2014 (1) TMI 1399 - AT - Income Tax

Determination of value of property - Held that - The assessee has purchased the property at very low price - The reasons for doing so as given by the assessee are not acceptable - Assessing Officer did not enquire the actual market value, even though referred the matter to the Sub- Registrar for valuation of similar properties in and around the same place where Assessee purchased - The determination of value on the basis of DVO s report is also not correct as it is only estimation - The AO could have enquire from the seller and the outcome of his income tax proceedings as provisions of section 50C could have been invoked in seller s case - These aspects are not on record and since order of the CIT(A) is not correct both on facts and on law - The issue has been restored for fresh adjudication.

Summary

Issues:
Cross-appeals by Revenue and Assessee against the Order of the CIT(A), Guntur dated 17.08.2012 regarding the addition made under section 69B read with section 142A of the I.T. Act based on the valuation of property purchased by the Assessee for a lower amount than the prevailing market rate.

Analysis:

1. Valuation Discrepancy and Addition under Section 69B:
The case involved the Assessee, engaged in money lending, who purchased a property at a lower rate than the prevailing market value. The Assessing Officer (AO) made an addition under section 69B based on the valuation report from the Departmental Valuation Officer (DVO) estimating the property at a higher value. The Assessee contested the addition, arguing that the reference to the DVO was not sufficient to justify the addition without evidence of extra consideration being paid. The CIT(A) considered the submissions and noted that the case was selected for scrutiny based on Annual Information Reports (AIR) data. The CIT(A) acknowledged the discrepancy in values but limited the addition under section 69B to a lower amount, considering the lack of direct evidence for extra payments beyond what was recorded in the books.

2. Appeal and Cross-Objection:
The Department was aggrieved by the CIT(A) order, challenging the restricted increase in value confirmed by the CIT(A). On the other hand, the Assessee cross-objected to the partial confirmation of the amount under section 69B. The tribunal examined the documents and found that the Assessee had accepted the valuation for registration without explanation for the difference in consideration amounts. The tribunal disagreed with the CIT(A) order, stating that there was no basis for reducing the amount determined. Consequently, the tribunal set aside the CIT(A) order and restored the issue to the AO for re-examination, emphasizing the need for further investigation into the actual market value and seller's details.

3. Final Decision:
The tribunal allowed both the Revenue's appeal and the Assessee's cross-objection for statistical purposes, directing a fresh examination by the AO. The tribunal highlighted the importance of verifying the actual market value, seller's details, and potential application of section 50C in the seller's case. The Assessee was to be given adequate opportunity to explain the purchase price compared to the market value. Ultimately, the tribunal emphasized the need for a comprehensive reassessment of the valuation issue by the AO.

In conclusion, the judgment addressed the valuation dispute, the application of section 69B, and the need for thorough investigation and re-examination by the Assessing Officer to determine the correct market value of the property purchased by the Assessee.