SUNIL AGARWAL,HYDERABAD vs. ITO, WARD -5(1), HYDERABAD

आयकर अपीलीय अिधकरण, हैदराबाद पीठ�, हैदराबाद INCOME TAX APPELLATE TRIBUNAL, HYDERABAD BENCHES, HYDERABAD BENCH: B BEFORE SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER AND SHRI MADHUSUDAN SAWDIA, HON’BLE ACCOUNTANT MEMBER ITA 989/HYD/2026 िनधा�रण वष�/Assessment Year: 2018-19 SUNIL AGARWAL ITO, WARD -5(1) 5-8-49, AGARWAL HOUSE, FATEH IT TOWERS, AC GUARDS, SULTAN LANE, NAMPALLY MASAB TANK Vs. STATION ROAD, HYDERABAD- HYDERABAD-500004, 500001, TELANGANA TELANGANA अपीलाथ� Appellant ��थ� Respondent

Permanent Account Number of Assessee: AGOPA2558D

अपीलाथ� �ारा/Appellant represented by: Shri Nitin, CA (Hybrid mode) ��थ� �ारा/Respondent represented by: Shri K Prasad, Sr-AR सुनवाई की तारीख / Date of conclusion of hearing: 07-September-2026 घोषणा की तारीख / Date of pronouncement: 18-September-2026 आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (for short, “CIT(A)”), dated 16/01/2026, which in turn arises from the order passed by the Assessing Officer (for short, “AO”) under section 143(3) r.w.s 143(3A) & 143(3B) of the Income Tax Act, 1961 (for short, “the Act”), dated 25/03/2021. The assessee has assailed the impugned order on the following grounds of appeal:

“1. The Ld. CIT(A) erred in law and on facts by sustaining the addition of Rs.72.33,000/-made by the Assessing Officer (AO) under Section 56(2) of the Act. 2. The Ld. CIT(A) erred in confirming the AO's action of not referring the valuation of the subject properties to the DVO, despite the appellant specifically disputing the stamp duty value and requesting such a reference under the third proviso to Section 56(2)(x) read with Section 50C(2). 3. The Ld. CIT(A) erred in holding that the reference to the DVO is merely discretionary and not mandatory. The appellant contends that once the stamp duty value is challenged as exceeding the fair market value, the Ld. AO is duty-bound to refer the matter to the DVO to ensure substantial justice. 4. The Ld. CIT(A) erred in summarily rejecting the comparative sale deed (Deed No. 4385/2017) provided by the appellant, which demonstrated that similar properties in the same locality were being transacted at values significantly lower than the stamp duty rates. 5. The Ld. CIT(A) and Ld. AO failed to appreciate that the actual consideration paid (Rs.42,00,000 and Rs.30,33,000) represented the true fair market value due to specific adverse factors. 6. The Ld. CIT(A) erred in upholding an assessment order that was passed mechanically. relying solely on the recitals of the sale deeds while ignoring the substantive submissions and documentary evidence provided by the appellant to justify the lower purchase price. 7. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, if deemed necessary, at any time before or at the time of hearing of the appeal, to enable Your Honour to decide this appeal according to law.”

On being queried, the assessee placed on record copies of the purchase deeds for the aforementioned properties. The AO taking cognizance of the difference in the purchase consideration as against the value adopted by the SRO, called upon the assessee to put forth an explanation regarding the same. In reply, the assessee vide his letter, dated 19/09/2020 submitted that the aforementioned variance was for the reasons, viz., (i) there was a dispute with regard to the property and the Municipal Corporation of Hyderabad (GHMC) had not regularized the abovementioned project and the required permission was not available; and (ii) it was agreed that the amount payable under Land Regularization Scheme (LRS) would be borne by the purchaser. However, the AO did not find favour with the aforesaid claim of the assessee. It was observed by him that the assessee had not produced any material which would evidence that the subject property was disputed one. On the contrary, it was observed that a perusal of the registered purchase deed revealed that there was no such dispute regarding the subject land and the seller had handed over peaceful possession of the same to the assessee. Accordingly, the AO held a conviction that the assessee had in the garb of his claim of having purchased a disputed property had tried to justify the lower purchase consideration. Apart from that, the AO observed that the assessee had duly acknowledge the purchase consideration in the respective purchase deeds. Thus, the AO, based on his aforesaid observation rejected the claim of the assessee and held the difference in the value adopted by the SRO for registering the subject properties as against the purchase consideration disclosed by the assessee i.e., Rs.72,33,000/- as the income of the assessee under section 56(2) of the Act.

However, we find that the assessee on being queried on the aforesaid aspect had vide his reply, dated 19/09/2020, submitted that the same was for the reasons, viz., (i) there was a dispute with regard to the property and the Municipal Corporation of Hyderabad (GHMC) had not regularized the above said project and the required permission was not available; and (ii) that it was agreed that the amount payable under Land Regularization Scheme (LRS) would be borne by the purchaser. Accordingly, the assessee had clearly come up with an explanation regarding the reason as to why the subject property was purchased at a value lower than the value adopted by the SRO for the purpose of payment of stamp value.

"7. 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 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. 8. 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 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. 9. 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. 10. For the aforesaid reasons, the order under challenge is set aside. 11. 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." (emphasis supplied by us)

Order pronounced in the open court on 18th September, 2026. Sd/- Sd/- MADHUSUDAN SAWDIA RAVISH SOOD ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad Dated: 18th September, 2026. OKK/SPS

Copy to: SUNIL AGARWAL, 5-8-49, AGARWAL HOUSE, FATEH SULTAN 1 LANE, NAMPALLY STATION ROAD, HYDERABAD-500001, TELANGANA ITO, WARD -5(1), 2 IT TOWERS, AC GUARDS, MASAB TANK, HYDERABAD-500004, TELANGANA 3 THE PCIT, HYDERABAD. 4 THE D.R., ITAT, HYDERABAD BENCH 5 GUARD FILE TRUE COPY KAMALA KUMAR Digitally signed by KAMALA KUMAR ORUGANTI ORUGANTI Date: 2026.09.18 17:51:40 +05'30' ASSISTANT REGISTRAR / SR. PRIVATE SECRETARY I.T.A.T., HYDERABAD