show that consideration over and above the apparent amount had passed or that the transaction was actually a sham transaction, the appeal of the Revenue on these peculiar facts was dismissed whereby it had challenged addition of Rs. 12 lakhs odd on account of capital gains on the transaction of assessee’s 50 per cent share in flat in Kailash building, in the facts of that case, there was no evidence brought to the notice of the Tribunal nor was there any valuation report in support of the Revenue’s assertion. As such, the finding arrived at by the Tribunal in that order does not in any way detract from the finding arrived at in the impugned order. Ac’corclingly, reliance placed thereon is misplaced as the said Case proceeds on peculiar facts of its own.

23. In Sankta Prasad Gupta in ITA No. 1428/Del/97 the Tribunal vide its order dt. 3rd Jan., 2003, the peculiar facts were that the purchase price of the two properties in Question on 7th July, 1997and 25th July, 1997, had been accepted and their sale on 8th Sept., 1997 and 30th May, 1997, had not been accepted. The’ Revenue did not rely upon any valuation report and the Tribunal on a perusal of facts did not agree with the finding of the tax authorities in view of the fact that difference of period between the purchase and sale was only two months in the case of the first property and three days in the case of the second property. No special reasons for escalation of price contrary to what had been shown by the assessee were given. In view of these specific facts, the appeal of the assessee succeeded-The said facts arc materially distinguishable’ from the facts as are1apparent in the case of the assessee which have been culled out in detail in the earlier part of this order from the order of the Tribunal. At the cost of reiteration, it is necessary to mention that in the facts of the present case, there is a valuation report confronted to the assessee. His submissions with regard to the same have been considered and there is no material on record filed by the assessee in support of its assertion. Thus, it is seen that the facts are materially distinguishable.

24. In Maveen Kumar Gaulechha vs. ITO the Tribunal vide its order dt. 6th Jan., 2002 in ITA No. 2148/Del/2002, the facts were that the assessee has sold its 1/3 Share of property for a certain sum in support of which, the valuation had also been filed by the assessee. The Tribunal therein comparing the valuation report of the assessee and that of the Government valuer relied by the AO came to the finding after an appraisal of the same. The sale instance cited by the Government valuer and the reasons for difference in valuation of land were taken into consideration. The cost of acquisition of the property in the case of the other co-owners had been accepted by the tax authorities. On these facts, since the valuation report of the Department had been rebutted by the assessee and the valuation adopted by the assessee was supported by a valuation report, accordingly, the sale consideration disclosed by the assessee stood accepted. Thus, it is seen that the facts here are materially distinguishable.

25. Similarly, the Tribunal in its order dt. 31st March, 2003 in ITA No. 2148/ Del/98 and others in the case of Mamta Mahajan and Ors. the facts were that in the case of three assessees before the Tribunal who each owned 1/4 share in the said property, the AO referred the matter for valuation under s. 55A and invited the assessee’s objections to the same. The assessee apart from objecting to the same filed its valuation report from an approved valuer. The Tribunal therein vide para 12 held that the AO is competent to make a reference in determining fair market value of the asset and whenever the Revenue has brought the complete material on record to prove that the assessee has received more consideration than what he has declared, the AO may take recourse to the provisions of s. 55A for determining the fair market value. Accordingly, it is seen that apart from the fact that the reference to the DVO could be made under s.55A, the Tribunal therein on a comparison of the two valuation reports came to the conclusion that the case of the assessee was allowed in view of the fact that it was supported by the valuation report of the approved valuer. In the facts as they stand, the only report of an expert is the report of the DVO which has been duly confronted to the assessee and his objections thereto have been taken into consideration. Merely relying upon various decisions and observations in different cases would not help the assessee. The acts on record have to be taken into consideration and thereto the decisions are replied.

26. It may be pertinent to state here that s. 2(24) defines the word”

income11. The definition is inclusive and covers “capital gains” chargeable under s. 45. Sec. 4 is the charging section and it provides that income-tax shall be charged in respect of the total income of the previous year of every person. Sec. 5 defines the scope of “total income” by providing that the total income of the previous year of a person who is responsible (resident) shall include all income from whatever source derived which is received or deemed to be received in India in such year by him or on his behalf or accrues or arises or is deemed to accrue or arise to him outside India during such year. The heads of income are enumerated in s. 14under which income shall for the purposes of charge of income-tax and computation of total income be classified and this includes “capital gains”, Sec. 45 of the Act provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income-tax under the head “capital gains” and shall be deemed to be the income of the previous year in which the transfer took place. The mode of computation of capital gams is laid down in s. 48. Sec. 55A talks of referring the valuation of a capital asset to a valuation officer with a view to ascertaining the fair market value of a capital asset for the purposes of “this Chapter” i.e. Chapter IV which deals with “Computation of total income”.

