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2010 (2) TMI 890 - AT - Income TaxValuation of property - fair market value - assessee company has shown Rs.11,84,926/- as the purchase/investment in the said property, whereas the value of the property has been determined by the DVO at Rs.11,84,926/- - as per AO the difference represents the unexplained investment, in the shape of unexplained/unaccounted expenditure - Held that - A perusal of the assessment order shows that the A.O. has not considered the objection filed by the assessee. It is further noticed that the CIT(A) has considered the objection and has found weight in the objection and had consequently made an ad hoc reduction of Rs.10 lacs from the addition made by the A.O. which was on the basis of the difference between the value as declared by the assessee and the value as estimated by the DVO. Once the CIT(A) has accepted that there is a difference between the comparative case taken by the DVO with that of the assessee obviously there cannot be any correction that can be made by the CIT(A) to such valuation. In these circumstances, the ad hoc reduction as given by the CIT(A) itself is wrong as there is no basis or method for the reduction. In fact, the defect having been accepted the valuation report itself was no more a reliable document for the purpose of making any addition and the addition itself, which has been made on the basis of such report is liable to be deleted in toto and we do so - appeal of the assessee is allowed.
Issues Involved:
1. Validity of invoking Section 142A for property valuation. 2. Justification of the addition made by the Assessing Officer (A.O.) based on the District Valuation Officer (DVO) report. 3. Ad-hoc reduction of the addition by the Commissioner of Income Tax (Appeals) [CIT(A)]. Issue-wise Detailed Analysis: 1. Validity of Invoking Section 142A for Property Valuation: The assessee, a company, purchased a property for Rs. 11,84,926/- and showed it as stock in trade. The A.O. invoked Section 142A and referred the matter to the DVO, who valued the property at Rs. 60,53,700/-. The A.O. treated the difference as unexplained money. The CIT(A) reduced the addition by Rs. 10 lacs. The assessee contested that there was no material evidence or information to justify invoking Section 142A. The Tribunal observed that Section 142A is applicable only when there is evidence of investment not recorded in the books. The A.O. had no such evidence and relied on speculative information from newspapers. The Tribunal cited the case of Rajeshwar Nath Gupta, emphasizing that without concrete evidence, a reference to the DVO under Section 142A is unjustified. Consequently, the Tribunal found the invocation of Section 142A without justification. 2. Justification of the Addition Made by the A.O. Based on the DVO Report: The A.O. made an addition based on the DVO's valuation, treating the difference as unexplained investment. The assessee argued that the DVO's valuation had defects and the comparative cases used were not appropriate. The Tribunal noted that the A.O. did not consider the objections raised by the assessee regarding the DVO's report. The CIT(A) acknowledged the defects and made an ad-hoc reduction. The Tribunal highlighted that for Section 69B to apply, the A.O. must find that the investment exceeds the amount recorded in the books. The A.O. failed to establish this, relying instead on speculative information. The Tribunal concluded that the addition based on the DVO's report was unsustainable without concrete evidence of excess expenditure. 3. Ad-hoc Reduction of the Addition by the CIT(A): The CIT(A) reduced the addition by Rs. 10 lacs, considering the defects in the DVO's valuation. However, the Tribunal found that the CIT(A)'s reduction was arbitrary without a clear basis. The Tribunal noted discrepancies in the comparative cases used by the DVO and accepted by the CIT(A). Given the acknowledged defects, the Tribunal held that the DVO's report was unreliable for making any addition. Therefore, the Tribunal deleted the addition entirely, allowing the assessee's appeal and dismissing the revenue's appeal. Conclusion: The Tribunal concluded that the invocation of Section 142A was unjustified due to the lack of concrete evidence. The addition based on the DVO's valuation was unsustainable, and the ad-hoc reduction by the CIT(A) was arbitrary. Consequently, the Tribunal allowed the assessee's appeal and dismissed the revenue's appeal, deleting the entire addition.
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