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Facts
The assessee, along with four brothers, jointly owned an ancestral property that underwent renovation. The AO estimated the renovation cost at Rs. 55 lakhs and attributed Rs. 27.5 lakhs each to the assessee for two assessment years, leading to additions. The assessee argued that the investment was joint and the AO was not competent to value the property.
Held
The Tribunal found that the ancestral property was jointly owned and the renovation investment was made by all co-owners, not solely by the assessee. It further ruled that the AO lacked the authority to estimate the valuation of the property and failed to refer the matter to the DVO. Consequently, the additions made by the AO and upheld by the CIT(A) were deleted for both assessment years.
Key Issues
1. Whether an addition for property renovation can be made solely in the hands of one co-owner when the property is ancestral and jointly owned, and renovation investment was made by all co-owners. 2. Whether the Assessing Officer has the competency to estimate the valuation of a property for renovation costs without referring the matter to a Departmental Valuation Officer (DVO).
Sections Cited
133(6)
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Income Tax Appellate Tribunal, RANCHI BENCH, RANCHI
Before: SHRI GEORGE MATHAN, JM & SHRI RATNESH NANDAN SAHAY, AM
O R D E R Per Bench : These two appeals are filed by the assessee against the separate orders passed by the ld.CIT(A), National Faceless Appeal Centre (NFAC), Delhi, both dated 28.02.2023 for the assessment years 2012-2013 & 2013- 2014.
Shri Devesh Poddar, ld. AR appeared on behalf of the assessee. Shri Khubchand T. Pandya, Sr.DR appeared on behalf of the revenue.
It was submitted by the ld AR that the assessee along with his four brothers jointly owned the ancestral property at Chitahi Village, Tundoo, Baghmara, Dhanbad. It was the submission that the AO estimated the cost of construction/cost of renovation of the said property at Rs.55 lakhs and apportioned the said estimated cost between two years at Rs.27.5 lakhs each. It was the submission that the house property originally belonged to the assessee’s father and on his demise, it is jointly owned by the assessee & 75/Ran/23 and his three brothers. It was the submission that it is fairly agreed that there has been renovation in the property. It was the submission that all the brothers are also replied to the notices issued u/s.133(6) of the Act by the AO that the renovation were done jointly out of their incomes. It was the submission that the estimation of Rs.55 lakhs itself is not done by the DVO but by the AO himself, who is not competent person to make such estimation. It was the submission that the AO in his assessment order in page 3 also records that the properties is an ancestral property. He also records that being ancestral property, the investment should have been made in the return of HUF. It was found that the HUF has not filed any return, insofar as the HUF has no source of income. It was the submission that the addition made in the hands of the assessee in his individual capacity itself is unwarranted.
In reply, ld. Sr. DR submitted that the assessee has admitted that there is renovation done to the property. The assessee ought to have shown the said investment in its return. The assessee having not shown the investment, the addition as made by the AO and as confirmed by the ld. CIT(A) is liable to be upheld.
We have considered the rival submissions. At the outset, it is an accepted fact that the property is belonged to the late father of the assessee. It is also an 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) of the Act have been issued to the brothers of the assessee. It is also accepted that the brothers of the assessee have & 75/Ran/23 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 ld. 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 ld. CIT(A) for both the years under consideration is liable to be deleted and we do so.
In the result, both appeals of the assessee are allowed. Order dictated and pronounced in the open court on 10/10/2025.