2014 (10) TMI 619 - HC - Income Tax

Addition u/s 69B Income from resort - Investment in land and building Reference made to DVO for determination of value of investment Held that - The addition was made on the basis of the report of the DVO wherein the DVO had valued the property on the basis of the rates adopted for the purpose of stamp duty by treating the property to be for commercial usage whereas the land had not been converted from agricultural land into commercial land by the Government under change of land use - the Deputy Commissioner-cum-Collector vide order dated 24.2.2011, it has accepted the value of the property as depicted by the assessee in the sale deed to be full value of consideration - the Tribunal had rightly not relied upon the report of the DVO the order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
1. Appeal by revenue under Section 260A of the Income Tax Act, 1961 against Tribunal's order.
2. Addition of Rs. 1,87,71,730 under Section 69B of the Act.
3. Valuation discrepancy of property for stamp duty purposes.
4. Application of Section 50C of the Act.
5. Correctness of the full value of consideration in the sale deed.
6. Tribunal's reliance on the report of the Departmental Valuation Officer (DVO).

Analysis:
1. The appeal was filed by the revenue under Section 260A of the Income Tax Act against the Tribunal's order dated 26.11.2009. The substantial questions of law raised were whether the Tribunal was correct in deleting the addition of Rs. 1,87,71,730 under Section 69B of the Act and in relying on a previous court decision. The assessee had initially declared a loss of Rs. 24,760 but the Assessing Officer made an addition based on discrepancies in the valuation of the property.

2. The Assessing Officer added Rs. 1,87,71,730 under Section 69B of the Act after a reference to the Valuation Officer who determined the value of the investment to be Rs. 2,27,71,730, significantly higher than the declared amount of Rs. 44 lacs. The Commissioner of Income Tax (Appeals) later deleted this addition, leading to the revenue's appeal before the Tribunal.

3. The revenue contended that the property valuation should have been based on the report of the Departmental Valuation Officer (DVO) as per Section 50C of the Act. However, the Deputy Commissioner accepted the value as per the sale deed, stating that the land was not commercial and had the correct stamp duty affixed.

4. The dispute also involved the application of Section 50C of the Act, which deals with the computation of capital gains in case of transfer of land or building. The revenue argued for the application of this section based on the DVO's report, while the assessee maintained that the full value of consideration in the sale deed was accurate.

5. The correctness of the full value of consideration in the sale deed was a crucial point of contention. The Deputy Commissioner's order acknowledged that the land was not commercial and accepted the value as per the sale deed, emphasizing that no penalty or additional stamp duty was required.

6. The Tribunal's decision not to rely on the DVO's report was upheld, as it was found that the property valuation was based on commercial rates for stamp duty purposes, despite the land not being converted into commercial land. The Tribunal's judgment was supported by the Deputy Commissioner's acceptance of the value in the sale deed as the proper consideration received by the assessee. Consequently, the appeal by the revenue was dismissed, and the substantial questions of law were answered in favor of the assessee.