NIKHIL JETHALAL SONANI,AHMEDABAD vs. INCOME TAX OFFICER, WARD 5(3)(1), AHMEDABAD

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ITA 2267/AHD/2026Status: DisposedITAT Ahmedabad28 October 2026AY 2018-20198 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the addition of ₹12,03,033/- made under Section 56(2)(x) of the Act could not be sustained without examining the assessee's objection that the stamp duty value exceeded the fair market value. The Tribunal noted that the assessee had disputed the stamp duty valuation through written submissions, contending it was influenced by a State Government notification and did not represent the actual fair market value of agricultural lands. The third proviso to Section 56(2)(x) read with Section 50C(2) mandates a reference to the DVO when the stamp duty value is disputed on grounds that it exceeds the fair market value. The Tribunal found that the AO was required to consider the assessee's objection and the applicability of a DVO reference. Since no such reference was made, the matter was restored to the AO for making a reference to the DVO and adjudicating the issue afresh. The addition was set aside for fresh adjudication. Regarding penalty under Section 270A, the Tribunal held that it would be considered based on the outcome of the fresh assessment proceedings. The assessee's grounds relating to valuation dispute were allowed for statistical purposes.

What were the facts?

The assessee, Nikhil Jethalal Sonani, filed an appeal against the order dated 19.03.2026 passed by the CIT(A)/NFAC, Delhi, for Assessment Year 2018-2019. The assessee had purchased two parcels of land with co-owners. The Assessing Officer (AO) made an addition of ₹12,03,033/- under Section 56(2)(x) of the Income-tax Act, 1961, representing the difference between the agreement value and the stamp duty value, after considering the assessee's share. The assessee had disputed the stamp duty valuation, contending that the properties were agricultural lands and the valuation was inflated due to a Gujarat State Notification. The AO rejected the explanation and made the addition without referring the matter to the Departmental Valuation Officer (DVO). The CIT(A) upheld the addition, stating the assessee had not made a formal request for DVO reference and had accepted the stamp duty valuation by paying stamp duty.

What were the issues?

1. Whether the addition of ₹12,03,033/- under Section 56(2)(x) of the Income-tax Act, 1961, is sustainable when the assessee disputed the stamp duty value as exceeding the fair market value, and the AO failed to refer the matter to the DVO? - Assessee's contention: The AO ought to have referred the valuation to the DVO as per the third proviso to Section 56(2)(x) read with Section 50C(2) of the Act, as the assessee had disputed the stamp duty value. Reliance was placed on Sunil Kumar Agarwal v. CIT and CIT v. Chandra Narain Chaudhri. Payment of stamp duty does not preclude disputing the value for income-tax purposes. - Revenue's contention: Not recorded in the judgment. 2. Whether the initiation of penalty proceedings under Section 270A is sustainable? - Assessee's contention: The penalty was mechanically initiated without appreciating that the addition stemmed from a debatable technical interpretation of stamp values versus actual costs. - Revenue's contention: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 56(2)(x),Section 50C(2),Section 250,Section 143(3),Section 144B,Section 270A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD

Before: DR. B.R.R. KUMAR, VICE-

For Appellant: Shri Girish Gore, AR
For Respondent: Shri Kalpesh Rupavatia, Sr. DR
Hearing: 19.10.2026Pronounced: 28.10.2026

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT ITA No. 2267/AHD/2026 (Assessment Year: 2018-19)

Nikhil Jethalal Sonani, Vs. The Income Tax Officer, 6/60, Pujan Apartment, Ward-5(3)(1), B/h. Jivraj Mehta Hospital Ahmedabad. Vasana, Ahmedabad-380007. [PAN : AGVPP1188 M] (Appellant) .. (Respondent) Appellant represented by : Shri Girish Gore, AR Respondent represented by: Shri Kalpesh Rupavatia, Sr. DR Date of Hearing 19.10.2026 Date of Pronouncement 28.10.2026 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-

This appeal has been filed by the Assessee against the order dated 19.03.2026 passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi (hereinafter referred to as ‘Ld. CIT (A)’ in short), under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’ in short) for Assessment Year 2018- 2019.

ITA No.2267/AHD/2026, AY-2018-19 Nikhil Jethalal Sonani - 2– 2. The Assessee has raised the following grounds of Appeal:-

1.

General Ground Against Arbitrary Addition The learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC) (hereinafter referred to as CIT(A)] erred in law and on facts in confirming the addition of ₹12,03,033/- made by the learned Assessing Officer (AO) under Section 56(2)(x) of the Income-tax Act, 1961. The confirmed addition is completely arbitrary. contrary to the facts on record, and unsustainable in law. 2. Failure to Mandatorily Refer the Matter to the Departmental Valuation Officer The learned CIT(A) erred in interpreting that a reference to the Departmental Valuation Officer (DVO) under the third proviso to Section 56(2)(x) (read with Section 50C(2)] is directory or optional ("may") rather than mandatory ("shall"). Having recognized that the Appellant actively disputed the Stamp Duty Value (SDV) vis-a-vis the actual fair market value, the lower authorities were statutorily bound to invoke the valuation machinery. 3. Erroneous Dismissal for Want of a "Formal Portal Request" The learned CIT(A) grievously erred in confirming the addition on the technicality that the Appellant did not raise a "formal request through the e- proceedings module" or submit an independent valuation report during assessment. The lower authorities failed to appreciate that the substantive written e-submissions dated 09.10.2019 and 07.01.2020 explicitly disputing the valuation constituted a valid legal objection under the Act. 4. Disregard of Factual Realities & Coercive Stamp Duty Valuation (Notification The learned lower authorities failed to appreciate that the subject properties were purely agricultural lands at the time of transaction. The escalated stamp duty value was determined under administrative compulsion due to Gujarat State Notification No. 58/2016/11994-12050 dated 14/07/2016, which artificially reclassified agricultural lands with future development potential as "Open Land" for stamp duty computations. Such fictional or generic guidelines do not represent the actual, real-world Fair Market Value on the date of purchase. 5. Misconceived Notion of "Conscious Acceptance"

