2019 (2) TMI 1875 - AT - Income Tax

Unexplained investment in construction of a property by the assessee u/s. 69A/56(2) (vii) (b) - difference between the actual value and the value for which the assessee purchased the property - As per the provisions of the 69A read with Sec.50C and 56(2)(vii)(b)(ii) the following income shall be charged to tax under the head Income from other sources - HELD THAT - Pune Bench of the Tribunal rendered in the case of Smt. Ratnakanta B. Agarwal 2017 (9) TMI 176 - ITAT PUNE is applicable to the facts of the present case. Without going into the objections of the assessee with regard to the report of the DVO find that the difference in valuation as adopted by the DVO and the price paid for the property by the assessee is less than 5%. In the given circumstances as held by the coordinate Bench of Pune Bench in the case of Smt. Ratnakanta B. Agarwal Supra valuation is always a matter of estimation and the difference of less than 5% is only a difference which should be construed as a difference in estimation and the value adopted by the assessee should be accepted in such circumstances. Respectfully direct that the addition sustained by the CIT(Appeals) should be deleted. - Decided in favour of assessee.

Summary

Issues:
1. Addition of unexplained investment in construction of a property under sections 69A/56(2)(vii)(b) of the Income-Tax Act, 1961.

Analysis:
The appeal before the Appellate Tribunal ITAT Bangalore was against the order of the CITA-2, Bengaluru regarding the assessment year 2015-16. The sole issue for consideration was whether the revenue authorities were justified in adding ?6,25,560 on account of unexplained investment in the construction of a property by the assessee under sections 69A/56(2)(vii)(b) of the Income-Tax Act, 1961.

The assessee, an individual and a Chartered Accountant by profession, acquired a property for ?1,45,00,000. The stamp duty value adopted for the property was ?2,05,52,400, resulting in a difference of ?60,52,400. The Assessing Officer (AO) referred the matter to the Departmental Valuation Officer (DVO) who estimated the fair market value of the property at ?1,51,75,560. Despite the assessee's contentions regarding the differences in valuation, the AO made an addition of ?6,25,560 to the total income of the assessee.

Upon appeal, the CIT(Appeals) upheld the AO's decision. However, the assessee cited a decision by the ITAT Pune Bench in a similar case where it was held that if the variance in valuation is less than 5%, no addition should be made. The Tribunal, considering the Pune Bench's decision, concluded that the difference in valuation between the DVO's estimate and the price paid by the assessee was less than 5%. Therefore, the addition made by the CIT(Appeals) was directed to be deleted, and the appeal by the assessee was allowed.

In conclusion, the Tribunal relied on the decision of the Pune Bench and emphasized that valuation is an estimation-based matter where some differences are expected. As the variance was less than 5%, the value adopted by the assessee was accepted, leading to the deletion of the addition sustained by the CIT(Appeals). The appeal was allowed in favor of the assessee.