INCOME TAX OFFICER, MUMBAI vs. NANJI DANA PATEL, MUMBAI

आयकर अपीऱीय अधिकरण, म ुंबई पीठें, म ुंबई INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI BENCH: B BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI G.M. DOSS, ACCOUNTANT MEMBER ITA No.6501/MUM/2026 (निर्धारणवर्ा/AssessmentYear:2017-18) INCOME TAX OFFICER NANJI DANA PATEL R.NO. 512, 5TH FLOOR, PIRAMAL 100/A, VALENTINO REST HILL CHAMBER LALBAUG PAREL, ROAD BANDRA WEST Vs. MUMBAI-400012, MAHARASHTRA MUMBAI-400050, MAHARASHTRA अपीलधर्थीAppellant प्रत्यथी Respondent

PAN of Assessee: AABPP5772B

CO No.283/MUM/2026 (निर्धारणवर्ा/AssessmentYear:2017-18) NANJI DANA PATEL INCOME TAX OFFICER 100/A, VALENTINO REST HILL R.NO. 512, 5TH FLOOR, ROAD BANDRA WEST, MUMBAI- PIRAMAL CHAMBER LALBAUG Vs. 400050, MAHARASHTRA PAREL, MUMBAI-400012, MAHARASHTRA अपीलधर्थीAppellant प्रत्यथी Respondent

PAN of Assessee: AABPP5772B

अपीलधर्थीद्वारा/Appellant represented by: Ms. Vinita Nara प्रत्यथीद्वारा/Respondent represented by: Shri Amit Dua ( CIT DR)

सुनवाईकीतारीख/Date of conclusion of hearing: 16-Sep-2026 घोषणाकीतारीख/Date of pronouncement: 18-Sep-2026

ITA No.6501/Mum/2026 & CO No.283/MUM/2026 NANJI DANA PATEL आदेश / ORDER Per Sanjay Garg, Judicial Member:

The present appeal filed by the Revenue and the corresponding Cross- Objection filed by the assessee have been preferred against the order of the Learned Commissioner of Income Tax (Appeal), National Faceless Assessment Centre [in short, “NFAC”], Delhi, dated 12.03.2026 for Assessment Year 2017- 18. 2. The sole issue involved in these appeals as to whether the Ld.CIT(A) was justified in deleting the addition so made by the AO u/s.56(2)(vii)(b) of the Income Tax Act, 1961 [in short, “the Act”] by holding that the said provisions are not applicable to a transaction of purchase of immovable property through a public auction conducted by the Bank under SARFAESI Act, 2002. 3. The AO made addition of Rs.1,09,72,000/- on account of difference between the purchase consideration and the immovable property and its stamp duty value. However, the Ld.CIT(A) deleted the addition made by the AO by observing as under: “ 4.4 Ground Nos. 3 & 4 – Addition under section 56(2)(vii)(b) of Rs.1,09,72,000/-: 4.4.1 These grounds relate to the addition made under section 56(2)(vii)(b) on account of difference between the purchase consideration of immovable property and its stamp duty value. During the year under consideration, the appellant purchased immovable property for a consideration of Rs.3,15,00,000/-. The stamp duty value of the property was Rs.4,24,72,000/-. The difference between the stamp duty value and the actual consideration was Rs.1,09,72,000/-. 4.4.2 The appellant, contended that the property was acquired through a public auction conducted by State Bank of India for recovery of dues from its borrower, being a stressed asset. It was further explained that the property is a leasehold

