2011 (8) TMI 421 - AT - Income Tax

Not accepting the valuation made by the DVO in respect of sale of property and also in respect of investments made in other property and in allowing relief. - Assessment framed u/s 143(3) is against the provisions of law contained u/s 153. - Addition on assumption that the property continued to be on rent from June and July, 2003 without enquiry or bringing any material on record. - Estimation of consideration u/s 142A Regarding Valuation made by DVO and Investment. - Held that - Provisions of section 142A are not applicable for the purpose of determination of full value of consideration. Therefore, in our considered opinion, in the absence of any contrary evidence, full value of consideration cannot be estimated under section 142A. The AO has to adopt the value for the purpose of stamp valuation as per circle rates as on the date of transfer. - there was no evidence against the assessee, which has been brought on record to show that the value of the property purchased had to be rejected. and DVO was justified to value the investments in properties by adopting rent capitalization method. decided in favour of Assessee. but allowed for statistical purpose. Assessement u/s 143(3) against provision of Section 153. - Held that - Assessee could not substantiate as to how the assessment framed was contrary u/s 153. decided against Assessee. Addition regarding rent. - held that - it is not considered assessee s contention in respect of vacancy of the house property. set aside to AO with direction to give opportunity of being heard to Assessee.

Summary

Issues Involved:
1. Valuation of property for capital gains computation.
2. Investment in property and determination of fair market value.
3. Validity of assessment under section 143(3) vis-`a-vis section 153.
4. Addition on account of rent.

Detailed Analysis:

1. Valuation of Property for Capital Gains Computation:
The Revenue challenged the deletion of an addition of Rs. 1,26,26,422/- based on the DVO's report concerning the sale of a property. The assessee sold a flat in Lajpat Nagar for Rs. 12 lakhs, which was also the purchase price in 1996, resulting in no capital gain. The Assessing Officer (AO) referred the matter to the DVO after an Inspector's report suggested a much higher market value. The DVO valued the property at Rs. 57,58,400/-, leading the AO to compute capital gains of Rs. 39,36,760/-. The assessee objected, arguing that the DVO's valuation did not consider the property's actual condition and location in a rehabilitation colony. The CIT (Appeals) found the DVO's report advisory and not binding, estimating the property's value at Rs. 14,40,000/- based on the assessee's objections. The Tribunal directed the AO to verify if the sale price aligned with the stamp valuation and to adopt the circle rate value if higher than Rs. 14,40,000/-.

2. Investment in Property and Determination of Fair Market Value:
The assessee invested Rs. 24 lakhs in three shops at NDSE-II, New Delhi. The DVO valued these properties at Rs. 1,51,26,800/-, leading the AO to determine an undisclosed investment of Rs. 89,29,662/-. The CIT (Appeals) deleted the addition, noting the lack of evidence of unaccounted investment beyond the DVO's report. The Tribunal upheld the reference to the DVO under section 142A, emphasizing the high rental income suggesting a higher market value. The Tribunal directed the AO to re-compute the property's value using the rent capitalization method per Rule 3 of Schedule III of the Wealth-tax Act, considering any deductions and the property's leasehold status.

3. Validity of Assessment under Section 143(3) vis-`a-vis Section 153:
The assessee contended that the assessment under section 143(3) was contrary to section 153. However, this issue was not raised before the CIT (Appeals), and the assessee failed to substantiate the claim. Consequently, this ground was rejected.

4. Addition on Account of Rent:
The AO added Rs. 36,000/- as rent for the property at Lajpat Nagar, assuming it continued to be rented in June and July 2003. The assessee argued the property was vacant during this period. The CIT (Appeals) upheld the addition, citing deemed rent provisions under section 23(4)(b). The Tribunal noted that the AO did not consider the vacancy claim and directed a re-examination under section 23(1)(c) to determine the actual rent receivable.

Conclusion:
The Tribunal partially allowed the appeals, directing re-examination of property valuation for capital gains and rent addition, while upholding the reference to the DVO for investment valuation. The assessee's claim on the validity of the assessment was rejected due to lack of substantiation.