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Facts
The assessee purchased a property below stamp duty valuation. The AO made an addition on account of this difference and also on account of outstanding payments to the builder. The CIT(A) deleted the addition for outstanding payments but upheld the addition on the property valuation difference.
Held
The Tribunal held that when the assessee disputes the valuation adopted by the AO based on stamp duty, it is the AO's duty to refer the matter to the Departmental Valuation Officer (DVO).
Key Issues
Whether the AO correctly made additions based on stamp duty valuation without referring to the DVO, and whether the outstanding payment to the builder was rightly treated as deemed income.
Sections Cited
250, 56(2)(x), 50C
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Income Tax Appellate Tribunal, MUMBAI “B” BENCHES :: MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI PRABHASH SHANKAR
This appeal has been preferred by the Assessee against the order dated 30/06/2025 impugned herein passed by the National Faceless Appeal Centre (NFAC)/Commissioner of Income Tax (Appeals), Delhi (in short, ‘Ld. Commissioner’) u/sec. 250 of the Income Tax Act, 1961 (in short, ‘Act’) for the A.Y. 2018-19.
(Narendra Kundanmalji Dhoka) 2. In the instant case, the Assessee had purchased a property along with his wife being co-sharer @ 50% share on a total consideration of Rs. 5,76,57,481/-, as against the stamp duty valuation of Rs. 7,17,70,472/- with a variation/difference of Rs.1,41,15,519/- in between the consideration shown by the Assessee and the stamp duty valuation determined as per Stamp Duty Valuation Authority, therefore, the Assessing Officer (AO), show-caused the Assessee.
The Assessee claimed before the AO that he had purchased bare shell flat without civil work, flooring, electrical fittings and bathroom fittings and also without Occupancy Certificate (OC) as the builder was under financial crisis, on a lowest sale consideration value below than the stamp duty valuation.
The AO, though, considered the claim of the Assessee, however, not being impressed with the same, ultimately, made the addition of Rs. 70,56,495/- being 50% variation/difference of Rs.1,41,15,519/- u/s 56(2)(x) of the Act and added the same to the total income of the Assessee.
Further, the AO also sought for details of payments made to the builder and present status of balance, payable to the builder along with documentary evidence, however, as per the assessment order, the Assessee remained silent. Therefore, the AO by construing “that Assessee has no plausible explanation for not providing the status of outstanding amount of Rs. 1,75,73,581/- to Lodha builders, till date”, treated the balance payment 1,75,73,581/- to builder, as deemed income of the Assessee, as per the provisions of the Act and made the addition of such amount and added in the income of the Assessee.
(Narendra Kundanmalji Dhoka) 6. The Assessee being aggrieved, challenged the said additions before the Ld. Commissioner, who though, by considering the relevant documents submitted by the Assessee, deleted the addition of Rs. 1,75,73,581/- on account of outstanding payments made to Lodha builders, however, affirmed the addition of Rs. 1,41,15,519/- made by the AO u/sec. 56(2)(x) of the Act, by holding that AO has rightly made the disallowance u/sec. 56(2)(x) of the Act.
We have given thoughtful consideration to the peculiar facts and circumstances of the case. No doubt, the contention of the learned Counsel for the Assessee to the effect that because the flat under consideration was just a bare shell flat, without civil work, flooring, electrical fittings, bathroom fittings and Occupation Certificate, and therefore the same was purchased on a lowest sale consideration than the stamp duty valuation, as per stamp duty valuation authority, seems to be plausible. Admittedly, both the authorities below despite of disputing the value of the property {as considered by the AO} directly or indirectly by the Assessee, have not exercised their powers for referring the case to the Departmental Valuation Officer (DVO), as per the norms of the Act, as applicable, and therefore, question emerge “as what could be the fate of addition made by the AO”.
