SUGANTHI SRINIVASAN ,SALEM vs. ITO, INTERNATIONAL TAXATION WARD,, COIMBATORE

ITA 668/CHNY/2026Status: DisposedITAT Chennai07 October 2026AY 2023-2411 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the Assessing Officer (AO) was not justified in re-computing the Long-Term Capital Gains (LTCG) based on the Department Valuation Officer's (DVO) valuation of Rs. 395/- per sq. ft. The Tribunal noted that the DVO's own working indicated a value of Rs. 465/- per sq. ft., and the reduction to Rs. 395/- was made without any stated reason or basis. The difference between the assessee's adopted value of Rs. 405/- per sq. ft. and the DVO's final value of Rs. 395/- per sq. ft. was marginal (approximately 2.5%). The Tribunal found no proper justification for displacing the value supported by the registered valuer's report. Accordingly, the AO was directed to delete the addition made in this regard and re-compute the LTCG using the registered valuer's valuation. The alternative contention regarding the scope of reference to the DVO was left undecided. Regarding the disallowance of the cost of improvement, the Tribunal observed that payments were made both before and after demonetization, and the assessee had provided supporting evidence. The lower authorities had not recorded adverse findings regarding the genuineness of these payments, and the revenue did not present any contrary material. Therefore, the disallowance was deemed untenable, and the AO was directed to delete it. The appeals were allowed for both assessees.

What were the facts?

These appeals by two assessees, Suganthi Srinivasan and Shanmugasundaram Jayanthi, are against the final assessment orders passed by the Income Tax Officer, International Taxation Ward, Coimbatore, under Section 143(3) read with Section 144C(13) of the Income Tax Act, 1961, for Assessment Year 2023-24. The common issue concerns the re-computation of Long-Term Capital Gains (LTCG). The assessees jointly sold an immovable property for Rs. 35 Crores. The Assessing Officer (AO) referred the matter to the Department Valuation Officer (DVO) for determining the market value of the property as on 01.04.2001. The DVO provided a valuation of Rs. 2,09,92,000/- (50% share). The AO also disallowed a portion of the claimed cost of improvement amounting to Rs. 18,47,500/-, citing cash payments with unexplained sources. The Disputes Resolution Panel (DRP) rejected the assessees' objections and upheld the AO's revised computation.

What were the issues?

1. Whether the Assessing Officer was justified in re-computing the Long-Term Capital Gains by adopting the valuation provided by the Department Valuation Officer (DVO) for the cost of acquisition as on 01.04.2001, instead of the valuation report submitted by the assessee, considering the provisions of Section 55A of the Income Tax Act, 1961, read with Rule 111AA of the Income Tax Rules? Assessee's Contention: The difference between the assessee's valuation and the DVO's valuation is within the tolerance band as per Section 55A and Rule 111AA. The DVO's final valuation of Rs. 395/- per sq. ft. was without basis, despite an initial calculation suggesting Rs. 465/- per sq. ft. Furthermore, a reference to the DVO should only be for sale consideration, not cost of acquisition. Revenue's Contention: The DVO adopted a scientific method to arrive at the value of Rs. 395/- per sq. ft., considering various aspects, and the AO rightly adopted this valuation. 2. Whether the disallowance of the cost of improvement amounting to Rs. 18,47,500/- on the ground of cash payments with unexplained sources is justified, considering the evidence provided by the assessee? Assessee's Contention: The assessee provided all relevant documents for expenses incurred. Payments were made in cash, some before demonetization and some after. The AO's disallowance based on the unavailability of Specified Bank Notes (SBNs) post-demonetization is incorrect, especially when evidence of payments was produced. Revenue's Contention: The cash payments were not properly supported by evidence, and therefore, the AO rightly disallowed them.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 55A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI

Before: SHRI SS VISWANETHRA RAVI & MS. PADMAVATHY.S

For Respondent: Ms. Anshu Sharatwat, Addl. CIT

PER PADMAVATHY.S, A.M: These appeals by the different assessees are against the final order of the assessment passed by Income Tax Officer, Inter

The order continues below.

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