2020 (6) TMI 468 - AT - Income Tax

Tribunal Removes Unexplained Investment Addition Due to Minor Valuation Variance and Pandemic Delays.

Dulari Devi Hetamsaria (L/H of Shyam Sundar Hetamsaria), C/o, M/s Pratik Automobiles Versus ACIT, Circle-3, Asansol

The Tribunal allowed the assessee's appeal, finding that the variation in valuation was minor and should be disregarded. Consequently, the addition of Rs. ... Unexplained investment u/s 69 - sending the matter to Valuation Officer to find the value in building - Difference in value of valuation officer who valued the building as per assessee had shown in her books of accounts - HELD THAT:- Variation or difference may arise because of various factors and therefore co- ordination bench in the case of Chandra Prakash Jhunjhunwala [2019 (8) TMI 1192 - ITAT KOLKATA] took the view that such minor difference should be ignored and no addition should be made on account of such minor variations. We note that the variation in valuation shown by DVO and the valuation made by the assessee does not exceed 10% hence relying on the judgment of Co-ordinate Bench(supra), on the identical issue, as noted above, we delete the addition - Decided in favour of assessee. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [2020 (5) TMI 359 - ITAT MUMBAI] Issues Involved:1. Justification of the Assessing Officer's decision to refer the matter to the Valuation Officer.2. Validity of referring the matter to the Valuation Officer without rejecting the books of accounts.3. Treatment of the difference in valuation as unexplained investment under Section 69 of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Justification of the Assessing Officer's decision to refer the matter to the Valuation Officer:The primary issue raised by the assessee was the justification of the Assessing Officer (AO) in referring the matter to the Valuation Officer to determine the value of the building. The Commissioner of Income Tax (Appeals) [CIT(A)] supported the AO's decision. The valuation report by the Divisional Valuation Officer (DVO) indicated that the value of the building was Rs. 1,76,55,900/- against Rs. 1,66,52,805/- shown by the assessee. This led to an enhancement of income by Rs. 10,03,095/-, treated as unexplained investment under Section 69 of the Income Tax Act, 1961.2. Validity of referring the matter to the Valuation Officer without rejecting the books of accounts:The assessee argued that the AO should not have referred the matter to the Valuation Officer without first rejecting the books of accounts and specifying the year in which the valuation exceeded the book value. The CIT(A) observed that the AO made a reference to the Valuation Officer under Section 142A/131(d) of the Income Tax Act, 1961, to value the cost of construction of the property. The DVO's report, received post-assessment, showed a higher valuation, leading to the enhancement of the assessee's income. However, it was noted that there were no recorded reasons for making the reference to the DVO found in the assessment records.3. Treatment of the difference in valuation as unexplained investment under Section 69 of the Income Tax Act, 1961:The Tribunal considered the difference between the DVO's valuation and the value shown by the assessee, which was Rs. 10,03,095/-. The assessee contended that this difference should be ignored as it was less than 10% of the value shown in the books. The Tribunal noted that variations within 10% should be ignored based on precedents, including the judgment of the ITAT Kolkata in the case of Chandra Prakash Jhunjhunwala vs. DCIT and other similar cases. The Tribunal held that the variation was below 10% and should be ignored, leading to the deletion of the addition of Rs. 10,03,095/-.Conclusion:The Tribunal allowed the appeal of the assessee, concluding that the variation in valuation was minor and should be ignored. The addition of Rs. 10,03,095/- as unexplained investment was deleted. The decision was pronounced after considering the extraordinary situation due to the Covid-19 pandemic and lockdown, which delayed the pronouncement beyond 90 days of hearing.