2022 (10) TMI 849 - AT - Income Tax

Determination of capital gain - addition made towards the valuation as per DVOJs report u/s 50C - discrepancy between DVQ's valuation and declared value as per sale deed - HELD THAT - We are of the considered view that if the difference between the value adopted by the DVO for estimating the sale price of the properties under consideration and the sale value declared by the assessee in its return of income is less than 15%, then the value adopted by the assessee may be taken into consideration. Accordingly, the matter is being restored to the file of the assessing officer to determine whether in the instant facts, the difference between the sale value adopted by the DVO and that by the assessee in respect of properties under consideration is less than 15% as submitted by the assessee. In the event, if such difference is less than 15%, then the sale value adopted by the assessee in its return of income may be taken into consideration, for the purpose of determining the capital gains tax. CIT(Appeals) not considering the ground of cost of improvement, stamp duty etc. - We observe that vide order sheet entry ITAT observed that assessee had not filed Form number 35, and accordingly it is not possible to decide whether this ground of appeal was raised before CIT(Appeals). We now observe that a perusal of Form 35 shows that the assessee has not raised any ground of appeal in connection with claim of cost of improvement before Ld. CIT(Appeals). Further, we have also perused the various written submissions filed by the assessee before CIT(Appeals) and from the same also it is apparent that the assessee has not filed any written submissions in respect of the claim of cost of improvement before Ld. CIT(Appeals) for his consideration. Though, apparently order of the CIT(Appeals), wherein the CIT has re-produced the relevant extracts of remand report received from the AO, there an indirect mention that in absence of evidence to the effect, cost of improvement could not be verified , however, besides the above, neither this ground is coming as per the grounds of appeal before CIT(Appeals), nor is it anywhere coming in written submissions filed before CIT(Appeals) during the course of appellate proceedings. Accordingly, in our considered, view ground of the assessee s appeal is infructious since this issue was never raised before CIT(Appeals) for his consideration. Disallowance of interest expenses - HELD THAT - CIT(Appeals) in its order has specifically observed that the assessee has simply mentioned that interest has been paid on loans taken for its property business. However, no documentary evidences have been furnished by the assessee and no nexus between the loans taken and the property purchased has been shown. Accordingly in absence of any supporting documents filed by the assessee during the appellate proceedings, Ld. CIT(Appeals) dismissed this ground of appeal of the assessee. We find no infirmity in the order of Ld. CIT(Appeals) who, on appreciation of facts/supporting documents placed before him, dismissed assessee s appeal on this ground.

Summary

Issues Involved:
1. Valuation of properties under section 50C of the Income Tax Act.
2. Consideration of cost of improvements and stamp duty.
3. Disallowance of interest expenses.

Detailed Analysis:

Issue 1: Valuation of Properties under Section 50C

Ground 2.1:
The assessee contested the valuation of properties done by the District Valuation Officer (DVO) under section 50C, arguing that the discrepancy between the DVO's valuation and the declared value was less than 15%, and thus the declared value should be accepted. During the assessment, the Assessing Officer (AO) added Rs. 46,40,047 to the assessee's income based on the stamp duty value, as the DVO's report was not available before the assessment deadline. The CIT(A) later considered the DVO's report, which was closer to the declared value, and directed the AO to recompute the capital gains based on the DVO's valuation. The assessee appealed, arguing that the CIT(A) ignored objections regarding discrepancies in the DVO's report and that the difference between the DVO's and declared values was within the acceptable 15% margin.

Ground 2.2:
The assessee argued that the CIT(A) erred in confirming the DVO's valuation despite the minor discrepancy. The tribunal cited several judicial precedents, including the Supreme Court's decision in C.B. Gautam vs. Union of India, which allowed considering the actual sale consideration if the DVO's valuation was within a 15% tolerance limit. The tribunal restored the matter to the AO to determine if the discrepancy was indeed less than 15%. If so, the declared value should be accepted for computing capital gains.

Decision:
Grounds 2.1 and 2.2 were allowed, directing the AO to verify if the discrepancy was within 15% and, if so, to accept the declared value.

Issue 2: Consideration of Cost of Improvements and Stamp Duty

Ground 2.3:
The assessee claimed that the CIT(A) failed to consider the cost of improvements and stamp duty amounting to Rs. 15,03,323. However, the tribunal noted that the assessee did not raise this issue in Form 35 or in written submissions before the CIT(A). Although there was an indirect mention in the remand report, the issue was not formally presented for consideration.

Decision:
Ground 2.3 was dismissed as it was not raised before the CIT(A).

Issue 3: Disallowance of Interest Expenses

Ground 3.1:
The assessee challenged the disallowance of Rs. 18,655 in interest expenses, claiming it was paid on loans taken for property business. The CIT(A) found that the assessee failed to provide documentary evidence or show a nexus between the loans and property purchases.

Decision:
Ground 3.1 was dismissed due to lack of supporting evidence.

Conclusion:
The appeal was partly allowed. The tribunal directed the AO to verify the discrepancy in property valuation and accept the declared value if within 15%. The claims regarding cost of improvements and interest expenses were dismissed due to lack of evidence and failure to raise the issues properly.