Facts of the Case

The assessee, Kiran Agarwal, filed her return of income for Assessment Year 2017-18. During assessment proceedings, the Assessing Officer made an addition of ₹71,193 under Section 69B by adopting the valuation of a residential house property as determined by the Departmental Valuation Officer. The addition arose mainly due to adoption of a lower deduction of 7.5% towards supervision charges by the DVO instead of the generally accepted deduction of 10%, resulting in a marginal difference between the value declared by the assessee in her balance sheet and the DVO valuation. The CIT(A), Jaipur confirmed the addition in a summary manner without dealing with the evidences and explanations furnished by the assessee. Aggrieved, the assessee preferred an appeal before the Tribunal.

Issues Involved

Whether addition under Section 69B was sustainable where the difference between the value declared by the assessee and the DVO valuation was within the permissible tolerance band of 10% under the third proviso to Section 50C, whether the CIT(A) erred in confirming the addition without proper adjudication, and whether such marginal variation could justify addition for unexplained investment.

Petitioner’s Arguments

The assessee contended that the difference between the value shown in the balance sheet and the DVO valuation was merely about 1.57%, which was well within the tolerance band of 10% provided under the third proviso to Section 50C. It was argued that even if a standard deduction of 10% towards supervision charges was applied, the DVO valuation would fall below the value declared by the assessee. The assessee further contended that the CIT(A) confirmed the addition mechanically without addressing the evidence and submissions placed on record.

Respondent’s Arguments

The Revenue relied upon the orders of the Assessing Officer and the CIT(A) and contended that the valuation adopted by the DVO was justified and that the addition under Section 69B was correctly made.

Court Order / Findings

The ITAT Jodhpur observed that the CIT(A) confirmed the addition in a summary manner without properly discussing how the assessee failed to substantiate her claim, despite the Assessing Officer himself having discussed the evidences furnished during assessment. The Tribunal noted that under the Income-tax Act, variation in the value of an immovable property is permissible to the extent of 10% as per the third proviso to Section 50C(1). The Tribunal further observed that in the present case, the difference between the value declared by the assessee and the DVO valuation was only about 1.57%, which squarely fell within the statutory tolerance band. The Tribunal also noted that even if deduction towards supervision charges at 10% was applied instead of 7.5%, the DVO valuation would be lower than the value disclosed by the assessee. Accordingly, the Tribunal held that the addition of ₹71,193 made under Section 69B was unsustainable in law and liable to be deleted.

Important Clarification

The Tribunal clarified that minor variations in valuation of immovable property falling within the statutory tolerance band of 10% under Section 50C cannot give rise to addition under Section 69B. Additions based on marginal valuation differences and mechanical reliance on DVO reports without proper appreciation of statutory provisions are impermissible.

Final Outcome

The appeal filed by the assessee was allowed in full. The addition of ₹71,193 made under Section 69B on account of marginal difference in valuation of the house property was deleted.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1768993720_KIRANAGARWALRAJASTHANVS.INCOMETAXOFFICERRAJASTHAN.pdf

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