Tribunal: Declared fair market value valid for capital gains when within 10% range

The Tribunal ruled in favor of the appellant, holding that when the variance between the declared fair market value (FMV) and the Departmental Valuation Officer's (DVO) valuation is less than 10%, the FMV disclosed by the assessee should be considered the true value for computing capital gains. Consequently, the addition of Rs. 2,55,000 for computing capital gains was deemed unwarranted, and the Tribunal allowed the appellant's appeal, deleting the said addition.

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Issues:
1. Addition of Rs. 2,55,000 in the sale of property for computing capital gain.

Analysis:
The appellant contested the addition of Rs. 2,55,000 in the sale of a property for computing capital gain, arguing that the fair market value (FMV) determined by the Departmental Valuation Officer (DVO) was only an estimate and involved guesswork. The appellant maintained that since the variance between the actual sale consideration and the DVO's valuation was just 2.55%, falling below the 10% threshold, the addition should be disregarded. The appellant relied on a precedent from the ITAT Pune Bench to support their position, emphasizing that if the difference is less than 10%, the FMV declared by the assessee should be accepted. The appellant urged that the FMV disclosed in the sale deed, i.e., Rs. 1 crore, should be considered the true value for computing capital gains.

The Revenue, however, argued that the DVO's valuation must be accepted as per the provisions of section 50C(2) of the Act, which mandates adopting the higher value determined by the stamp valuation authority or the DVO. The Revenue contended that the AO had no discretion once the DVO had determined a value lower than the stamp valuation authority's value.

The Tribunal analyzed the contentions and referred to a previous judgment from the ITAT Pune Bench, highlighting that the DVO's valuation is not final and subject to appeal. The Tribunal emphasized that the DVO's determination is an estimate and not conclusive, especially when the variance between the declared FMV and the DVO's valuation is less than 10%. In such cases, a liberal approach favoring the assessee is warranted. Given that the variance in this case was only 2.55%, falling below the 10% threshold, the Tribunal ruled in favor of the appellant. The Tribunal concluded that the FMV disclosed by the assessee in the sale deed should be accepted as the true value, and the addition of Rs. 2,55,000 for computing capital gains was unwarranted. Consequently, the Tribunal allowed the appellant's appeal and deleted the said addition.

In conclusion, the Tribunal held that when the variance between the declared FMV and the DVO's valuation is less than 10%, the FMV disclosed by the assessee should be considered the true value for computing capital gains, and no addition should be made based on the deeming fiction under section 50C(2) of the Act. The Tribunal allowed the appellant's appeal, ruling in favor of the assessee and deleting the addition of Rs. 2,55,000 for computing capital gains.

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