JAYANT VALLABHDAS KANERIA,PUNE vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2, PUNE, PUNE

ORDER

Per PARTHA SARATHI CHAUDHURY, JM:

Jayant Vallabhdas Kaneria return of income on 30/06/2016 declaring total income of Rs.69,21,730/-. The return was selected for scrutiny under CASS and the assessment was completed u/s 143(3) of the Act making addition of Rs. 52,32,000/- u/s 56(2)(vii)(b) of the IT Act. During the course of scrutiny proceedings, it was found by the Assessing Officer (AO) that assessee had entered into an agreement for purchase of property on 22/10/2012 for Rs. 78 lac, which was duly registered with the Sub- Registrar. Having paid the stamp duty on the amount fixed, the AO invoked the provisions of sec. 50C(2) of the Act and referred the matter to the Departmental Valuation Officer (DVO) to ascertain the actual value of the property. The DVO had submitted his report and on the basis of DVO‟s report, the AO valued the property at Rs.1,30,32,000/- and the difference amount of Rs.52,32,000 (1,30,32,000 – 78,00,000) was added to the total income of the assessee.

“IV.3 ……. The difference of Rs 6068000 has to be adopted instead of Rs 5232000 arrived by the assessing officer. The report of the valuation officer is dtd 22/10/2020, since the Valuation Report was received late i.e after the scrutiny proceedings under sec 143(3) was completed on 26/12/2017. The order under appeal is this order dtd 26/12/2017. During the course of appellate proceedings my predecessor CIT(Appeals)-3, Pune had requested for copy of Valuation Report. The taxpayer has submitted copy of the Valuation report during appellate proceedings. As per sec 56(2)(vii)(b), if the 2

Jayant Vallabhdas Kaneria taxpayer receives an immovable property with consideration the excess of Stamp Duty Value over and above the value declared by the taxpayer should be brought to tax. The Stamp duty value is Rs. 13032000. The assessing officer had brought to tax the difference between the Stamp duty value and the amount as per Agreement for Sale i.e Rs. 5232000. Instead of this amount Rs 6068000 which is the difference between the value as per DVO’s report and the amount declared by the taxpayer has to be brought to tax. There is an enhancement in income in that respect. IV.A The main arguments raised by the taxpayer during the course of appellate proceedings is that the Agreement for Sale i.e the date of fixing the amount and the date of registration are different which prompted the assessing officer to tax the same. The taxpayer’s case is hit by the 1st proviso which clearly states that Agreement for Sale and the Date of Registration has to be the same. The taxpayer has only concluded the purchase agreement on 15/9/2014. Taxpayer in his written submission has argued that the date of Agreement for sale and Registration are not on different dates. They are on the same date i.e 22/10/2012 and hence it is not hit by the 1st proviso. Taxpayer’s case is hit by the 3rd proviso which says that if there is a difference between the value declared by the taxpayer and the stamp duty value, reference can be made to the ova to arrive at the correct value of property. "Provided that where the stamp duty value of immovable property as referred to in sub-clause (b) is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of sub-clause (b) as they apply for valuation of capital asset under those sections ." IV.5 The grounds mentioned in sec 50C(2) are a. when taxpayer claims that value taken as Stamp duty value is not correct. b. the value adopted by ova has not been disputed before appeal, revision or no reference has been made before any court or authority. The arguments of the taxpayer are as follows – The section clearly states that in any previous year, if the assessee receives any immovable property then the section applies and it applies with effect from 1/4/2014. The deed was finally registered on 15/9/2014 and it means that the assessee received the property from its original owner in the FY 2014-15. The section specifically mentioned the word 'receive' and not 'transfer'. Therefore the date of initial agreement to sale or the date of transfer is immaterial in the instant case. The claim of the assessee regarding the applicability of the section is thus not acceptable. However the 1st proviso to the section is applicable in this case and therefore the stamp duty value on the date of the agreement is to be taken for the purposes of sub clause. The stamp duty value of the property as on the date of agreement to sale was Rs 13032000 and therefore the different amount of 3 Jayant Vallabhdas Kaneria Rs.5232000 is added to the total income as income from other sources. IV.6 Assessee further stated that he was into the business of development of real estate and that he had purchased the property for development in the future. As the property was an agricultural land the same would have to be converted into NA, and for the same he might have to spend an amount of 50% of the stamp duty value to the govt. Assessee cited this reason for purchase of property at a price lesser than the stamp duty value. However the said reason is immaterial as the section does not provide any relief to any individual as is being claimed by the assessee. Therefore assessee's claim on this aspect is rejected. IV.7 Summarising this discussion it is held that assessing officer has rightfully assessed the difference between the Stamp Duty value and value declared by the taxpayer. The taxpayers argument that the Agreement for Sale was registered on 22/10/2012 not on 15/9/2014 even though executed on 15/9/2014 does not hold good. When the Act itself says following the 1st proviso under sec 56(2)(vii)(b) the Stamp Duty Value as on the date of entering into the agreement for sale and fixing the amount has to be reckoned, it means that Agreement for Sale is the initial point of taxability. The final deed is drawn on 15/9/2014 (or on 20/9/2014). But the stamp duty was paid on 19/10/2012 itself. The reference to DVO is the point which was made during the course of scrutiny assessment proceedings. Reference to the DVO was made on 12/12/2017, scrutiny assessment was completed on 26/12/2017. The DVO's report was received on 22/10/2020 and the same is considered here. The addition of Rs 6068000 is upheld.”

5.1 We observe from the findings of the NFAC that there is no whisper as to any opportunity of hearing given to the assessee before enhancement had taken place. The assessee had submitted copy of valuation report during the appellate proceedings before the NFAC which had observed that as per sec.56(2)(vii)(b), if the assessee receives any immovable property with consideration the excess of 4

Jayant Vallabhdas Kaneria stamp duty value over and above the value declared by the assessee should be brought to tax. The stamp duty value is Rs. 1,30,32,000/-, the AO had brought to tax the difference between the stamp value and the amount as per agreement for sale i.e. Rs. 52,32,000/-, instead of this amount, Rs. 60,68,000/- which is the difference between the value as per the DVO‟s report and the amount declared by the assessee has been brought to tax. There is, therefore, an enhancement in the income in that respect. That, finally at para IV.7, the NFAC holds that the AO has rightly assessed the difference between the stamp duty value and the value declared by the assessee. However, in the entire decision making process, there was no opportunity given to the assessee to place his case before the Department.

5.2 Considering the totality of the facts and circumstances, we are of the considered view that one opportunity should be given to the assessee for making his submissions regarding the enhancement of income and then the NFAC shall adjudicate the issue as per law. In view thereof, we set aside the order of the NFAC and remand the matter back to its file and we state here that since the enhancement issue has a bearing on the entire case spectrum, therefore, it will be more judicious that a denovo adjudication as per law is done by the NFAC in this matter, following the principles of natural justice. We order accordingly and the grounds stands allowed for statistical

Jayant Vallabhdas Kaneria purposes only.

Order pronounced in open Court on 19th December, 2023.