ITO Vs Smt. Samiksha Mahajan (ITAT Delhi)
Bank Valuation ≠ Incriminating Material: Delhi ITAT Restricts Section 69 Addition & Deletes Estimated STCG in Search Assessment
The Delhi Bench of the ITAT dismissed both the Revenue’s appeal and the assessee’s cross-objection, holding that a bank valuation report obtained u/s 133(6) cannot be treated as incriminating material for making additions in a search assessment u/s 153A, and that capital gains cannot be recomputed on pure estimates without invoking section 50C.
In the search assessment for AY 2005-06, the AO made an addition of ₹10.53 crore u/s 69 on the basis of a valuation report obtained by Indian Overseas Bank while granting OD/CC facilities, treating it as unexplained investment in property. The AO also enhanced the sale consideration by applying 20% estimated appreciation over DVO value and computed short-term capital gain of ₹31.15 lakh.
The CIT(A) restricted the unexplained investment addition to ₹15.75 lakh, based on a comparative analysis of adjoining property transactions with reasonable escalation, and deleted the STCG addition in entirety.
Upholding the CIT(A), the Tribunal held that:
- Valuation reports obtained from banks are not incriminating material found during search and cannot justify massive additions in completed assessments
- Estimation of property value must be reasonable and evidence-based, not arbitrary adoption of bank/DVO values
- STCG cannot be recomputed by estimating sale consideration, especially when:
- Sale consideration exceeded circle rate
- Section 50C was not applicable
- No incriminating material was found during search
- Applying 120% of DVO value without statutory backing leads to absurd results and is legally impermissible
Accordingly, the ITAT sustained restriction of addition u/s 69 to ₹15.75 lakh, upheld deletion of STCG addition of ₹31.15 lakh, and dismissed both Revenue’s appeal & assessee’s cross-objection
FULL TEXT OF THE ORDER OF ITAT DELHI
The Revenue has filed the instant appeal and Assessee has filed the Cross Objection and both are arising out of the order of the Ld. CIT(A)-37, New Delhi dated 21.02.2020 passed in Appeal No. CIT(A), Delhi-37/10046/2018-19, pertaining to assessment year 2005-06.
