2017 (3) TMI 389 - HC - Income Tax

Additions made on the basis of the reevaluation of the assesses s property - assessment u/s 153A - AO referred the issue to the District Valuation Officer (DVO) - whether AO was justified in re-valuing the property based upon the replies to the queries by the assessee s banker? - Held that - The sale and the consideration received were reported by the assessee in the return filed. The transaction took place on 29.06.2007. The dispute vis-a-vis the transaction value is a matter as yet undertermined. The orders of the adjudicating authorities most importantly that of the AO, nowhere discloses what was the fresh document or material seized which made him suspect the valuation of the property which ultimately led him to send queries to the assessee s banker and also refer the matter to the DVO. No infirmity with the ITAT order which essentially held that the valuation by the banker, who provided credit could well be different from the valuation report for the transaction given that the assessee had purchased the property long ago. In other words, the absence of any material seized during the search proceeding could not have justified afresh examination of the valuation issue. No substantial question of law arises. - Decided against revenue.

Summary

Issues:
1. Validity of additions made on the basis of reevaluation of the assessee's property.
2. Justification of the AO's revaluation of property during search and seizure proceedings.
3. Interpretation of valuation reports and applicability of relevant sections of the Income Tax Act.
4. Assessment of the ITAT and CIT(A) orders regarding the property valuation dispute.

Issue 1:
The Revenue challenged the ITAT's decision affirming the CIT(A)'s finding that the additions made on the reevaluation of the assessee's property were erroneous. The AO had revalued the property based on the replies from the assessee's banker, concluding the market value at a higher amount than the DVO's valuation. However, the CIT(A) disagreed with the AO's approach, citing case law and contemporaneous transactions to support the assessee's declared value. The ITAT upheld the CIT(A)'s decision, leading to the dismissal of the Revenue's appeal by the High Court.

Issue 2:
The AO's revaluation of the property during search and seizure proceedings was questioned by the appellant. The Court noted that the AO's suspicion of the property valuation lacked substantial evidence from the seized material. The ITAT's observation that the banker's valuation could differ from the official valuation due to the property's long ownership by the assessee was considered valid. The absence of seized material did not justify a fresh examination of the valuation issue, leading the Court to dismiss the appeal.

Issue 3:
The Court analyzed the interpretation of valuation reports and the application of relevant sections of the Income Tax Act. It was observed that the AO's valuation based on the banker's replies did not align with the CIT(A)'s findings supported by case law and contemporaneous transactions. The Court clarified the scope of valuation reports under different sections of the Act and emphasized the importance of following due procedures in valuation disputes.

Issue 4:
The High Court's decision to dismiss the appeal was based on the lack of substantial evidence supporting the AO's revaluation during search and seizure proceedings. The Court upheld the ITAT and CIT(A) orders, emphasizing the importance of considering all relevant factors in property valuation disputes. The judgment clarified that the discussion did not address the pending issues between the parties, leaving the contentions open for future consideration.