AISHA MOHAMMED ISMAIL SHAIKH,MUMBAI vs. ITO - 24(1)(1), MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER:

dated 31.12.2025 for assessment year (AY) 2015-16. In ITA No. 1649/M/2026,

the assessee has challenged the addition in quantum assessment completed

under section 144 dated r.w.s. 147 dated 24.02.2024. In ITA No. 1648/M/2026,

the assessee has challenged the validity of penalty levied under section

271(1)(c). Since facts in both the appeals are common, therefore, with the

consent of both the parties both the appals were clubbed, heard together and

are decided by common order.

ld. Authorised Representative (AR) of the assessee submits thatassessee is an individual and no return of income for AY 2015-16 was filed. The assessing officer (AO)

initiated assessment proceedings on the basis of information available on the Insight

Portal indicating that the assessee had entered into a high-value transactionfor purchase

of an immovable property valued at ₹50,12,000/- during the relevant financial year.

Since no return of income was filed by the assessee for the said year, the case was

selected under the non-Filer category of the Risk Management Strategy (RMS), and

proceedings were initiated under section 147 of the Income-tax Act. From the contents

of assessment order, it seems that the AO issued a show cause notice under section

148A(b), followed by an order under section 148A(d), and notice under section 148

dated 20.04.2022. As recorded by the AO, there was no compliance from the assessee

at any stage of the proceedings, final show cause notice issued prior to completion of

assessment remained uncomplied with. Consequently, the AO proceeded to complete

the assessment ex-parte under section 144 read of the Act. It also seems that during

the course of assessment, the AO obtained information from the Joint Sub-Registrar,

Borivali-8, about transaction of purchase of property. And in absence of any explanation

regarding the source of investment, the AO treated the value of property determined by

Sub-Registrar, at Rs. 50,12,000/- as unexplained under section 69 and brought it to tax

under section 115BBE.

Commissioner of Income Tax (Appeals) “ld CIT(A)”. The appeal was filed with a delay of

191 days, which was condoned. The primary contention of the assessee before the ld.

CIT(A) was that no notices under sections 148A, 148, or 142(1) were ever served upon

her, as they were issued at incorrect addresses and she was unaware of the

proceedings. It was further contended that the assessment was completed in violation of principles of natural justice without providing an opportunity of being heard. The appeal

was heard by NFAC and vide order no. ITBA/NFAC/S/250/2025-26/1084248593(1) dated

31/12/2025 and the appeal was dismissed. Further aggrieved, by the order of ldCIT(A),

the assessee has preferred this appeal before Tribunal.

purchased an immovable property during the relevant previous year for a total

consideration of Rs. 19,00,000/-only, whereas the stamp duty valuation authority

(SVA)determined value of such property at Rs. 50,12,000/- for the purpose of collection

of stamp duty. The d. AO, without making any independent enquiry or bringing any

material on record to show that the Appellant had actually invested an amount over and

above the stated consideration, proceeded to treat the entire stamp duty value as

unexplained investment under section 69 of the Act. The deeming provisions relating to

stamp duty valuation, such as those contained in section 50C or section 56(2)(x),

operate in specific situations and cannot be extended beyond their limited scope.

Section 50C applies only in the hands of the seller for computation of capital gains, while

section 56(2)(x) may apply in certain cases in the hands of the purchaser subject to

fulfilment of conditions prescribed therein. However, the AO has not invoked section

56(2)(x), nor has satisfied the conditions required thereunder. Instead, the AO made

under section 69, which requires a finding of actual unexplained investment based on

material evidence. In the absence of any evidence of on-money payment, the stamp

duty value cannot be treated as the actual investment of the Appellant.

assuming for the sake of argument that the stamp duty value could be considered, the

addition could at best be restricted to the difference between the stamp duty value and the actual consideration, and not the entire value of ₹50,12,000/-The action of the AO in

taxing the entire stamp duty value as unexplained investment is grossly excessive and

contrary to settled principles of taxation. The ld AR of the assessee-appellant submits

that the entire investment of Rs. 19,00,000/- is from disclosed sources. The assessee-

appellant had sold an immovable property in the immediately preceding previous year

and received sale consideration of Rs. 25,00,000/-. The said funds were available with

the assessee-appellant and have been utilized for the purchase of the present property.