The Hon'ble Kolkata High Court in the case of Sunil Kumar Agarwal vs. CIT in G.A. No. 3686 of 2013 (ITAT No. 221 of 2013) has also dealt with the identical issue and held that in case of dispute qua property consideration, the AO should, in fairness, have given an option to the assessee to have the valuation made by the Departmental Valuation Officer (DVO) contemplated u/s 50C. As a matter of course, in all such cases the AO should give an option to (Narendra Kundanmalji Dhoka) the assessee to have the valuation made by the DVO. The valuation by the DVO is required to avoid miscarriage of justice. The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the District Sub Registrar for the purpose of stamp duty. The legislature has taken care to provide adequate machinery to give a fair treatment to the citizen/taxpayer. There is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused. Even in a case, where no such prayer is made, the AO, discharging a quasi-judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law.
The Hon’ble High Court, ultimately, remanded the matter back to the AO with a direction to refer the matter to the DVO in accordance with law and after such valuation, the assessment shall be made denovo in accordance with law. For brevity, the observations made and conclusion drawn by the Hon’ble High Court are reproduced herein below:
“We have considered the rival submissions advanced by the learned advocates appearing for the parties. The submission of Ms. Ghutghutia that the requirement of clauses a) and (b) of sub-section 2 of Section 50C has not been met by the assessee, can hardly be accepted. The requirement of clause (b) of sub-Section 2 of Section 50C was evidently met. The only question is whether the requirement of clause (a) of sub- Section 2 of Section 50C was met by the assessee. We have already set out hereinabove the recital appearing in the Deeds of Conveyance upon which the assessee was relying. Presumably, the case of the assessee was that price offered by the buyer was the highest prevailing price in the market. If this is his case then it is difficult to accept the proposition that the assessee had accepted that the price fixed by the District Sub Registrar was the fair market value of the property. No such inference can be made as against the assessee because he had nothing to do in the matter. Stamp duty was payable by the purchaser. It was for the purchaser to either accept it or dispute it. The assessee could not, on the basis of the price fixed by the Sub- Registrar, have claimed anything more than the agreed consideration of (Narendra Kundanmalji Dhoka) a sum of Rs.10 lakhs which, according to the assessee, was the highest prevailing market price. It would follow automatically that his case was that the fair market value of the property could not be Rs.35 lakhs as assessed by the District Sub Registrar. In a case of this nature the assessing officer should, in fairness, have given an option to the assessee to have the valuation made by the departmental valuation officer contemplated under Section 50C. As a matter of course, in all such cases the assessing officer should give an option to the assessee to have the valuation made by the departmental valuation officer. For the aforesaid reasons, we are of the opinion that the valuation by the departmental valuation officer, contemplated under Section 50C, is required to avoid miscarriage of justice. The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the District Sub Registrar for the purpose of stamp duty. The legislature has taken care to provide adequate machinery to give a fair treatment to the citizen/taxpayer. There is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused. Even in a case where no such prayer is made by the learned advocate representing the assessee, who may not have been properly instructed in law, the assessing officer, discharging a quasi-judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law. For the aforesaid reasons, the order under challenge is set aside. The impugned order including orders passed by the CIT(A) and the assessing officer are all set aside. The matter is remanded to the assessing officer. He shall refer the matter to the departmental valuation officer in accordance with law. After such valuation is made, the assessment shall be made de novo in accordance with law.”
Thus, on the aforesaid analyzation, it has become clear that it is the bounden duty of the AO to refer the matter/valuation to the DVO in case the Assessee disputes the valuation adopted and/or determined, as per stamp duty valuation, by the AO. Thus, the orders passed by the authorities below are set aside and the case is remanded to the file of the AO with a direction to refer to the valuation of the property to the DVO, as per the norms applicable of the Act and after getting the valuation report, frame the assessment afresh, as per law.
Thus, the case is accordingly remanded to the file of the AO in the aforesaid terms.
In the result, the appeal filed by the Assessee is allowed for statistical purposes.
Order pronounced in the open court on 13.10.2025.