Substitution of sale consideration rejected where valuation estimate falls within tolerance band, resulting in deletion of notional additions and adjusted interest.

Where multiple deeds arise from a single agreement for contiguous land, aggregate treatment of sales was applied and the Valuation Officer's estimated valuation-unsupported by comparable sales and without addressing the assessee's objections-was held within the recognised tolerance band; consequently the notional substitution of declared consideration was rejected and the additions under section 43CA totalling the stated amount were deleted. As a corollary, interest liability consequential on tax assessment was adjusted in favour of the assessee reflecting the reduced tax computation.

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Issues: (i) Whether additions made under section 43CA of the Income-tax Act, 1961 in respect of sale of plots (aggregate additions totalling Rs. 45,08,931) are sustainable; (ii) Whether interest under sections 234A, 234B and 234C of the Income-tax Act, 1961 is payable in view of the relief in quantum.

Issue (i): Whether the addition under section 43CA of the Income-tax Act, 1961 substituting actual sale consideration with valuation (including DVO report and ready reckoner/stamp duty value) is justified where the difference between declared consideration and valuation falls within the recognized tolerance band and where transactions are part of an aggregate single sale.

Analysis: Relevant material includes the Valuation Officer report, objections filed by the assessee, and coordinate jurisprudence applying a tolerance band to differences between declared consideration and notional valuation under sections 43CA/50C. The transactions were executed by separate deeds but arise from a single agreement with a single purchaser and contiguous land; therefore comparison on an aggregate basis is appropriate. The valuation relied upon was an estimated figure by the Valuation Officer and did not rest on comparable sales in the report; objections by the assessee to the valuation were not addressed in the report. Coordinate decisions and statutory provisos introducing a tolerance band for small variations between declared consideration and stamp duty valuation (and their retrospective application in analogous contexts) have been applied to section 43CA by analogy to section 50C.

Conclusion: Addition under section 43CA of the Income-tax Act, 1961 amounting to Rs. 45,08,931 is deleted as the variation between declared consideration and the valuation falls within the applicable tolerance band and the sale transactions are to be treated on aggregate basis; grounds 1 to 7 are allowed in favour of the assessee.

Issue (ii): Whether interest under sections 234A, 234B and 234C of the Income-tax Act, 1961 is chargeable after granting consequential relief on the quantum of assessment.

Analysis: Interest liability under the cited provisions is consequential upon the tax determination; reduction or deletion of assessment additions impacts computation of interest.

Conclusion: Interest under sections 234A, 234B and 234C of the Income-tax Act, 1961 is to be adjusted consequentially in favour of the assessee.

Final Conclusion: The appeal is partly allowed by deleting the additions under section 43CA of the Income-tax Act, 1961 and granting consequential relief on interest under sections 234A, 234B and 234C.

Ratio Decidendi: Where the difference between declared sale consideration and valuation by the valuation officer or stamp duty/ready reckoner value is within the recognised tolerance band and valuation is an estimate unsupported by comparable sales or adequately addressed objections, the notional substitution under section 43CA of the Income-tax Act, 1961 should not be applied and the declared consideration must be accepted.

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