Thus, the source of investment is clearly identifiable, explained, and supported by

documentary evidence. Once the source of funds is explained, no addition under section

69 can be sustained. The AO completed the assessment ex-parte without proper service

of notices upon the assessee. The notices were issued at incorrect addresses and were

never received by her. Consequently, the assessee was deprived of an opportunity to

present her case and explain the source of investment. This has resulted in a gross

violation of the principles of natural justice, rendering the entire assessment proceedings

vitiated. It is a settled principle that any addition made without affording reasonable

opportunity of being heard cannot be sustained in law. Entire addition has been made

merely on the basis of third-party information and stamp duty data, without conducting

any independent enquiry, verification, or investigation. No statement has been recorded,

no inquiry has been made from the seller, and no material has been brought on record

to establish that the Appellant has paid any consideration over and above what is stated

in the registered document. In the absence of such evidence, the addition under section

69 is wholly unsustainable. The AO has grossly erred in making the impugned addition

mechanically in adopting the stamp duty valuation without carrying the mandatory

exercise of verification through a reference to the Departmental Valuation Officer (DVO), despite the existence of a substantial and abnormal variation between the stamp duty

value of Rs. 50,12,000/- and the actual agreement value of Rs.19,00,000/-. The wide

disparity itself warranted deeper scrutiny and independent valuation, particularly when

the assessee-appellant had not accepted the stamp duty valuation as reflective of the

fair market value. The reference to the DVO is a well-recognized mechanism under the

Act to determine the fair market value of a property in cases where the value adopted

by the stamp valuation authority is disputed or appears excessive. The failure of the Ld.

AO to invoke such a mechanism and instead proceed to make the addition purely on the

basis of stamp duty value reflects non-application of mind and renders the addition

arbitrary. The DVO's report is intended to bring objectivity and technical accuracy into

the determination of value, which is especially crucial in cases involving significant

differences between circle rate and actual transaction value.The ld. AR of the assessee

submits that matter may be restored back to the file of AO for passing

assessment order afresh with the direction for reference to DVO and to allow

opportunity to the assessee to contest the valuation proceedings. He undertakes

that on behalf of the assessee to make timely compliance.

section 271(1)(c), the ld. AR of the assessee submits that the penalty is

consequential to the addition in the assessment order. In case, this bench of the

view that assessee required fresh hearing before AO, the penalty levied by

assessing officer will not survive.

of AO as well as ld. CIT(A) in both the appeals.

through the orders of lower authorities carefully. We find that case of assessee

was reopened on the basis of information in the insight portal that the assessee

purchased immovable property. It seems that SVA reported the value of

transaction as per value determined for the purpose of collection of stamps for

registration of transaction. It is matter or record that assessment was completed

under section 144. In absence of explanation from assessee, the AO added entire

value of transaction as determined by SVA. The ld CIT(A) also confirmed the

action of AO in ex-parte order. We find that substantial rights of the assessee are

involved in the present appeals. Thus, considering the request of the ld AR of the

assessee that the assessee may be allowed to contest the case on merit, and

keeping in view the principal of natural justice, the matter is restored back to the

file of AO, with direction to refer the issue of fair market to DVO for estimation of

fair market value of transaction. The assessee is also directed to provide

complete evidence and information and to substantiate the source of investment.

Needless to direct that the AO shall allow reasonable opportunity to the assessee

before passing order afresh. In the result, the grounds of appeal in ITA No.

1649/Mum/2026 are allowed for statistical purpose.

1649/Mum/2026 is allowed for statistical purpose.

therefore, the penalty levied under section 271(1)(c) will not survive. However,

the AO is at liberty to initiate fresh penalty proceedings as per law.

and appeal in ITA No. 1648/Mum/2026 is allowed.

Order was pronounced in the open Court on 20/05/2026.

/- S/- /- SSd/- Sd/- GIRISH AGRAWAL PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 20/05/2026 Biswajit

Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Nagpur; and (5) Guard file. By Order

Assistant Registrar / DDO ITAT, Mumbai