MALKAI SUDERSHAN,NIZAMABAD vs. INCOME TAX OFFICER, WARD-1, NIZAMABAD

The assessee has raised one effective ground in his appeal that the Ld. CIT (A) has erred in sustaining the addition made by the Ld. AO of Rs. 4,71,900/- invoking the provisions of section 56(2)(vii)(b) of the Act being the difference between the SRO value and purchase consideration paid for acquiring immovable property during the relevant assessment year.

The brief facts of the case are that the assessee is an individual engaged in jewellery business as partner in M/s. Shri Raghavendra Jewellers. Information was received from the Intelligence and Criminal Investigation Wing of the Department that the assessee had purchased an immovable property vide Doc. No.12722/2013 wherein the SRO value of the property purchased was Rs. 23,59,500/- and the actual sale consideration paid was Rs. 15,50,000/-, difference being Rs. 8,09,500/-. Therefore, the assessment was reopened U/s. 147 r.w.s 148 of the Act. During the course of assessment proceedings it was revealed after thorough examination that the actual difference between the SRO value and the sale consideration was Rs. 4,71,900/. Therefore, invoking the provisions of section 56(2)(vii)(b) of the Act the Ld.AO made addition of Rs. 4,71,900/- in the hands of the assessee. On appeal, the Ld. CIT (A) obtained remand report from the Ld. AO who in turn had obtained the market value of the property from the Registration and Stamps Department of the State Government and since there was no disparity in the value adopted earlier by the AO the Ld. CIT (A) confirmed the order of the Ld. AO on the issue.

The Ld. AR submitted before us that the State Government vide order No.157 dated 30/03/2013 had empowered the Commissioner and Inspector General of Registration and Stamps to implement the revised market value in urban areas, Secunderabad Cantonment area and Rural area in the State w.e.f 01/04/2013. However, the Hon’ble Andhra Pradesh High Court vide judgment in PAL No. 274, dated 23/09/2013 had set-aside the revised rate fixed by the aforesaid authority as it was arbitrary and issued without revision of the “Andhra Pradesh revisions of market value rules 1998”. It was therefore pleaded that the revised SRO value does not have any legal sanctity and therefore it cannot be applied for making additions invoking the provisions of section 56(2)(vii)(b) of the Act. Hence, it was pleaded that the addition made by the Ld. AO which was further sustained by the Ld. CIT (A) may be deleted. The Ld. DR could not controvert to the submission of the Ld. AR however, he relied on the orders of the Ld. Revenue Authorities and prayed for sustaining the same.

After hearing both sides, I find merit in the submission of the Ld. AR. When the Hon’ble High Court of AP has set-aside the revised value suggested by the Appropriate Authority such valuation does not have any legal sanctity and it cannot be adopted for the purpose of making addition invoking the provisions of section 56(2)(vii)(b) of the Act. Therefore, the addition made by the Ld. AO on this count is devoid of merit. Hence, I hereby set aside the order of the Ld. CIT (A) and further direct the Ld. AO to delete the addition of Rs. 4,71,900/- made in the hands of the assessee invoking the provisions of section 56(2)(vii)(b) of the Act.

The order in this appeal could not be passed within 90 days from the date of hearing due to COVID-19 national lock-down. However following the decision of the Mumbai Tribunal in the case of DCIT Vs. JSW Ltd., in & 6103/Mum/2018, AY.2013- 14, dt.14-05-2020, I find it appropriate to pronounce the order though it is beyond the period of 90 days.

In the result, appeal of the assessee is allowed.