27. At this juncture, we propose to examine the principle laid down by their Lordships of the apex Court in the case of K.P. Varghese vs. ITO (supra).

27.1 Briefly, the facts before their Lordships were that the assessee was the owner of a house which he had purchased in 1958 for a price of Rs. 16, 500. Within a span of seven years i.e. 1965, the assessee sold the house for the same price to his daughter-in-law and five of his children. The assessment for 1966-67 assessment year was completed in the normal course and in this assessment no amount was included by way of capital gains in respect of transfer of the house in view of the fact that the house was sold by the assessee at the same price at which it was purchased. Hence, no capital gains accrued or arose to him as a result of this transfer.

27.2 The material fact here was that subsequently, the AO issued a notice under s. 148 of the Act seeking to reopen the assessment and requiring the assessee to submit a return of income. Thereafter, the AO intimated the assessee that he proposed to fix the fair market value of the house sold at Rs. 65, 000 as against the consideration of Rs. 16, 500 shown by the assessee. The difference of Rs. 48, 500 was as such proposed to be assessed as capital gains in the hands of the assessee.

27.3 The objections of the assessee against the reassessment proposed were rejected and Rs. 48, 500 was included as capital gains and brought to tax. The AO rested his decision to assess a sura of Rs. 48, 500 to tax on sub-s. (2) of s. 52. Being of the view that this sub-section did not require as a condition precedent that there should be understatement of consideration in respect of transfer and it was enough to attract the applicability of the said sub-section if the fair market value of the property as on the date of the transfer existed the full value of the consideration declared by the assessee by an amount of not less than 15 per cent of the value so declared which was the, position in the present case.

27.4 The AO could not invoke s. 52 sub-s. (1) for bringing the sum of Rs. 48, 500 to tax in view of the fact that admittedly, there was no understatement of consideration in respect of the transfer of the house which was in favour of daughter-in-law and five of his children who were persons directly connected with him and it was not possible to say that the transfer was effected by the assessee with the object of avoidance or reduction of his liability under s. 45.

27.5 Against the action of the AO, the assessee filed a writ before the Kerala High Court challenging the validity of the order of reassessment insofar as it brought the sum of Rs. 48, 500 to tax relying upon s. 52 sub-s. (2) of the Act.

27.6 The learned single Judge came to the conclusion in the writ proceedings that the understatement of consideration in respect of the transfer was a necessary condition for attracting the applicability of s. 52 sub-s. (2) and since in the present case there was admittedly no understatement of consideration and it was perfectly a bona fide transaction, sub-s. (2) of s. 52 had no application and a sum of Rs. 48, 500 could not be brought to tax as applicable under the provision.

27.7 Against this order, the Revenue appealed before the Division Bench of the High Court which referred the appeal to the Full Bench.

27.8 The Full Bench heard the appeal but there was a difference of opinion, two Judges taking one view and the third another. The majority view was that in . order to bring a case within s. 52 sub-s.(2), it was not at all necessary that there should be understatement of consideration in respect of the transfer and once it is found that the fair market value of the property as on the date of the transfer existed, the full value of consideration declared by the assessee in respect of the transfer by an amount of less than 15 per cent of the value so declared s. 52 sub-s. (2) was straightaway attracted and the fair market value of the property as on. the date of transfer was liable to be taken as full value of consideration for the transfer.

27.9 Accordingly, the writ petition was dismissed and the order of reassessment sustained by the majority decision was reached by the Full Court.

27.10 Against this, the assessee on a certificate obtained by the High Court went in appeal before their Lordships of the Supreme Court.

27.11 The question which was referred to their Lordships was whether understatement of consideration in a transfer of property is a necessary condition for attracting the applicability of s. 52sub-s. (2) of the IT Act 1961 or it is enough for the Revenue to show that the fair market value of the property as on the date of the transfer exceeds the full value of consideration declared by the assessee in respect of the transfer by an amount of not less than 15per cent of the value so declared.

