2025 (1) TMI 1175 - AT - Income Tax

Valuation of the property by the Departmental Valuation Officer (DVO) - whether report of DVO is a valid and reasonable report than the report of registered valuer? - HELD THAT - Assessee has challenged the basis of valuation by the DVO stating that the same is highly arbitrary and have no legal or other basis however there was no whisper about any corroborative support to substantiate that the report of DVO was arbitrary or unreasonable. Assessee s reference to 1st proviso of section 56(2)(vii) r.w.s. 50C and its applicability in the present case nothing has been submitted before us to support such claim in terms of corroborative evidence also apparently no such claim was made before the AO while seeking rectification u/s 154 therefore we are unable to consider and to persuade with such contention of the assessee under the grounds of appeal in the present case. As described by the CIT(A) allegations by the assessee are only averments with no cogent documentary support. Before us also the assessee has not placed any documentary evidence so as to dislodge the decisions taken by the revenue authorities. Thus we find substance in the decision of CIT(A) that the appellant has not pointed out any real defect in the valuation report of DVO hence the report of DVO is valid and reasonable as against the report of registered valuer we thus there was no error in the findings of Ld. CIT(A) which needs our indulgence to correct the same. Decided against assessee.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment primarily addresses the following core issues:

Whether the valuation of the property by the Departmental Valuation Officer (DVO) can exceed the stamp duty value of the property as recorded by the assessee in their books, in light of the provisions of Section 56(2)(vii) read with Section 50C of the Income Tax Act, 1961.
Whether the valuation conducted by the DVO was appropriate and based on relevant documents, and if the addition made by the Assessing Officer (AO) based on the DVO's valuation report was justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Valuation Exceeding Stamp Duty Value

Relevant Legal Framework and Precedents: The case involves the interpretation of Section 56(2)(vii) and Section 50C of the Income Tax Act, which deal with the valuation of properties for tax purposes. The first proviso to Section 56(2)(vii) suggests that the valuation by the DVO should not exceed the stamp duty value.
Court's Interpretation and Reasoning: The Tribunal considered the appellant's argument that the DVO's valuation exceeded the stamp duty value and should not form the basis for additional tax liability. However, the Tribunal found that the DVO's valuation was reasonable and based on the property's commercial potential and comparable rates in the area.
Key Evidence and Findings: The DVO's report valued the property at Rs. 9,07,21,740/-, while the book value was Rs. 6,43,00,000/-. The Tribunal noted that no substantial evidence was provided by the assessee to challenge the DVO's valuation.
Application of Law to Facts: The Tribunal applied the relevant sections of the Income Tax Act and concluded that the DVO's valuation was valid and reasonable, thus supporting the AO's decision to make the addition based on this valuation.
Treatment of Competing Arguments: The appellant's argument that the DVO's valuation should not exceed the stamp duty value was not supported by evidence. The Tribunal found the DVO's valuation more credible than the registered valuer's report.
Conclusions: The Tribunal upheld the DVO's valuation, concluding that it was a valid basis for the AO's addition to the assessee's income.

Issue 2: Appropriateness of DVO's Valuation

Relevant Legal Framework and Precedents: The appropriateness of the DVO's valuation is assessed under the provisions of the Income Tax Act concerning property valuation for tax assessments.
Court's Interpretation and Reasoning: The Tribunal found that the DVO's report was comprehensive and took into account the commercial value and demand for the property, as well as comparable rates in the vicinity.
Key Evidence and Findings: The DVO's report was deemed more reliable than the registered valuer's report, which the AO initially relied upon. The DVO's valuation was less than the registered valuer's, leading to a revised addition.
Application of Law to Facts: The Tribunal applied the relevant tax provisions and found no error in the AO's reliance on the DVO's report for the revised addition.
Treatment of Competing Arguments: The appellant's objections to the DVO's valuation were not substantiated with evidence, and the Tribunal found no defects in the DVO's methodology.
Conclusions: The Tribunal concluded that the DVO's valuation was appropriate and justified the AO's revised addition.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The DVO has reached to a reasonable rate of the said land. The DVO has mentioned the location of land and also given importance to its commercial value and high demand."
Core Principles Established: The Tribunal established that the DVO's valuation, when conducted with due diligence and consideration of relevant factors, can form a valid basis for tax assessments, even if it exceeds the initial valuation by a registered valuer.
Final Determinations on Each Issue: The appeal was dismissed, and the Tribunal upheld the AO's decision to use the DVO's valuation for the revised addition to the assessee's income.

In summary, the Tribunal found that the DVO's valuation was reasonable and upheld the AO's revised addition based on this valuation. The appellant's arguments regarding the excessiveness of the DVO's valuation compared to the stamp duty value were not substantiated by evidence, leading to the dismissal of the appeal.

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