9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (8) TMI 633 - AT - Income TaxUnexplained income u/s 56(2)(vii)(b) - amount by which an immovable property purchased by the assessee fell short of its stamp duty value - Assessee argued that land purchased by the assessee had several defects effecting its market value which he pointed out were also noted by the DVO in his valuation report and therefore the market value of the land was comparatively lower - HELD THAT - As we agree with assessee that majority of the comparable instances picked up by the DVO for valuation of impugned land falling within the acceptable range of comparison with the purchase value of the assessee there was a good a justifiable case for treating the purchase value of land by the assessee as comparable to its fair market value. We find there is no basis given by the DVO for arriving at fair market value of Rs. 495/- from the comparable instances listed by him in his report. We see no reason for adopting the said value as the fair market value when the facts sufficiently demonstrate that majority of the comparable instances picked up by the DVO himself showed that the purchase price paid by the assessee was comparable to the instances picked up by him. For this reason alone we hold that the addition made to the income of the assessee u/s 56(2)(viib) was not justified and direct the same to be deleted. The contention of the AO is bound to accept the DVO s report we agree with the same. But at the same time Valuation of property is only an exercise in approximate estimation. And therefore there is always scope for correction of the estimates on account of discrepancies. Assessee is well within his rights to contest the valuation which if found justified the appellate authorities cannot shut their eyes to the same. The decision relied upon by the DR of the hon ble jurisdictional high court in the case of Gayatri Enterprise vs. ITO 2019 (9) TMI 777 - GUJARAT HIGH COURT has been rendered in a totally different context where the issue raised before the Hon ble Court was in the context of revisionary proceedings conducted by the Commissioner u/s 263 of the Act finding assessment order erroneous on account of the AO have not taxed difference between the purchase price of the asset and the fair market value of the property. It is in this context of facts that held that the AO was bound by the valuation done by the DVO and having not brought to tax the difference between the valuation done by the DVO and the price by which the property was purchased by the assessee the order passed by the AO was held to be in error. The said decision is of no assistance to the Revenue. The distinction pointed out by the DR on the case law referred to by the counsel for the assessee for getting the benefit of 10% difference in valuation and actual purchase price in the case of GB. Gautam 1992 (11) TMI 1 - SUPREME COURT we have noted that the assessee has relied on the decision in the case of Amrapali Cinema 2021 (4) TMI 1160 - ITAT DELHI for the proposition that the safe harbour of 10% difference in valuation and purchase price provided in section 50C is applicable retrospectively. No decision being cited by DR to the contrary of any higher judicial authority the said decision will apply to the present case. There is no case for making any addition to the income of the assessee on account of purchase price of land falling short of its fair market value. The addition made to the income of the assessee on account of the same is deleted. The grounds of appeal raised by the assessee are allowed.
Issues Involved:
1. Addition of Rs. 7,07,500/- as unexplained income under section 56(2)(vii)(b) of the Income Tax Act, 1961. 2. Justification and legality of the findings of the CIT(A). 3. Request for valuation of property by the DVO. 4. Comparison of the purchase price with the fair market value and stamp duty value. 5. Applicability of the 10% safe harbor rule in valuation differences. Summary: Issue 1: Addition of Rs. 7,07,500/- as unexplained income under section 56(2)(vii)(b) of the Income Tax Act, 1961 The solitary issue in the appeal relates to the addition of Rs. 55,91,837/- to the income of the assessee under section 56(2)(vii)(b) of the Act. The Assessing Officer treated the difference between the purchase consideration and the stamp duty value as income, leading to an addition of Rs. 55,91,873/- in the hands of the assessee. Issue 2: Justification and legality of the findings of the CIT(A) During appellate proceedings, the CIT(A) directed the Assessing Officer to refer the property for valuation to the DVO. The DVO valued the property at Rs. 94,15,000/-, and the CIT(A) upheld the addition to the extent of Rs. 7,07,500/-. The CIT(A) rejected the assessee's objections to the DVO's valuation, stating that the objections were not raised within the stipulated time. Issue 3: Request for valuation of property by the DVO The assessee contended that the Assessing Officer erred in not referring the property for valuation to the DVO initially. The CIT(A) directed the Assessing Officer to make the reference, and the DVO submitted a valuation report estimating the fair market value at Rs. 94,15,000/-, leading to a reduced addition of Rs. 7,07,500/-. Issue 4: Comparison of the purchase price with the fair market value and stamp duty value The assessee argued that the land had several defects affecting its market value, which were noted by the DVO. The purchase price was Rs. 421 per square meter, while the DVO valued it at Rs. 495 per square meter. The assessee highlighted that comparable instances in the nearby area ranged from Rs. 108 to Rs. 508 per square meter, supporting the purchase price. Issue 5: Applicability of the 10% safe harbor rule in valuation differences The assessee argued that the statute recognizes a 10% difference in fair market value and purchase price as immaterial. The ITAT agreed, noting that majority of the comparable instances picked by the DVO fell within the acceptable range. The ITAT held that the addition made under section 56(2)(vii)(b) was not justified and directed its deletion. Conclusion: The ITAT found that the majority of comparable instances supported the assessee's purchase price and that the DVO's valuation lacked a basis. The appeal was allowed, and the addition of Rs. 55,91,837/- was deleted. The ITAT emphasized that valuation is an approximate exercise and that the assessee is within rights to contest it if justified. The appeal of the assessee was thus allowed.
|
