2009 (9) TMI 1006 - AT - Income Tax

Summary

Issues involved: Appeal against CIT(A) order for AY 2005-06 regarding deletion of additions u/s 55A based on fair market value discrepancy.

Summary:
1. The Revenue appealed against the CIT(A) order deleting additions of Rs. 27,51,870 made by the AO due to a variance in fair market value and sale consideration of a flat.

2. During scrutiny assessment, it was found that the assessee sold a flat for Rs. 27,00,000, while admitting the sale for Rs. 9,00,000. The DVO estimated the fair market value at Rs. 36,77,000. The AO completed the assessment at a total income of Rs. 44,22,520, adding Rs. 27,51,870 as income from capital gain due to the unexplained difference in sale consideration.

3. The CIT(A) deleted the addition citing precedents like the ITAT Delhi Bench in the case of Tej Pratap Singh and the Hon'ble Jurisdictional High Court in the case of Smt. Nilofer I. Singh.

4. The Hon'ble Delhi High Court clarified that a reference to a Valuation Officer u/s 55A is to ascertain the fair market value of a capital asset. Capital gain is computed by deducting from the "full value" of consideration, not the market value. The ITAT Delhi Bench also emphasized that capital gain tax cannot be based on fair market value determined by a valuation report.

5. Consequently, the Tribunal found no fault in the CIT(A) order and dismissed the Revenue's appeal.