Tribunal adjusts property valuation, directs tax assessment revision under Income Tax Act

The Tribunal partly allowed the appeal regarding the valuation of a property for tax assessment. It found discrepancies in the valuation report provided by the Departmental Valuation Officer (DVO) and determined a fair market value rate based on seven comparable sale instances. The Tribunal directed the Assessing Officer to adjust the addition made under section 56(2)(vii) of the Income Tax Act accordingly. The decision was rendered on 28th July 2020, setting aside the valuation discrepancy in the assessment order.

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Issues: Valuation of property for tax assessment

Analysis:
1. Issue: Addition on account of valuation of a property
- Summary: The appeal pertains to an addition made on account of the valuation of a property purchased by the assessee. The Assessing Officer observed a variance between the stamp value and the purchase price of the property, leading to the addition under section 56(2)(vii) of the Income Tax Act.

2. Analysis:
- The property in question was jointly purchased by the assessee and five co-owners for a total consideration of Rs. 1,80,00,000. The assessee's share was 1/6th, amounting to Rs. 30,00,000.
- The Assessing Officer, noting the variance, calculated the excess amount attributable to the assessee at Rs. 13,62,326. The assessee requested a valuation by the DVO under section 55A, but no report was received before the assessment order was passed.
- Subsequently, the DVO's report valued the property at Rs. 2,11,42,000, which was challenged by the assessee. The CIT(A) upheld the addition based on the DVO's report, leading to the appeal before the Tribunal.

3. Analysis:
- The Tribunal found discrepancies in the DVO's valuation, particularly the rate of Rs. 77,640 per sq. mtr used without a proper basis. The DVO's preliminary report cited seven comparable sale instances with varying rates.
- In the absence of clarity on the rate adopted by the DVO, the Tribunal determined the fair market value rate at Rs. 62,073 per sq. mtr, the average of the seven sales instances. The Assessing Officer was directed to adjust the addition accordingly under section 56(2)(vii) of the Act.

4. Outcome:
- The Tribunal partly allowed the appeal, setting aside the impugned order to the extent of the valuation discrepancy. The decision was pronounced in the Open Court on 28th July 2020.

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