YASHMITH RAJENDRA CHOUDHARY,MUMBAI vs. INCOME TAX OFFICER WARD 22(3)(6), MUMBAI, MUMBAI

Briefly stated facts of the case are that the assessee filed Return of Income declaring total income of Rs. 4,71,370/-.Notices under section 143(2) and 142(1) of the Act were issued under “Faceless Assessment Scheme, 2019” for the scrutiny assessment. The assessee had purchased a residential Flat at 301, 3rd floor, Rameshwaram Apartment, Dadar- West, Mumbai 400 028, for Rs. 1,75,00,000/- during the relevant year at a public auction conducted by the IDFC FIRST Bank. The said property was sold by the bank under the provisions of “The P a g e | 4 A.Y. 2020-21 Yashmith Rajendra Choudhary Securitisation and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (SARFAESI Act).” After necessary legal procedures made by the bank, the Debt Recovery Tribunal (DRT), a quasi judicial body, empowered by Law, had fixed the minimum sale value of the property and issued an order and permitted the said bank to sell the property by public auction.However, the AO passed order u/s. 143 (3) of the Act, and added the amount of Rs. 71,45,000/- u/s. 56(2)(x) of the Act, being the difference between the Stamp Duty ready reckoner value of Rs. 2,46,50,000/- and the actual purchase value as determined by Debt Recovery Tribunal Rs. 1,75,00,000/-.

In the subsequent appeal before the ld.CIT(A), the assessee contended that the property was purchased through an auction conducted under the SARFAESI Act by IDBI Bank, as the price was as approved by a quasi judicial body and the same being taxed at a public auction, there was no control of the assessee in arriving at the sale/ purchase price, the sale-deed was to be accepted as the fair market value for the purposes of payment of stamp duty in the present case and not the prices worked out as per the ready reckoner. The assessee submitted the auction details along with sale certificate issued by the bank. The ld.AR also cited following case laws that well establish the fact that property purchased in auction conducted under the Securitisation and P a g e | 5 A.Y. 2020-21 Yashmith Rajendra Choudhary Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (SARFAESI Act) does not attract the provisions of section 56(2)(x): (2024) 467 ITR 163 ((Delhi)(HC) b) Southern Steel Ltd., Hyderabad vs Income-tax Officer, Ward- 3(3), Hyderabad. (ITA No. 1220/Hyd/2016) c) Pinak Bharat & Co. vs Anil Ramrao Naik, COMM EXECUTION APPLICATION NO. 22 OF 2016

1 However,the ld.the CIT(A) disregarded the contention of the assessee stating that the circular issued by the Office of the Inspector General of Registration and Controller of Stamps, Maharashtra State, is only applicable regarding market value issued by Government or semi- government agencies. He contended that the case laws cited were distinguishable. The ld.CIT (A) held that the provisions of section 56(2)(x) of the Act were applicable because nothing prevented the assessee from quoting a higher price and submitting a bid which would have been closer or identical or higher to the stamp duty value failing to appreciate the fact that expecting the appellant to buy the property at a higher price would constitute an impermissible interference in his fundamental right to exercise commercial expediency the department

Before us, the ld.AR has submitted that thelower authorities have not considered the applicability of SARFAESI Act, explanations and case-laws, relied upon by the assessee and duly submitted to the AO in reply to the show cause notices issued by him. The AO erred in not following the procedure laid down in section 50C(2) of the Act which mandates that in case the assessee claims before any Assessing Officer that the value adopted or assessed or assessable by the stamp valuation authority exceeds the fair market value of the property as on the date of transfer, he shall refer the valuation of the capital asset to a Valuation Officer. The assessing officer having failed to refer the property for valuation to the valuation officer of the Income Tax Department and hence the addition made u/s 56(2)(x) is bad in law and is liable to be deleted. 5.1 Copies of the advertisement in the Newspapers by the IDFC bank for the sale of said property and a copy of sales certificate issued by the said bank in respect of the assessee who had purchased the said property at the auction value of Rs. 1,75,00,000/- were submitted to the AO. It was stated that for property purchased in an auction, once the full payment is made, the bank issues a Sale Certificate. To legally transfer