2024 (8) TMI 528 - AT - Income Tax

Addition u/s 56(2)(vii)(b) - difference in between the set fourth value and valuation of the DVO - HELD THAT - Whether an addition can be made solely and simply on the basis of valuation report submitted by the DVO is no longer res integra. The land locked issue is duly considered by both DVO independent valuer during the valuation of property. The impugned lands are in nature of land locked property and the independent valuer considered the market value - DR has not submitted any contrary judgment against the submission of assessee and has not made any strong argument against the fact cited by the ld. AR. After considering the different valuation report of land, the valuation of independent valuer is accepted and valuation of land is confirmed - Accordingly, we quash the addition made by ld. CIT(A) - The market value of the land is confirmed and the appeal of the assessee is partly allowed.

Summary

Issues:
1. Valuation of property for income tax assessment
2. Consideration of independent valuation report
3. Treatment of land locked property in valuation

Issue 1: Valuation of property for income tax assessment

The appeal was filed against the order of the Ld. Commissioner of Income-tax (appeals) for the assessment year 2016-17. The assessee sold two properties, and the difference between the market value and purchase value was added back to the total income. The Ld. CIT(A) accepted the market value determined by the District Valuation Officer (DVO) and upheld the addition related to the difference in values. The appeal was then filed before the Tribunal challenging this assessment.

Issue 2: Consideration of independent valuation report

The appellant argued that an independent valuer had valued the property at a lower amount, which was not considered by the Ld. CIT(A). The appellant contended that the difference in values was based on suspicion and conjecture as the property was land locked, making it difficult to sell. The appellant sought to have the valuation of the independent valuer recognized to determine the market value of the property.

Issue 3: Treatment of land locked property in valuation

The Tribunal considered the different valuation reports and the nature of the land locked property. The DVO's report highlighted the challenges of the land locked property's location. The Tribunal referred to relevant case laws, including the decision in the case of Dhariya Construction Co., emphasizing the burden of proof on the Revenue to show any understatement of income. After evaluating the evidence and arguments, the Tribunal accepted the valuation of the independent valuer at Rs. 15,50,000 for the land locked property. Consequently, the addition made by the Ld. CIT(A) was quashed, confirming the market value of the property at Rs. 15,50,000, and partially allowing the appeal of the assessee.

In conclusion, the Tribunal's decision on the valuation of the property for income tax assessment, consideration of the independent valuation report, and treatment of the land locked property in valuation resulted in the partial allowance of the appeal filed by the assessee.