ACIT, CENTRAL CIRCLE-15, NEW DELHI VS. SPACE AGE TECHNICAL SERVICES PVT. LTD., NEW DELHI, ITA 7750/DEL/2018, ITAT DELHI
In a significant ruling, the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that a valuation report alone, found during a search operation, without corroborative material or evidence, cannot be the sole basis for making additions under Section 153C of the Income Tax Act, 1961.
🔍 Background of the Case
The case revolves around M/s Space Age Technical Services Pvt. Ltd., which was subjected to assessment under Section 153C read with 143(3) for AY 2007-08. This action followed a search conducted on 11/11/2010 at the premises of a third-party group — the Tinna Group of companies.
During the course of the search, a valuation report related to a property transaction by the assessee was found and seized. Based solely on this report, the Assessing Officer (AO) made an addition of ₹16.90 crore on account of capital gains on the alleged undervaluation of the property.
🧾 CIT(A)’s Decision
The assessee contested the addition before the Commissioner of Income Tax (Appeals) [CIT(A)], asserting that:
- The valuation report was not conclusive evidence of undervaluation.
- The report was created for banking purposes (to secure loan limits), not to represent actual sale value.
- The sale deed reflected the real transaction value, which was also accepted by the Stamp Valuation Authority and the DVO (Departmental Valuation Officer), both of which assessed the property at lower than the impugned valuation.
The CIT(A) accepted the assessee’s contention and deleted the addition. The Revenue then filed an appeal before the ITAT.
⚖️ ITAT’s Observations
The ITAT, while dismissing the Revenue’s appeal, observed:
- The valuation report lacked corroborative evidence such as comparable sale instances or a contradictory DVO report.
- The same valuation report was also found in the case of the assessee’s sister concern, M/s S.S. Horticulture Pvt. Ltd., and had already been rejected by a Co-ordinate Bench of ITAT in ITA No. 7122/Del/2018 dated 14/07/2022.
- The approved valuer’s report, without examination of the valuer or any inquiry into the basis of valuation, cannot be treated as credible evidence for addition.
The Tribunal further emphasized that initiation of proceedings under Section 153C requires incriminating material relatable to the assessment year, and in this case, the valuation report alone was insufficient to substantiate an addition of such magnitude.
🧠 Legal Takeaway
This ruling reaffirms two key principles:
- Valuation reports cannot override sale deed values unless supported by other evidence.
- Search-based assessments under Section 153C require concrete, incriminating material, not assumptions or one-sided documents.
“A valuation report prepared for bank loans cannot form the sole basis for income addition in the absence of any independent inquiry or contradictory valuation,” the ITAT emphasized.
📌 Conclusion
The ITAT’s decision in ACIT vs. Space Age Technical Services Pvt. Ltd. is a clear signal to tax authorities: Additions under search assessments must be supported by solid, corroborative evidence. A document without independent verification—especially one created for unrelated purposes like bank financing—cannot justify reassessment or additions under the Income Tax Act.
This ruling offers relief and clarity to taxpayers who often face unjustified additions based on one-off documents, ensuring that substance over form remains the guiding legal principle.