2025 (10) TMI 582 - AT - Income Tax

Tax additions deleted: renovation costs must be apportioned among four co-owners; valuation unsubstantiated without DVO

Dulu Mahato Versus DCIT/ACIT, Circle-1, Dhanbad

ITAT held the appeals in favor of the appellant and deleted additions made by the AO and upheld by the CIT(A). The tribunal found the property was jointly ... Estimation of cost of construction/cost of renovation - assessee along with his four brothers jointly owned the ancestral property - property is belonged to the late father of the assessee - HELD THAT:- As admitted fact that the assessee along with his three brothers jointly owned the property. This is evident from the fact that the notice u/s.133(6) have been issued to the brothers of the assessee. It is also accepted that the brothers of the assessee have responded saying that they have also invested in the property for renovation. This being so, admittedly, the investment, if any, in the house property would have been considered in all the four hands and not that of the assessee alone. On this ground alone, the addition made by the AO and confirmed by the CIT(A) for both the years under consideration should be deleted and we do so. Even otherwise, the AO is not competent authority for valuation of a property. If the AO doubted the valuation or wanted the property to be valued, he ought to have referred the valuation to the DVO. This, admittedly, has not been done. Consequently, as the valuation itself is erroneous and is unsubstantiated and made by a person not competent to do the valuation, on this ground also, the addition made by the AO and confirmed by the CIT(A) for both the years under consideration is liable to be deleted and we do so. Appeals of the assessee are allowed. The assessee and three brothers jointly owned ancestral house property; notices under section 133(6) were issued to all brothers and the brothers replied that renovations were funded jointly. The AO estimated renovation cost at Rs. 55 lakhs (apportioned Rs. 27.5 lakhs each year) without referring valuation to the DVO. The AO also noted the property belonged to the deceased father and that any investment 'should have been made in the return of HUF,' but the HUF had not filed returns. Tribunal found (1) the investment, if any, would be reflected 'in all the four hands and not that of the assessee alone,' and on that basis held that 'the addition made by the AO... for both the years under consideration should be deleted'; and (2) the AO 'is not competent authority for valuation of a property,' and having failed to refer to the DVO, the AO's valuation was 'erroneous and unsubstantiated.' Both grounds led to deletion of the additions and allowance of the appeals.