BHARATBHAI RANCHHODBHAI BHARVAD,DAHOD vs. INCOME TAX OFFICER, ANAND CIRCLE

PDF · subscribers
ITA 2425/AHD/2026Status: DisposedITAT Ahmedabad15 October 2026AY 2017-186 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal noted that the assessee had disputed the stamp duty value of the property before the AO, but the AO failed to refer the matter to the Valuation Officer (VO) as required by Section 56(2)(vii) of the Act when the stamp duty value is disputed. The Tribunal observed that fresh evidence in the form of a VO's report in the case of the co-owner, Shri Ramanlal Mori, for the same property was placed on record. This report determined the fair market value at Rs. 37,65,306/-, as against the stamp duty value of Rs. 1,12,95,918/- adopted by the AO. The Tribunal considered this report as relevant material requiring examination for determining the property's value under Section 56(2)(vii). Consequently, the Tribunal found it appropriate to restore the issue to the file of the Jurisdictional AO for fresh adjudication. The AO was directed to examine the VO's report in the co-owner's case, verify its authenticity and applicability, and determine the fair market value accordingly. The AO was also instructed to verify the additional evidence and provide the assessee with a reasonable opportunity of being heard. The appeal was allowed for statistical purposes.

What were the facts?

The assessee, Bharatbhai Ranchhodbhai Bharvad, filed his return of income for Assessment Year 2017-18 on March 29, 2018, declaring a total income of Rs. 4,23,450/-. His case was selected for scrutiny due to a survey action in FY 2016-17. During the survey, documents revealed the purchase of a property jointly with Shri Ramanlal Mori for Rs. 16,00,000/-. The stamp duty value of this property was Rs. 1,12,95,918/-. The Assessing Officer (AO) added Rs. 48,47,959/-, representing the difference between the stamp duty value and the consideration paid, to the assessee's income under Section 56(2)(vii). The assessment was completed under Section 143(3) on December 29, 2019, at a total income of Rs. 52,71,410/-. The assessee's appeal to the Commissioner of Income Tax (Appeals) – 4, Vadodara, was dismissed by an order dated April 1, 2026. The assessee is now in appeal before the Income Tax Appellate Tribunal (ITAT).

What were the issues?

The primary issues before the Tribunal are: 1. Whether the addition of Rs. 48,47,959/- as unexplained investment, being the difference between the stamp duty value and the purchase value of the property, is bad in law and deserves to be quashed, as argued by the assessee. 2. Whether the Commissioner of Income Tax (Appeals) erred in confirming the addition under Section 56(2)(vii) by ignoring the specific deficiencies of the property and the assessee's request for reference to the Valuation Officer (VO), as contended by the assessee. 3. Whether the initiation of penalty proceedings under Section 271AAC(1) by the AO is bad in law and deserves to be quashed, given that the assessment order is allegedly bad in law, as argued by the assessee. The assessee contended that no compliance could be made before the CIT(A) due to the default of their counsel, leading to the dismissal of the appeal without adjudication on merits. The assessee argued that they had disputed the stamp duty value before the AO and produced a valuer's report. They highlighted that in the case of the co-owner, Shri Ramanlal Mori, a reference to the VO determined the fair market value at Rs. 37,65,306/-, significantly lower than the stamp duty value adopted by the AO. The assessee requested the matter be set aside to the AO for reconsideration based on the VO's report in the co-owner's case. The Revenue, through its Senior Departmental Representative, supported the orders of the lower authorities but had no objection if the matter was set aside to the file of the Jurisdictional AO.

Which sections of the Income-tax Act were involved?

Section 56(2)(vii),Section 143(3),Section 250,Section 271AAC(1),Section 69A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD

Before: SHRI NARENDRA PRASAD SINHA & SHRI SANJAY KUMAR

For Appellant: Shri B. T. Thakkar, CA
For Respondent: Shri Arvind Kumar Namdeo, Sr. DR
Hearing: 08.10.2026Pronounced: 15.10.2026

PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:

This appeal has been filed by the Assessee against the order of Commissioner of Income Tax (Appeals) – 4, Vadodara [hereinafter referred to as “CIT(A)”] dated 01.04.2026 for the Assessment Year (A.Y.) 2017-18.

