A bare perusal of clause (a) of section 55A indicates that theAssessing Officer is empowered to make a reference to a Valuation Officer forvaluing the capital asset if he is of the opinion that the value claimed by theassessee is otherwise in accordance with the estimate made by the registeredvaluer, but such value is less than its fair market value. Obviously, thisprovision is not applicable to the facts of the instant case inasmuch as theestimate of value made by the registered valuer was, in the opinion of theAssessing Officer, on a lower side. If he had been satisfied with the valueestimated by the registered valuer, there was no point in making reference tothe DVO. The only purpose of the AO in making reference to the DVO was to lowerthe fair market value of the property as on 1-4-1981 so that the cost ofacquisition may be reduced and, resultantly, the amount of capital gain may beenhanced.
Now turning to clause (b) of section55A, it is noted that the Assessing Officer is empowered to make a reference tothe Valuation Officer where he is of the opinion that the fair market value ofthe capital asset exceeds the value of asset as claimed by the assessee by morethan such percentage of the value of the asset as so claimed or by more thansuch amount as may be prescribed. Rule 111AA provides percentage of value ofasset, at 15 per cent and the amount, at Rs. 25,000. Sub-clause (i) of clause(b) is not applicable in this case, as the Assessing Officer was inclined toreduce the estimate of fair market value as declared by the assessee and not toenhance it, which is otherwise the prescription of this provision. Thus, theapplicability of sub-clause (i) of clause (b) of section 55B is also ruled out.
Then comes sub-clause (ii) of clause(b) of section 55A, which is in the nature of residual provision for makingreference to a valuation officer where 'in the opinion of the AssessingOfficer', it is necessary to do so, having regard to the nature of the assetand the relevant circumstances. The mandate of this provision, for making areference to the DVO, is activated where the Assessing Officer is of theopinion that 'it is necessary so to do'. Before making a reference undersection 55A(b)(ii), it is necessary for the Assessing Officer to record the relevantcircumstances on the basis of which he forms the opinion that reference to theValuation Officer is called for. From the assessment order, it is manifest thatthere is no reference to any material on record prompting the Assessing Officerto from an opinion that reference to the DVO for ascertaining the fair marketvalue of asset was necessary having regard to the nature of the asset and otherrelevant circumstances. It is manifest from the Rajasthan High Court decisionin CIT v. HotelJoshi [2000] 242 ITR 478/108Taxman 199, and from the decision of Gujarat High Court in Hiaben Jayantilal Shah v. ITO [2009] 310 ITR 31/181 Taxman 191(Guj.), that unless the Assessing Officer has formed an opinion on the basis ofmaterial on record that reference to the DVO was necessary for ascertainingfair market value of the capital asset, such a reference under section55A(b)(ii) is invalid. In the instant case as, admittedly, the fair marketvalue of the property declared by the assessee as on 1-4-1981 is duly supportedby the report of the registered valuer and further there is no reference to anyfact in the assessment order as to the necessity of making a reference to theDVO, the Commissioner (Appeals) was not justified in adopting fair market valueas on 1-4-1981 of Rs. 6,85,800 as worked out by the DVO. The impugned order isset aside to this extent and it is directed that the fair market value of thefull property as on 1-4-1981 as shown by the assessee at Rs. 24.00 lacs, whichis backed by the report of the registered valuer should be adopted.
The other controversy is as towhether exemption under section 54 is available in respect of one house or morethan one house. In the instant case, the assessee was allotted two flats on twodifferent stories which he claimed as eligible for exemption under section 54.Admittedly there is no unity of construction between such flats. The SpecialBench of the Tribunal in the case of ITO v. SushilaM. Jhaveri[2007] 107 ITD 321/14 SOT 394 (Mum.) (SB), has categorically heldthat the exemption under section 54 is available only in respect of one houseand not more than one. It is not the case of the assessee that both the flatson different floors were used as one residential house. Naturally it could nothave been so for the reason that these two flats situated on different storiescannot constitute one house. Thus, the Commissioner (Appeals) was justified inrestricting the benefit of exemption under section 54 only in respect of oneflat.
In the result, the appeal is partly allowed.
RefCase:
ITAT MUMBAI BENCH 'B'
Smt. Myrtle D'Souza
v.
Income-tax Officer, Ward19(3)(4), Mumbai
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