2020 (9) TMI 564 - AT - Income Tax

Rectification of mistake u/s 254 - FMV determination - AO has determined the fair market value on the basis of incorrect total area of two office bearing No. 202 203 of the building which were sold by the assessee - HELD THAT - We find that the AO/DVO has considered the total area of these two offices at 283.80 sq. mt. as against area of 247.49 sq. mt. sold by the assessee as per sale deed. The AO/DVO added the common area of 36.31 sq. mt. in the area of these two office. We note that what is sold by the assessee is the offices no. 202 203 and the area as per sale deed shall be considered as the actual area sold by the assessee. The common area in the building which is clearly described in the sale deed and available for the purpose of ingress, aggress as well as common use cannot be added to the area of these offices but certainly these facilities available to the offices sold by the assessee would increase fair market prices of the offices in question. Accordingly, AO/DVO is directed to determine the fair market value by considering these common are as a positives factor while determining the fair market value of the offices but the common area cannot be considered as the area sold by the assessee when only offices are sold. Hence, the impugned order is modified accordingly.

Summary

Issues:
Rectification of mistake in determining fair market value of property sold by assessee.

Analysis:
The Appellate Tribunal ITAT Jaipur addressed a miscellaneous application seeking rectification of mistake in the impugned order dated 01.07.2019. The issue revolved around determining the fair market value of a property sold by the assessee. The Tribunal had set aside the issue for fresh determination by the AO/DVO due to discrepancies in valuation. The dispute primarily concerned the area of two offices wrongly considered by the AO/DVO. The Tribunal observed that the DVO had incorrectly assessed the offices as being on the third floor instead of the actual second floor as per the sale deed. As a result, the matter was remanded to the AO/DVO for reevaluation based on accurate facts. The assessee contended that the Tribunal had not addressed the actual area sold, which was crucial in determining the fair market value. The AO/DVO had erroneously included common area in the total area of the offices, leading to an inflated valuation. The Tribunal clarified that only the actual area sold, as per the sale deed, should be considered for valuation purposes. While acknowledging that common areas could enhance the property's value, they should not be counted as part of the sold area. Therefore, the Tribunal directed the AO/DVO to determine the fair market value by factoring in the common area as a positive attribute but excluding it from the area sold by the assessee. Consequently, the impugned order was modified, and the appeal of the assessee was partly allowed.

This detailed analysis highlights the meticulous consideration by the Tribunal in rectifying the valuation discrepancies and ensuring a fair determination of the property's market value. The judgment emphasizes the importance of accurately assessing the area sold and distinguishing it from common areas to arrive at a just valuation.