2011 (2) TMI 685 - AT - Income Tax

Addition - Value of property - Assessing Officer held that Rs.32.44.810/- being the difference between the sale value declared and the valuation done by the valuation cell was to be added to the income of the assessee - Assessing Officer has not pointed out any defect in the books of account of the assessee, nor any incriminating material has been found by the Revenue - Thus,there was no occasion to refer the property for valuation - Thus the assessee is engaged in the business of construction and sale and purchase of properties, the value has to be examined from the point of view of books of accounts and documents found and produced - Hence,the Assessing Officer has erred in referring to valuation cell items in which assessee deals in - Accordingly, set aside the orders of the authorities below and delete the addition.

Summary

Issues: Valuation of property for tax assessment in the case of a construction and real estate company.

In this case, the appellant, a construction and real estate company, appealed against the orders of the Commissioner of Income Tax (Appeals) regarding the valuation of a property sold during the assessment year 2006-07. The Assessing Officer had added the difference between the declared sale value and the valuation done by the Valuation Cell to the appellant's income. The Commissioner of Income Tax (Appeals) upheld this decision. The appellant contended that as they were engaged in the business of construction and property dealings, the valuation should have been based on their books of accounts and documents produced, without the need for external valuation. The Appellate Tribunal noted that the Assessing Officer had not found any defects in the appellant's books of account or any incriminating material. The Tribunal cited legal precedents, including the case of K.P. Verghese vs. Income Tax Officer, to emphasize that the burden of proof lies with the Revenue in cases of alleged understatement or concealment. They also referred to the case of C.I.T. vs. P.V. Kalyanasundaram, where allegations based on non-convincing evidence were deleted. The Tribunal concluded that there was no justification for the addition made by the Assessing Officer and set aside the lower authorities' orders, deleting the addition and allowing the appellant's appeal.

This judgment highlights the importance of considering the nature of the appellant's business when valuing properties for tax assessment purposes. It underscores the requirement for the Revenue to prove allegations of understatement or concealment and the need for valid and convincing evidence to support such claims. The Tribunal's reliance on legal precedents emphasizes the significance of established case law in determining tax liabilities. The decision ultimately favored the appellant, emphasizing the need for proper justification and evidence when making additions to a taxpayer's income based on property valuations.