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2022 (6) TMI 1151 - AT - Income TaxIncome from other sources u/s 56(2)(vii) - difference in price as finalized by Ld. DVO and actual purchase-price - HELD THAT - As the assessee has submitted comparable instances to Ld. DVO as well as Ld. CIT(A) with supportive evidences to demonstrate that the assessee has purchased land at much higher price as compared the prices paid in the those comparable instances. But no finding has been given by the lower authorities on this submission. Secondly we observe that the land purchased by the assessee is situated in interior area is rocky and is not suitable for activities. These undisputed features which are well-accepted by Ld. TPO have a substantial bearing on the valuation of land and must be taken into account. Thirdly we observe that the difference in valuation is about 13.14% which is a meagre difference which against is due to estimation involved in the valuation. We observe that these factual aspects are similar to the facts involved in the decision of Hon ble ITAT Mumbai Bench in Suresh C Mehta ( 2014 (1) TMI 192 - ITAT MUMBAI ) relied upon by Ld. AR. On perusal of the decision we observe that in the similar set of facts the Hon ble ITAT has set aside the order passed by the learned Commissioner (Appeals) and remitted the matter back to him to decide afresh after considering the objections of the assessee to V.O s estimate as well as claim for benefit when the difference is less than 15%. At this stage we would like to make it clear that this decision pertains to Section 50C of the act but that does not make any difference because section 56(2)(vii) is pari materia section 50C. Respectfully following the decision of Hon ble Co-ordinate Bench we also think it fit to remit the present matter back to Ld. CIT(A) for a fresh adjudication after considering the objections of assessee. Appeal of assessee is allowed for statistical purposes.
Issues Involved:
1. Addition of Rs. 15,71,040/- under Section 56(2)(vii) of the Income-tax Act, 1961 on account of the difference between the fair market value determined by the Departmental Valuation Officer (DVO) and the actual purchase price of the land. Detailed Analysis: Background: The assessee filed an original return of income on 30.10.2017, declaring a total income of Rs. 11,74,260/-, and a revised return on 05.01.2018, declaring an income of Rs. 11,76,260/-. The case was selected for scrutiny, and the assessment was completed under Section 143(3) on 23.12.2019, determining the total income at Rs. 29,66,132/- after making various additions. The assessee appealed against the addition of Rs. 15,71,040/- under Section 56(2)(vii) related to the land purchase, which was upheld by the Commissioner of Income-Tax (Appeals) [CIT(A)]. The assessee then filed this appeal before the ITAT. Proceedings Before Ld. AO: The assessee purchased land for Rs. 1,19,52,500/-, which the Stamp Authority valued at Rs. 4,11,60,000/- for registration purposes. Dissatisfied with the Stamp Authority's valuation, the assessee requested a reference to the Departmental Valuation Officer (DVO). The DVO estimated the fair market value at Rs. 1,35,23,540/-. The Assessing Officer (AO) issued a show-cause notice proposing to tax the difference of Rs. 15,71,040/- as "Income from Other Sources" under Section 56(2)(vii). The assessee argued that the land was in a remote, rocky area with limited potential, and the difference in valuation was minor (13.14%). The AO, however, was not convinced and made the addition. Proceedings Before Ld. CIT(A): The assessee reiterated the arguments made before the AO. The CIT(A) noted that the AO had referred the matter to the DVO at the assessee's request and that the DVO's valuation exceeded the permissible range of 5% for the assessment year 2017-18. Therefore, the CIT(A) upheld the AO's addition. Submissions of Ld. AR: The Authorized Representative (AR) for the assessee argued that the purchase price was higher than comparable transactions in the area. The AR highlighted deficiencies in the land's quality, as noted by the DVO, and stressed that the valuation difference was only 13.14%. The AR cited the Supreme Court's decision in C.B. Gautam vs. Union of India, which accepted a valuation difference of up to 15% as acceptable. The AR also referred to the ITAT Mumbai Bench's decision in Suresh C Mehta vs. ITO, which supported ignoring minor valuation differences. Submissions of Ld. DR: The Departmental Representative (DR) supported the lower authorities' orders, arguing that the addition was justified under Section 56(2)(vii) and that the DVO's valuation was binding on the assessee. Our Analysis: The ITAT observed that the assessee provided comparable transaction instances and supportive evidence, which the lower authorities did not adequately consider. The land's interior, rocky nature, and lack of potential for residential development were significant factors affecting its valuation. The ITAT noted that the valuation difference was minor (13.14%) and similar to the facts in the Suresh C Mehta case, where a difference of less than 15% was deemed acceptable. The ITAT emphasized that Section 56(2)(vii) is akin to Section 50C, allowing for similar considerations. Disposition: The ITAT set aside the CIT(A)'s order and remitted the matter back for fresh adjudication, considering the assessee's objections and the minor valuation difference. The appeal was allowed for statistical purposes. Order Pronounced: The order was pronounced on 20.06.2022 as per Rule 34 of the ITAT Rules, 1963.
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