2.

The brief facts of the case are that the assessee had filed his return of income for A.Y. 2017-18 on 29.03.2018 declaring total income of Rs.4,23,450/-. The assessee is partner in Hotel Ghanshyam and also engaged in the business of construction work. The case of the assessee was selected for scrutiny under CASS for the reason of survey action

ITA No. 2425/Ahd/2026 Bharatbhai Ranchhodbhai Bharvad Vs ITO, AY- 2017-18 2 conducted during the Financial Year 2016-17. In the course of survey, certain documents were found regarding purchase of property by the assessee jointly with one Shri Ramanlal Mori for a consideration of Rs. 16,00,000/-. It was found that the stamp duty value of the said property was Rs.1,12,95,918/-. The AO had, therefore, required the assessee to explain as to why the proportionate difference in the stamp duty value and the actual consideration paid being Rs. 48,47,959/- should not be considered as income of the assessee under the provision of section 56(2)(vii) of the Act. Not convinced with the explanation of the assessee, the AO had made addition of Rs. 48,47,959/- on account of difference in the stamp duty value and the purchase consideration. The assessment was completed u/s. 143(3) of the Act on 29.12.2019 at total income of Rs.52,71,410/-.

3.

Aggrieved with the order of the AO, the assessee had filed an appeal before the First Appellate Authority which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was dismissed.

4.

Now, the assessee is in second appeal before us. The following grounds have been taken in this appeal:

1.

The grounds of appeal mentioned hereunder are without prejudice to each other. 2. The appeal order passed under section 250 of the Income Tax Act, 1961 by Commissioner of Income Tax, (Appeal), Surat is bad in law and deserves to be quashed 3. The In Facts and in circumstances of the case Commissioner of Income Tax, (Appeal), Surat has grossly erred while making an 3 addition of Rs. 48,47,959/- as unexplained investment. The said addition of difference

ITA No. 2425/Ahd/2026 Bharatbhai Ranchhodbhai Bharvad Vs ITO, AY- 2017-18 3

between Stamp Value and Purchase value is bad in law and deserves to be quashed. 4. The Commissioner of Income Tax, (Appeal), Surat has grossly erred while making an addition u/s. 56(2)(vii) of the Act, ignoring specific deficiencies of property as submitted while filing return of income and during scrutiny and ignoring reference to Valuation Officer (V.O.). The said ignorance is bad 5. There is no investment made through unaccounted sources. In spite of that Lr. A.O. in the assessment order said that investment is made through unaccounted sources and has initiated penalty under section 271AAC (1). In fact and in circumstances of the case Lr. A.O. has erred in initiating penalty proceedings u/sec 271AAC(1) of the Income Tax Act, 1961. Since the Assessment Order is bad in Law consequently initiation of penal proceedings deserves to be quashed. 6. Looking to the opportunity for representing the defense your appellant preferred an appeal. The appellant craves, leave to add alter amend OR withdraw any one OR more grounds of appeal

5.

The Assessee as also taken an additional ground which is as under: 1. The Ld. Commissioner of Income Tax erred in law and on facts in confirming addition of Rs. 48,47,959/- being difference between the Stamp Duty Value and the purchase consideration as unexplained investment u/s. 69A of the Income Tax Act, 1961. 6. Shri B. T. Thakkar the Ld. AR of the assessee submitted that no compliance could be made before the Ld. CIT(A) and, therefore, he had dismissed the appeal of the assessee without adjudicating the grounds taken by the assessee on merits. He explained that the non-compliance before the Ld. CIT(A) was due to the default of the counsel who neither attended the proceedings nor informed the assessee. The Ld. AR explained that the assessee had made due compliance before the AO and had disputed the stamp duty value of the property. He explained that report of the valuer about the fair market value of the property was also produced before the AO. However, the AO did not refer the matter to the DVO in spite of specific objection of the assessee and had made the