ITA No.6501/Mum/2026 & CO No.283/MUM/2026 NANJI DANA PATEL property of MHADA and was sold through a transparent auction mechanism open to the public. Therefore, the price determined through such auction represents the true market value determined through competitive bidding. Therefore, according to the appellant, the transaction represented the fair market value of the property and the provisions of section 56(2)(vii)(b) should not apply. 4.4.3 The contention of the appellant has been carefully considered. However, the provisions of section 56(2)(vii)(b), as applicable for the relevant assessment year, provide that where an individual receives any immovable property for a consideration which is less than the stamp duty value of the property by an amount exceeding Rs.50,000/-, the difference between the stamp duty value and the consideration shall be taxable under the head “Income from Other Sources”. 4.4.5 In the present case, the difference between the stamp duty value and the purchase consideration amounts to Rs.1,09,72,000/-, which is significantly higher than the threshold prescribed under the Act. The undisputed facts are that the property was purchased through a public auction conducted by State Bank of India for recovery of dues from its borrower, and the sale was not a private negotiated transaction between related or interested parties. 4.4.6 It is a well-settled principle that auction conducted by a public authority or bank for recovery of dues is a transparent process intended to discover the best possible price available in the market. The price so determined through competitive bidding generally reflects the actual market value under the prevailing circumstances, particularly in cases involving distressed assets. In such situations, the property is usually sold to recover outstanding dues and the market conditions surrounding such sale may differ from normal open market transactions. Therefore, the auction price represents the real price that a willing buyer is prepared to pay in the given circumstances. 4.4.7 The stamp duty valuation, on the other hand, is determined based on general guideline values prescribed by the stamp valuation authority and does not necessarily account for factors such as distress sale conditions, encumbrances or litigation, leasehold restrictions, limitations attached to properties sold through recovery proceedings. In the present case, the property was a leasehold property of MHADA, which itself imposes restrictions affecting the free transferability and market value of the property. 4.4.8 Further, when the price is determined through a public auction conducted by a scheduled bank, the transaction cannot be regarded as an attempt to undervalue the property for tax purposes. The consideration paid represents the highest price discovered through a competitive bidding process, which in itself is a reliable indicator of the fair market value. 4.4.9 In this regard, reliance is placed on the judgement of the Hon’ble ITAT MUMBAI BENCH 'D in the case of “Income-tax Officer v. Mahavir Enterprises”. In that case, the assessee had purchased an immovable property from a co-operative bank through an etender process and had emerged as the highest and successful bidder. The Assessing Officer sought to invoke valuation provisions by comparing the consideration with the stamp duty value. However, the Hon’ble Tribunal held that when a property is acquired through a transparent and competitive bidding process conducted by a bank, the price discovered through such e-auction represents the fair market value of the property, since it reflects the highest price that the market is willing to pay under the prevailing circumstances. Accordingly, it was held that the consideration paid in the auction

ITA No.6501/Mum/2026 & CO No.283/MUM/2026 NANJI DANA PATEL should be regarded as the fair market value, and the stamp duty value cannot be substituted mechanically. The ratio of this decision squarely applies to the present case, where the property was purchased through a public auction conducted by State Bank of India, and the price paid by the appellant represents the highest bid discovered through a transparent competitive process, thereby constituting the true market value of the property. 4.4.10 The objective of section 56(2)(vii)(b) is to prevent tax avoidance through undervalued transactions between parties, and not to tax genuine transactions where the price has been discovered through a transparent and competitive mechanism. Accordingly, the addition of Rs.1,09,72,000/- made by the Assessing Officer under section 56(2)(vii)(b) is hereby deleted.”

ITA No.6501/Mum/2026 & CO No.283/MUM/2026 NANJI DANA PATEL proceed accordingly as provided u/s.50C of the Act. At this stage, the relevant part of provisions of Section 50C of the Act is reproduced as under: 50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer : …… ……

(2) Without prejudice to the provisions of sub-section (1), where—

(a) the assessee claims before any Assessing Officer that the value adopted or assessed or assessable by the stamp valuation authority under sub- section (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed or assessable by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub- sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act.

ITA No.6501/Mum/2026 & CO No.283/MUM/2026 NANJI DANA PATEL of Section 56(2)(vii) of the Act will not be attracted in this case. We don’t find any infirmity in the order of the Ld.CIT(A) and the same is upheld. 7. In the result, appeal filed by the Revenue is dismissed. Cross-Objection No.283/Mum/2026: 8. The assessee in his Cross-Objection has taken up certain legal grounds, however, since the Revenue appeal has been decided in favour of the assessee, the Cross-Objection raised by the assessee have been rendered academic in nature and the same are hereby dismissed being having rendered infructuous at this stage. 9. In the result, appeal filed by the Revenue as well as Cross-Objection filed by the assessee are hereby dismissed. Order pronounced on 18.09.2026.

Sd/- Sd/- (G.M. DOSS ) (SANJAY GARG ) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 18.09.2026 Copy to: NANJI DANA PATEL 1 100/A, VALENTINO REST HILL ROAD BANDRA WEST, MUMBAI- 400050, MAHARASHTRA INCOME TAX OFFICER, R.NO. 512, 5TH FLOOR, PIRAMAL CHAMBER 2 LALBAUG PAREL, MUMBAI-400012, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAIBENCH 5 GUARD FILE

ITA No.6501/Mum/2026 & CO No.283/MUM/2026 NANJI DANA PATEL