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2022 (8) TMI 848 - AT - Income TaxAddition 56(2)(vii)(b) - difference in stamp duty value and purchase price of the property - original difference in valuation adopted by the AO by taking into consideration the valuation worked out by the DVO and the 50% share of the assessee came - HELD THAT - AO passed the order u/s 154 when the DVO by considering the objection of the assessee worked out the difference at Rs. 13,41,900. The total consideration for the property was declared by the assessee at Rs. 3,24,00,000/- and his 50% share was at Rs. 1,62,00,000/- while the DVO worked out the valuation of assessee s share at Rs. 1,75,41,900/-, thus, the difference in valuation determined by the DVO and declared by the assessee was 8.28% which was less than 10%. On a similar issue, the ITAT Delhi Bench SMC for the A.Y. 2014-15 in the case of Geetika Sachdeva 2019 (12) TMI 451 - ITAT DELHI held that the addition confirmed by the CIT(A) was not tenable since the difference between the sale consideration shown by the assessee and fair market value submitted by the DVO was less than 10% in the said case earlier decision in the case of Rahul Constructions 2012 (1) TMI 229 - ITAT PUNE where in difference is less than 10 per cent and considering the fact that valuation is always a matter of estimation where some degree of difference is bound to occur, we are of the considered opinion that the AO in the instant case is not justified in substituting the sale consideration as against the actual sale consideration disclosed by the assessee - Decided in favour of assessee.
Issues Involved:
1. Validity of the addition made under section 56(2)(vii)(b) of the Income Tax Act, 1961. 2. Fair market value versus stamp duty value. 3. Applicability of Section 155(15) in the absence of capital gains. 4. Relevance of judicial precedents in determining fair market value. Detailed Analysis: 1. Validity of the addition made under section 56(2)(vii)(b) of the Income Tax Act, 1961: The primary issue revolves around the addition made by the Assessing Officer (AO) under section 56(2)(vii)(b) of the Income Tax Act, 1961. The AO added Rs. 32,91,000 to the assessee's income due to the difference between the stamp duty value and the purchase price of the property. The assessee contended that the price paid was the correct fair market value and that the stamp duty value exceeded the fair market value on the date of transfer. The AO referred the matter to the District Valuation Officer (DVO), who determined the fair market value at Rs. 1,75,41,900, leading to a revised addition of Rs. 13,41,900. The assessee argued that the difference in valuation (8.28%) was less than 10%, thus no addition was warranted. 2. Fair market value versus stamp duty value: The AO initially computed the addition based on the collector rate of Rs. 1,94,91,000, which was reduced following the DVO's assessment. The DVO's valuation brought the difference to Rs. 13,41,900, which the assessee claimed was within acceptable limits (less than 10%). The assessee cited several judicial precedents, including decisions from ITAT Mumbai and ITAT Delhi, which supported the view that minor differences (less than 10%) between the fair market value and the stamp duty value should not result in additions. 3. Applicability of Section 155(15) in the absence of capital gains: The CIT(A) questioned the applicability of Section 155(15) since no capital gains arose from the transaction. The assessee clarified that the AO had incorrectly mentioned Section 155(15) for rectification purposes. The appeal was against the addition under Section 56(2)(vii)(b), and the minor difference in valuation should lead to the addition being disregarded. 4. Relevance of judicial precedents in determining fair market value: The assessee relied on various judicial precedents to argue that minor differences in valuation should not result in additions. The ITAT Chandigarh Bench referred to cases like ACIT vs. M/s Standard Combines Pvt. Ltd., Bimla Singh vs. CIT, and others, which upheld that differences less than 10% between the declared value and the DVO's valuation should not lead to additions. The tribunal cited decisions from ITAT Pune, ITAT Mumbai, and ITAT Delhi, reinforcing that minor discrepancies in valuation are acceptable and should not result in additional tax liabilities. Conclusion: The tribunal, after considering the facts and judicial precedents, concluded that the difference in valuation (8.28%) was minor and within acceptable limits. Hence, the addition made by the AO and sustained by the CIT(A) was deleted. The appeal of the assessee was allowed. Order Pronouncement: The order was pronounced in the open court on 19/05/2022.
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