ITA No. 2425/Ahd/2026 Bharatbhai Ranchhodbhai Bharvad Vs ITO, AY- 2017-18 4 addition in a mechanical manner. The Ld. AR submitted that in the case of joint owner of the property Shri Ramanlal Mori, the matter was referred to the DVO who had submitted his report on 17.11.2022 and the fair market value of the property was determined at Rs. 37,65,306/- only, as against stamp duty value of Rs.1,12,95,918/- adopted by the AO. Considering this fact, the addition made by the AO was not correct. A copy of the DVO report in the case of Ramanlal Mori has also been brought on record. The Ld. AR, therefore, requested that the matter may be set aside to the file of the AO with a direction to consider the DVO report in the case of co-owner and, thereafter, re-adjudicate the matter.

7.

Per contra, Shri Arvind Kumar Namdeo, the Ld. Sr. DR supported the order of the lower authorities. He, however, had no objection if the matter was set aside to the file of Jurisdictional AO.

8.

We have considered the rival submissions and perused the material available on record. On examination of the assessee's reply reproduced in the assessment order, we find that the assessee had disputed the stamp duty value adopted for the property. However, the AO did not refer the matter to the DVO for determining the fair market value of the property. As per provision of section 56(2)(vii) of the Act, if the stamp duty value of the property is disputed by the assessee, then the AO is required to refer the matter to the Valuation Officer to find out the fair market value of the property. In the case of the assessee, no such reference to the DVO was made by the AO. From the fresh evidence brought on record by the assessee, it transpires that the matter was referred to the DVO in the case of the co-owner Shri Ramanlal Mori. The assessee has placed on record a valuation report issued by the DVO in the case of the co-owner, Shri

ITA No. 2425/Ahd/2026 Bharatbhai Ranchhodbhai Bharvad Vs ITO, AY- 2017-18 5 Ramanlal Mori, in respect of the same property. The property document referred to in the assessment order appears to correspond with Document No. 2935 dated 28.09.2016 mentioned in the valuation report. The DVO determined the fair market value of the property at Rs. 37,65,306/-, as against the stamp duty value of Rs. 1,12,95,918/- adopted by the AO. The said report, therefore, constitutes relevant material requiring examination while determining the value of the property for the purposes of section 56(2)(vii) of the Act.

9.

In view of the above and having regard to the fact that the assessee's objection to the stamp duty value was not examined through a reference to the DVO, we consider it appropriate to restore the issue to the file of the Jurisdictional AO for fresh adjudication. The AO is directed to examine the valuation report of the DVO in the case of the co-owner, verify its authenticity and applicability to the property in question, and determine the fair market value in accordance with the applicable provisions of law. The AO shall also verify the additional evidence placed on record by the assessee and afford the assessee a reasonable opportunity of being heard before passing an appropriate order. Accordingly, the issue is restored to the file of the Jurisdictional AO for fresh adjudication in the above terms.

10.

In the result, the appeal of the assessee is allowed for statistical purpose.

Order pronounced in the Court on 15/10/2026 at Ahmedabad.

Sd/- Sd/- (SANJAY KUMAR) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Dated – 15th October, 2026

ITA No. 2425/Ahd/2026 Bharatbhai Ranchhodbhai Bharvad Vs ITO, AY- 2017-18 6 (True Copy) Neelesh, Sr. PS आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड� फाईल /Guard file. आदेशानुसार/BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार पंजीकार (Dy./Asstt.Registrar) उप उप/सहायक उप उप सहायक सहायक पंजीकार सहायक पंजीकार पंजीकार आयकर आयकर अपीलीय आयकर आयकर अपीलीय अपीलीय अिधकरण अपीलीय अिधकरण अिधकरण, अहमदाबाद अिधकरण अहमदाबाद अहमदाबाद / ITAT, Ahmedabad अहमदाबाद

More judgments on Section 56(2)(vii)

All 365 judgments and leading authorities on Section 56(2)(vii) →

Recent GST High Court judgments

Search GST case law →