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2019 (12) TMI 451 - AT - Income TaxAddition made u/s. 56(2)(vii)(b)(ii) - Purchase of flat below Fair Market value - adequate consideration - Addition on account of difference of margin between the value as given by the assessee and the Departmental Valuer - HELD THAT - From the facts, it is apparent that the assessee has disputed the addition to be made as mentioned in the show cause notice issued by the AO u/s. 56(2)(vii)(b) of the Act by stating that the purchase consideration paid by her was as per prevailing market rate at that time. However, the AO has not referred the matter to the DVO for the determination of the fair market value of the flat purchased as required under the relevant provisions of the Act. Accordingly the AO has been directed during the appellate proceedings to make such reference to the DVO to meet the principle of natural justice. The DVO, after considering the objections of the assessee and other evidences produced before him by the assessee, has determined the fair market value of the said flat at ₹ 98,40,000/-. Ld. CIT(A) has observed that there was no justification for further altering the FMV determined by the DVO and further objections raised by the assessee were rejected. Accordingly under the facts of the case the addition made by the AO was confirmed to the extent of ₹ 8,40,000/- and the balance addition was deleted by the Ld. CIT(A) against which the assessee is in appeal before the Tribunal. In the case of Rahul Constructions vs. DCIT 2012 (1) TMI 229 - ITAT PUNE passed in ITA No. 1543/Pn/2007 (AY 2004-05) wherein the Tribunal has adjudicated and decided the similar issue in favour of the assessee, where it was held that the margin between the value as given by the assessee and the Departmental Valuer was less than 10 percent and the difference is liable to be ignored and the addition made by the lower authorities on this count cannot be sustained and accordingly, the same was deleted. In the case in hand, the difference between sale consideration shown by the assessee at ₹ 90 lacs and fair market value estimated by the DVO at ₹ 98,40,000/- which was less than 10% and hence, the same is liable to be ignored and, therefore, the addition confirmed by the Ld. CIT(A) is not tenable and needs to be deleted - the addition in dispute is hereby deleted. Appeal of the assessee allowed in part.
Issues Involved:
1. Validity of assessment without jurisdiction. 2. Confirmation of addition made under Section 56(2)(vii)(b)(ii) of the Income Tax Act, 1961, amounting to ?8,40,000. Issue-Wise Detailed Analysis: 1. Validity of Assessment Without Jurisdiction: The first ground of appeal concerning the validity of the assessment without jurisdiction was not pressed by the counsel for the assessee. Consequently, this ground was dismissed. 2. Confirmation of Addition Under Section 56(2)(vii)(b)(ii): The second ground of appeal pertained to the confirmation of an addition of ?8,40,000 under Section 56(2)(vii)(b)(ii) of the Income Tax Act, 1961. The assessee's counsel argued that this issue was covered by a precedent set by the ITAT, Pune-B Bench, in the case of Rahul Constructions vs. DCIT (ITA No. 1543/Pn/2007, AY 2004-05). In that case, it was held that if the margin between the value given by the assessee and the Departmental Valuer was less than 10 percent, the difference should be ignored, and the addition made by the lower authorities could not be sustained. The assessee contended that the purchase consideration paid was as per the prevailing market rate at the time. However, the Assessing Officer (AO) did not refer the matter to the Departmental Valuation Officer (DVO) for determining the fair market value (FMV) of the flat purchased. During appellate proceedings, the AO was directed to make such a reference to the DVO to ensure natural justice. The DVO determined the FMV at ?98,40,000 after considering the assessee's objections and other evidence. The assessee raised further objections during the appellate proceedings, arguing that the DVO did not properly consider comparable sale deeds and the location of the flat. However, these additional objections were not sent back to the DVO and were instead considered by the CIT(A). The CIT(A) found no justification to alter the FMV determined by the DVO and confirmed the addition made by the AO to the extent of ?8,40,000, deleting the balance addition. The Tribunal reviewed the decision in Rahul Constructions vs. DCIT, where it was held that a difference of less than 10 percent between the value given by the assessee and the DVO should be ignored. In the present case, the difference between the sale consideration shown by the assessee (?90,00,000) and the FMV determined by the DVO (?98,40,000) was less than 10 percent. Therefore, the Tribunal concluded that the addition confirmed by the CIT(A) was not tenable and needed to be deleted. Conclusion: The appeal was partly allowed, with the Tribunal deleting the addition of ?8,40,000 made under Section 56(2)(vii)(b)(ii) of the Income Tax Act, 1961, based on the precedent set by the ITAT, Pune-B Bench. Order Pronounced: The order was pronounced on 02/12/2019.
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