SHRI NARENDRA KUNDANMALJI,MUMBAI vs. ACIT, CIRCLE 20(1), MUMBAI

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. 3 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 4 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