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2024 (7) TMI 30 - AT - Income TaxIssues Involved: 1. Deletion of addition made by the Assessing Officer under Section 37(1) of the Income Tax Act. 2. Non-referral of property valuation to the District Valuation Officer (DVO) under Section 43CA of the Income Tax Act. Detailed Analysis: Issue 1: Deletion of Addition under Section 37(1) Facts and Contentions: - During the assessment proceedings, the Assessing Officer (AO) noted that the assessee claimed a business loss of Rs. 12.25 Crores due to the non-execution of a sale deed. The AO questioned the large expenses claimed and the details of the broker involved. - The assessee explained that it entered into an agreement to purchase a hotel property for Rs. 95 Crores but failed to raise the balance payment due to depressive market conditions. Consequently, the vendor forfeited Rs. 12.25 Crores, which the assessee claimed as a business loss under Section 37 of the Income Tax Act. - The AO disallowed the claim, arguing that the assessee did not provide sufficient details about the broker or efforts to raise funds, and the explanations given were vague and contradictory. CIT(A) Findings: - The Commissioner of Income Tax (Appeals) [CIT(A)] found that the assessee was engaged in real estate business and the deal was part of its business activities. The CIT(A) concluded that the loss incurred was a business loss and allowed the claim under Section 37 of the Income Tax Act. Tribunal's Decision: - The Tribunal upheld the CIT(A)'s decision, agreeing that the loss was incurred during the normal course of business and was allowable as a business loss under Section 37. The grounds raised by the Revenue were dismissed. Issue 2: Non-referral to DVO under Section 43CA Facts and Contentions: - The AO observed that the assessee sold a plot for Rs. 17.93 Crores while the stamp duty valuation was Rs. 19.73 Crores. The AO added the difference to the income under Section 43CA, despite the assessee's objection and request to refer the matter to the DVO. - The assessee argued that the plot was sold at the then prevailing market price and the additional 10% valuation was due to preferential location charges, which were not applicable as it was the only hotel plot in the township. CIT(A) Findings: - The CIT(A) deleted the addition, noting that the AO did not refer the matter to the DVO despite the assessee's specific objections. The CIT(A) relied on various judicial precedents to support the decision. Tribunal's Decision: - The Tribunal agreed with the CIT(A), emphasizing that the AO should have referred the valuation to the DVO upon the assessee's objection. The Tribunal cited similar cases where non-compliance with Section 50C(2) led to the deletion of additions. The appeal by the Revenue was dismissed. Conclusion: - The Tribunal dismissed the Revenue's appeal on both issues, upholding the CIT(A)'s decisions. The Tribunal found that the assessee's business loss claim under Section 37 was justified and that the AO's failure to refer the valuation to the DVO under Section 43CA warranted the deletion of the addition. The appeal was pronounced dismissed on 26th June, 2024.
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