ARIES EXPORT PRIVATE LIMITED,MUMBAI vs. INCOME TAX OFFICER, MUMBAI

The brief facts of the case are that the assessee is a private limited company and carrying on business of export of sugar mill machinery, agricultural implements, tea processing machinery, sugar chemicals and other allied activities. During the year, the assessee purchase an immovable property amount to Rs.14,44,50,000/- whereas stamp duty value of the said property was Rs.17,66,55,000/-. The assessee’s case was selected for complete scrutiny related to the compliance with TDS provision, on payment of outside India, duty drawback and investment in immovable property. Related to the purchase of the alleged immovable property the difference in between the agreement value and value as per the stamp duty authority which comes to Rs. 3,22,05,000/-. During the assessment proceeding the assessee filed objection for not to decide the matter with out referring the District Valuation Officer (DVO) as per provision of section 50C(2) of the Act. But without considering the assessee’s plea, the Ld. AO confirmed the addition amount to Rs.3,22,05,000/- without referring the valuation to DVO. The aggrieved assessee filed an appeal before the Ld. CIT(A). But without considering the assessee’s objection the Ld. CIT(A) rejected the appeal of the assessee and uphold the impugned addition. Being aggrieved assessee filed an appeal before us.

The Ld. AR filed a paper book comprising pages 1 to 120, which has been taken on record. The Ld. AR submitted that, during the assessment proceedings, the assessee had furnished all the relevant documents and specifically requested the Ld. AO to refer the valuation of the property to the DVO. However, without considering the assessee's request, the Ld. AO invoked the provisions of section 56(2)(x) of the Act and made an addition of Rs. 3,22,05,000/-, being the difference between the purchase consideration and the stamp duty value of the property. Being aggrieved, the assessee preferred an appeal before the Ld. CIT(A). During the appellate proceedings, the assessee furnished a valuation report dated 09.02.2023 issued by a Registered Valuer, which is placed at pages 76 to 98 of the APB. The Ld. AR also invited our attention to the e-Proceedings Response Acknowledgement, placed at pages 99 to 100 of the APB, to demonstrate that the assessee had specifically requested the Ld. CIT(A) to direct a reference of the property to the DVO and had simultaneously furnished the valuation report of the Registered Valuer. The said valuation report determined the fair market value of the impugned property at Rs. 14 crore, which was substantially in line with the actual purchase consideration. The Ld. AR further submitted that the aforesaid submissions and the assessee's request for a reference to the DVO were duly taken note of by the Ld. CIT(A) in the impugned appellate order. The relevant extract from page 4 of the impugned appellate order is reproduced below: “The appellant had objected against the show cause notice and had requested the assessing officer to not add the difference between the stamp duty value and purchase value of the property and treat the same as income u/s 56(2)(x). Ignoring the objection of the appellant the learned AO decided not to refer the matter to District Valuation Officer (DVO) as referred in section 50C (2) which is bad in law. We have also obtained a valuation certificate of the property received from the government registered valuer wherein the property is valued at Rs. 14,00,00,000/- which is below the agreement value. We are attaching the valuation certificate of the property received from the government registered valuer certifying the fair market value of the property for your reference. On the basis of the said certificate it is evident that the appellant has transacted at the fair market value. In the absence of any reference to the DVO the learned AD concluded that the stamp duty value is the market value and added the difference to the Income of the appellant which is against the legal provisions as enumerated under the income tax act 1961.”

The Ld. DR relied upon and supported the orders of the revenue authorities. However, the Ld. DR did not controvert the submissions advanced by the Ld. AR by placing any contrary facts or material on record.

We have heard the rival submissions and carefully considered the documents available on record. The assessee filed its return of income under section 139 of the Act, and the case was selected for scrutiny. During the assessment proceedings, the Ld. AO observed that the assessee had purchased an immovable property for a consideration of Rs. 14,44,50,000/-, whereas the stamp duty value of the property was Rs. 17,66,55,000/-. Accordingly, the difference in valuation was brought to tax by invoking the provisions of section 56(2)(x) of the Act. The Ld. AR submitted that, both during the assessment proceedings and the appellate proceedings, the assessee had specifically objected to the adoption of the stamp duty value and had requested that the matter be referred to the DVO for determination of the fair market value of the property. It was further submitted that the assessee had also furnished a valuation report of a Registered Valuer, wherein the fair market value of the property was determined at approximately Rs. 14 crore, which substantially matched the actual purchase consideration. Despite these submissions, neither of the revenue authorities considered the assessee's request for a reference to the DVO. The record further reveals that the assessee had filed the Registered Valuer's report before the Ld. CIT(A) through the e-proceeding response acknowledgement dated 06.02.2023. On perusal of the impugned appellate order, we find that the Ld. CIT(A) has duly recorded this factual position.