2015 (12) TMI 1803 - AT - Income Tax

Disallowance u/s. 14A r.w. Rule 8D - exempt income earned by the assessee is by way of single dividend warrant - HELD THAT - There is no dispute that the only exempt income earned by the assessee is by way of single dividend warrant. As gone through the computation of estimation of expenses made by the assessee. We find that computation at 917/- is quite reasonable. AO has simply rubbished this computation made by the assessee without assigning any specific reason or fallacy in the computation. Addition made by the AO is unwarranted we accordingly direct the AO to delete the addition - Decided in favour of assessee Short term capital gain computation - Additions made u/s. 50C - DVOs report acceptance at its face value - property is an undeveloped property connected with a kaccha road with a slaughter house in the vicinity - HELD THAT - Assessee s Valuation Officer has reported the rate for Plot No. 14/1 at 272/-per Sq. mtr and for Plot No. 177 at 261/- per Sq. mtr. The same has been taken by the DVO at 623/- and 722/- per Sq. mtr respectively. A perusal of both the Valuation Report shows that none of the report is based on comparable cases being sale deeds in or near the impugned properties. Thus there is no sale incidence to support the value taken by the respective valuation authorities. No doubt the DVOs report is based on the circle rate but then the stamp duty is also assessed on the circle rate. So the DVOs report cannot be accepted at its face value. As mentioned elsewhere the valuation report furnished by the assessee is also devoid of any sample sale in or around impugned property therefore the value taken by the Valuation Officer also cannot be accepted. To put an end to the litigation the value for plot No. 14/1 taken by the DVO at 623/- is to be reduced by 40% the value now should be adopted is 374/-. Similarly the value adopted for Plot No. 177 at 722/- is to be reduced by 35% the value now should be adopted is 470/-. AO is accordingly directed to consider these two values and recompute the Short term capital gains as per the provisions of the law.

Summary

Issues:
1. Disallowance u/s. 14A of the Act r.w. Rule 8D
2. Additions made u/s. 50C of the Act

Issue 1: Disallowance u/s. 14A of the Act r.w. Rule 8D:
The appeals were against orders of the Ld. CIT(A)-1 regarding disallowance u/s. 14A of the Act r.w. Rule 8D. The Assessing Officer noticed the assessee had dividend income claimed exempt. The assessee estimated disallowance at &8377; 917/-, but the AO computed it at &8377; 35,08,699/-. The Tribunal found the assessee's computation reasonable, and the AO's addition unwarranted. The Tribunal directed the AO to delete the addition in both appeals.

Issue 2: Additions made u/s. 50C of the Act:
The AO found discrepancies in the sale consideration of plots of land and referred the matter to the Valuation Officer. The AO computed capital gains based on the DVO's valuation, leading to additions in the returned income. The Ld. CIT(A) upheld the AO's decision. The Tribunal noted discrepancies in valuation reports and decided to reduce the DVO's values by 40% and 35% for the two plots, respectively. The AO was directed to recompute the short-term capital gains accordingly.

In conclusion, the Tribunal partly allowed the appeal related to disallowance u/s. 14A and fully allowed the appeal regarding additions made u/s. 50C.