Not referring objections of the assessee to DVO and passing order was clearly denial of principles of natural justice. ITAT deleted addition and remanded the case
ABCAUS Case Law Citation:
ABCAUS 2344 (2018) (05) ITAT
The assessee was an individual. During the course of assessment proceedings, it was seen that assessee had purchased an immovable property in a village at a price much below than the circle rate.
The assessee was asked to explain as to why provisions of deeming fiction under section 56(2)(vii)(b) of the Act should not be invoked. The assessee submitted that the market value of the property at the village was less than the circle rate and therefore, the property was registered at a lower rate. The assessee referred to provisions of Section 50C of the Income Tax Act 1961 (the Act) and stated that matter may be referred to Valuation Cell to get the correct value. In support of the existing market rate, assessee furnished copy of few sale deeds registered for sale/purchas transaction on the location.
The Assessing Officer (AO) referred the matter to the Departmental Valuation Officer (DVO) for determination of the fair market value of immovable property under consideration. The Valuation Officer furnished his valuation report assessing the fair market value of the said property at a price less than the circle rate but higher than the price paid by the assessee.
On receipt of the DVO report, the assessee was asked to furnish her comments on the same and also to explain as to why the excess of the purchase consideration should be taxed as income from other sources u/s 56(2)(vii)(b) of the Act.
The assessee filed reply stating that the valuation report was made merely an estimate/opinion and there was no basis for making the addition. However, the AO after considering the objections of the assessee, made the addition on account of difference between the purchase cost shown by assessee and as reported by DVO.
The assessee challenged the addition before the CIT(A) and submitted that submitted that the DVO had not followed the guidelines issued by the CBDT. He also contended that the Valuation Officer was bound to give opportunity to file objections as being referred under section 55A of the Act. However, the CIT(A), dismissed the appeal of assessee.
The Tribunal observed that the assessee filed objections before AO objecting to the report of the DVO. The assessee also explained before CIT(A) guidelines issued by the CBDT which had not been followed by the DVO. Several instances of the lesser cost were furnished which had not been considered by the DVO. The assessee pointed out the defects and deficiencies in the report of the DVO which had not been considered by the AO. The assessee had also furnished reports from two registered valuers who had reported lesser value.
It was further observed that the AO, instead of referring the objections of the assessee to the DVO, passed the order within two days of receipt of the objections from the side of the assessee. The course adopted by the AO was not permissible and was clearly denial of principles of natural justice as well.
Accordingly, the Tribunal set aside the orders of the authorities below and restored the matter in dispute to the file of AO with a direction to re decide the matter in issue as per law by giving reasonable, sufficient opportunity of being heard to the assessee. It was also directed that the AO shall forward the objections of the assessee to the Valuation Officer for getting his comments and further report and after confronting the same to the assessee, may pass the order in accordance with the law on the matter in issue.
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