2022 (12) TMI 64 - AT - Income Tax

Tribunal emphasizes fair valuation methods in income tax appeal decision

The Tribunal allowed the assessee's appeal, setting aside the order of the revenue authorities. It emphasized the importance of proper valuation methods ... Capital gain computation - addition u/s 50C - AO sent the matter to the DVO and as matter was getting time barred, without waiting for the DVO’s order, he added the difference between the sale value and circle rate - assessee contended that sale instances of the property located in the same building were filed by the assessee before the ld. CIT(A), which the Ld. CIT(A) has not considered - HELD THAT:- As decided in MS. MADHU SHARMA. case [2004 (3) TMI 341 - ITAT DELHI-C] comparison should be done among instances which are relatively near. In the present case, the DVO despite noting the instances himself has not followed the valuation done for the same property but had preferred to take into account adjacent building without any reason. We find considerable cogency in the assessee’s submissions that DVO’s approach is not correct. DVO has done the valuation in a very arbitrary manner. He has preferred rates of nearby plots despite noting himself an instance of lower rate in the same building. When this was pointed out to Ld. CIT(A) by the assessee, CIT(A) rejected the same by holding valuation adopted by assessee’s valuer also has no value. We do not find ourselves in agreement with the view of CIT(A). The assessee’s valuer has duly mentioned and taken into account these instances of the same building. This as per the ratio emanating from the decision of Madhu Sharma [2004 (3) TMI 341 - ITAT DELHI-C] is the correct method. Moreover, this view is also supported by the newspaper articles referred by the valuer that the actual prevailing transaction rate in the area were much lower than the circle rate . These aspects have not been rebutted by the revenue authorities. Hence, in our considered opinion, the order of the Ld. CIT(A) deserves to be set-aside - Assessee’s appeal is allowed. Issues:1. Validity of the order passed by Ld. CIT(A)2. Application of Section 50C of the Income-tax Act, 19613. Consideration of valuation reports by DVO and assessee's valuer4. Comparison of sale instances for valuation purposesAnalysis:1. Validity of the order passed by Ld. CIT(A):The appeal challenged the order of the Ld. CIT(A) dated 27.08.2019 for Assessment Year 2015-16. The assessee contended that the order was erroneous and bad in law. The Ld. CIT(A) had sustained an addition of Rs. 26,86,000 out of the total addition of Rs. 27,00,500 made by the Assessing Officer under Section 50C of the Act.2. Application of Section 50C of the Income-tax Act, 1961:The Assessing Officer invoked the provisions of Section 50C of the Act as the circle rate of a property sold by the assessee was higher than the sale consideration. The matter was sent to the DVO for valuation. Despite the DVO's report showing a value of Rs. 1,77,86,000, the Ld. CIT(A) upheld this value. The assessee argued that the DVO's valuation was arbitrary and not based on correct comparisons.3. Consideration of valuation reports by DVO and assessee's valuer:The DVO's valuation was challenged by the assessee, who presented a comparative valuation chart showing instances of properties in the same building with lower sale rates. The assessee relied on various decisions to support the contention that the DVO's approach was incorrect. The Tribunal noted that the DVO's valuation was arbitrary and did not consider instances from the same building, as highlighted by the assessee.4. Comparison of sale instances for valuation purposes:The Tribunal emphasized the importance of comparing instances that are relatively near for valuation purposes. It was observed that the DVO had not followed the correct valuation method by not considering instances from the same building. The Tribunal referred to the decision in the case of Ms. Madhu Sharma vs ITO (2004) 91 TTJ Del 894 (Del.) to support the assessee's argument. The Tribunal set aside the order of the revenue authorities and decided the issue in favor of the assessee based on the correct valuation approach.In conclusion, the Tribunal allowed the assessee's appeal, emphasizing the importance of proper valuation methods and comparisons for determining fair market value under Section 50C of the Income-tax Act, 1961.