27.12 Accordingly, in these facts, their Lordships held that sub-s. (2) of s. 52 had no applicability in a case of a honest and bona fide consideration whether the consideration in respect of the transfer has been correctly declared or is disclosed by the assesseee ven if the condition of 15 per cent difference between the fair market value of the capital asset as date of transfer and the full value of the consideration declared by the assessee is satisfied.

27.13 Thus, the Revenue in order to invoke the said sub-section must show not only the fair market value of the said asset as on the date of transfer exceeds the full market value declared by the assessee by not less than 15 per cent of the value so declared but also that the consideration has been understated and the assessee has actually received more than what is required by him. It is only that the two conditions are satisfied when it could be considered that the Revenue has discharged its burden. Their Lordships while examining as to the purpose why the Parliament has introduced the first condition as a prerequisite for the applicability of sub-s. (2) at p. 615observed :

“It is a well-known fact borne out by practical experience that the determination of fair market value of a capital asset is generally a matter of estimate based to some extent on guesswork and despite the utmost bona fides, the estimate of the fair market value is bound to vary from individual to individual. It is obvious that if the restrictive condition of a difference of 15 percent or more between the fair market value of the capital asset as on the date of the transfer and the consideration declared in respect of the transfer were not provided in sub-s. (2) many marginal cases would, having regard to the possibility of difference of opinion in subjective assessment of the fair market value, fall within the mischief of that sub-section and the statutory measure enacted in that sub-section for determining the consideration actually received by the assessee would be applicable in all its rig our in such cases. This condition of 15 per cent or more difference is merely intended to be a safeguard against the undue hardship which would be occasioned to the assessee if the inflexible rule of thumb enacted in sub-s. (2) were applied in marginal cases and it has nothing to do with the question of burden of proof for, the burden of establishing that there is an understatement of the consideration in respect of the transfer always rests on the Revenue. The postulate underlying sub-s. (2) is that the difference between one honest valuation and another may range up to 15 per cent and that constitutes the class of marginal cases which are. taken out of the purview of sub-s. (2) in order to avoid hardship to the assessee.”

27.14 Accordingly, on account of these facts, their Lordships held that sub-s. (2) could not be invoked unless there is understatement of consideration in respect of transfer and the burden of showing that there is such understatement is on the Revenue. Their Lordships were guided by the fact that in a circumstance where the fair market value is arrived at by a method of estimate and guess work, the rigors of provisions of law in marginal cases should be safeguarded. Their Lordships further at p. 617 were of the view that sub-s. (2) of s. 52 would also be violative of the fundamental rights of the assessee under Art. 19(l)(f) which fundamental right was in existence at that point of time when sub-s. (2) came to be enacted. Their Lordships at p. 618 were careful to observe ::

“We find that in the present case, it was not the contention of the Revenue that the property was sold by the assessee to his daughter-in-law and five of his children for a consideration which was more than the sum of Rs. 16, 500 shown to be the consideration for the property in the instrument of transfer and there was an understatement or concealment of the consideration in respect of the transfer. It was common ground between the parties and that was finding of fact reached by the IT authorities that the transfer of the property by the assessee was a perfectly honest and bona fide transaction where the full value of the consideration received by the assessee was correctly disclosed at the figure of Rs. 16, 500. Therefore, on the construction placed by us, sub-s. (2) had no application to the present case and the ITO could have no reason to believe that any part of the income of the assessee had escaped assessment so as to justify the issue of a notice under s. 148. The order of reassessment made by the ITO pursuant to the notice issued under s. 148 was accordingly without jurisdiction and the majority judges of the Full Bench were in error in refusing to quash it.”

27.15 Thus, on these peculiar facts, considering 1966-67assessment year, their lordships held that the said section could not be invoked unless there is an understatement of consideration in respect of transfer the burden was caused upon the Revenue. The peculiar circumstances where the fair market value was arrived at by a method of estimate and guess work, their Lordships were concerned that the marginal cases should be safeguarded. They further held s.52(2) to be violative of fundamental rights. However, s. 52(2) is no longer on the statute. Sec. 55A of the IT Act 1961 was inserted by s.27 of the Taxation Laws (Amendment) Act, 1972 ) (45 of 1972) w.e.f. 1stJan., 1973 The decision of K.P. Varghese (supra) has considered the peculiar facts and law as applicable in 1966-67 assessment year. Sec.55A empowers the AO to make a reference to a valuation officer for ascertaining the fair market value of any capital asset where he differs from a registered valuer in the matter of valuation and, in certain other cases. We may at this point digress to point out that before their lordships, there was no dispute over the issue that the sale and purchase price of the house was accepted by both the parties and it was an accepted fact. The basis for the AO to reopen the assessment was estimate and guesswork and thus devoid of any valuation report or any other acceptable method. Reverting to the legislative history of the said section i.e., 55 A which reads asunder: –

“55A. With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the AO may refer the valuation of capital asset to a Valuation Officer:

(a) in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the AO is of opinion that the value so claimed is less than its fair market value;

(b) in any other case, if the AO is of opinion:

(i) that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf; or

(ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do,

and where any such reference is made, the provisions of sub-ss.(2), (3), (4), (5) and (6) of s. 16A, els. (ha) and (i) of sub-s. (1)and sub-ss. (3A) and (4) of s. 23, sub-s. (5) of s. 24, s. 34AA, s.35 and s. 37 of the WT Act 1957(27 of 1957), shall with the necessary modifications, apply in relation to such reference as they apply in, relation to reference made by the AO under sub-s. (1) of s.16A of that Act. Explanation: In this section, “Valuation Officer” has the same meaning, as in cl. (r) of s. (2) of the WT Act 1957 (27 of 1957).”

27.16 As a conseo^ience to the introduction of the said section in the Statute, the Central Government appointed a large number of valuation officers under s. 12AoftheWTAct.

28. The issue before the Tribunal in the appeal proceedings hinged on the material fact that there was in existence a valuation report of an expert which was duly confronted to the assessee. His objections thereto had been considered and as a result the valuation report of the DVO stood modified. Even after that the assessee’s objections were considered, situational variance and size considerations were considered. In the course of the hearing, on behalf of the assessee, no defects in the valuation report were pointed out. Merely, reliance was placed on various decisions. In the absence of-any such arguments or facts, the valuation report after taking into consideration the objections of the assessee cannot be ignored unless the assessee points out material defects or supports his case by a valuation report of an approved valuer. The section aims to provide expert assistance to the AO who may not have the requisite technical qualification to dislodge or discard the fair market value shown by the assessee particularly when it is backed by a report of an expert. The arbitrary guesswork and estimate of the AO has been sought to be frowned at and the knowledge of the expert in the line has been made available to him. Accordingly, the legislature in its wisdom has considered it necessary to arm the AO with the experience and knowledge of an expert and not resort to arbitrary guesswork and estimates. Their Lordships in K.P. Varghese (supra) in148 proceedings deplored the action of the tax authorities based on mere guesswork. Their Lordships were considering the position as it stood in 1966-67 assessment year whereas s. 55A was inserted by Taxation Laws (Amend.) Act, 1972 w.e.f. 1973. Thus, blindly relying upon a certain judgment without considering the facts, the contents and the question of law determined there, does not advance the case of either side. Each judgment lays down the principle in certain facts of its own.

29. Thus, after a careful appraisal of the orders and the judgments, for the detailed reasons given in the earlier part of this order, the MA filed by the assessee is dismissed as it is found to be without any merit. The Revenue by confronting the assessee with the estimated value determined by the DVO discharged its initial onus. The objections of the assessee have been noted not only by the DVO but even by the tax authorities. Thereafter, it is for the assessee to show that the valuation as arrived at by the DVO is not correct-since whatever objections of the assessee have already been given consideration, we would like to observe that the assessee in the course of the hearing in the appeal had not led any evidence and had failed miserably to discharge the onus cast upon it. It is trite law to; state that a person who alleges a particular fact has to prove the same by cogent positive evidence. Once the evidence is led and the individual against whom it is alleged is confronted with that evidence, the law presumes that the individual alleging a fact has discharged the onus and thereafter, it is for the other individual against whom the evidence is produced to rebut the same and demonstrate that the evidence so led is not a good and sufficient evidence. Here, the understatement has been supported by the Revenue by a valuation report and the fact that the apparent is not real is for the assessee to demonstrate and the demonstration presupposes not relying upon various decisions or orders but demonstrate by way of facts or by way of a report of an expert.

30. Accordingly, the miscellaneous application filed by the assessee is dismissed.