ITA No.2267/AHD/2026, AY-2018-19 Nikhil Jethalal Sonani - 3– The learned CIT(A) erred in law by concluding that because the Appellant paid the stamp duty to secure deed registration without filing a separate dispute before the State Stamp Authority, he had "consciously accepted" the circle rate as the true market value for income tax assessments. Payment of a state-levied fee under regulatory duress cannot act as an estoppel against disputing the value under the Income-tax Act. 6. Non-Exercise of Co-Terminus Appellate Powers The learned CIT(A) erred in failing to exercise his co-terminus powers of assessment and adjudication under Section 250 of the Act. If the learned CIT(A) was of the view that a DVO reference was lacking from the assessment file, he ought to have directed such a reference during the appellate proceedings to ensure substantive justice, instead of summarily dismissing the appeal. 7. Mechanical Initiation of Penalty Proceedings The learned lower authorities erred on facts and in law in mechanically initiating penalty proceedings under Section 270A for alleged "under- reporting of income," without appreciating that the entire addition stems from a highly debatable technical interpretation of stamp values versus actual agreement costs. 8. Reservation of Statutory Rights The Appellant craves leave to add, alter, amend, modify, or delete any of the above grounds of appeal at or before the time of the physical or virtual hearing before this Honorable Tribunal. 3. The assessee filed his return of income for Assessment Year 2018–19 on 24.10.2018, declaring total income of ₹3,58,680/-. The case was selected for limited scrutiny under the Computer-Assisted Scrutiny Selection (CASS) system on the issue of investment in immovable property. During the relevant previous year, the assessee, along with other co-owners, purchased two parcels of land at Ahmedabad. The agreement value and stamp duty value of the properties were ₹43,71,000/- and ₹76,49,250/-, respectively, in respect of the first property, and ₹68,30,978/- and ₹1,17,91,500/-,

ITA No.2267/AHD/2026, AY-2018-19 Nikhil Jethalal Sonani - 4– respectively, in respect of the second property. Considering the assessee’s respective ownership shares of 14% and 15%, the Assessing Officer computed the difference attributable to the assessee at ₹12,03,033/-. During the assessment proceedings, the assessee filed written submissions dated 09.10.2019, 07.01.2020 and 02.01.2021, disputing the stamp duty valuation. It was contended that the properties were agricultural lands and that the stamp duty valuation had been enhanced pursuant to Gujarat State Notification No. 58/2016/11994-12050 dated 14.07.2016, which allegedly resulted in the application of higher rates for stamp duty purposes.

3.1 The Assessing Officer, vide order dated 09.04.2021 passed under Section 143(3) read with Section 144B of the Act, rejected the explanation and made an addition of ₹12,03,033/- under Section 56(2)(x) of the Act without referring the valuation to the DVO.

4.

The Ld. CIT(A), vide order dated 19.03.2026, upheld the addition, observing, inter alia, that the assessee had not made a formal request through the e-proceedings module for a DVO reference and had consciously accepted the stamp duty valuation by paying the applicable stamp duty. Aggrieved, the assessee is in appeal before this Tribunal.

5.

The learned Authorised Representative submitted that the assessee had disputed the stamp duty valuation through written submissions filed during the assessment proceedings. It was contended that the difference between the agreement value and the

ITA No.2267/AHD/2026, AY-2018-19 Nikhil Jethalal Sonani - 5– stamp duty value arose on account of the stamp valuation methodology applicable to the properties and did not necessarily represent any additional benefit received by the assessee.

5.1 The learned Authorised Representative further submitted that the third proviso to Section 56(2)(x) of the Act incorporates the valuation mechanism prescribed under Section 50C of the Act. Once the assessee disputed the stamp duty value on the ground that it exceeded the fair market value of the properties, the Assessing Officer ought to have considered referring the valuation to the DVO.

5.2 Reliance was placed on the decisions in Sunil Kumar Agarwal v. CIT (2015) 372 ITR 83 (Calcutta High Court) and CIT v. Chandra Narain Chaudhri (2013) 38 taxmann.com 275 (Allahabad High Court). It was also submitted that payment of stamp duty for registration of the sale deeds could not, by itself, prevent the assessee from disputing the stamp duty value for income-tax purposes. Accordingly, the assessee prayed that the addition be deleted.

6.

We have considered the grounds of appeal, the written submissions filed by the assessee and the material available on record. The principal issue for consideration is whether the addition of ₹12,03,033/- made under Section 56(2)(x) of the Act can be sustained without examining the assessee’s objection that the stamp duty value of the properties exceeded their fair market value.

6.1 The assessee has specifically contended that the valuation adopted for stamp duty purposes was influenced by the applicable

ITA No.2267/AHD/2026, AY-2018-19 Nikhil Jethalal Sonani - 6– State Government notification and did not represent the actual fair market value of the agricultural lands on the relevant date. The assesses has also referred to written submissions filed before the Assessing Officer disputing the valuation. However, the valuation of the properties has not been independently examined by the DVO.

6.2 The third proviso to Section 56(2)(x) of the Act provides for a reference to a Valuation Officer where the stamp duty value of immovable property is disputed by the assessee on the grounds specified in Section 50C(2) of the Act. The said provision incorporates the valuation mechanism under Section 50C, as far as applicable.

6.3 In the present case, the assessee has relied upon contemporaneous written submissions to demonstrate that the stamp duty valuation was disputed during the assessment proceedings. Further, the payment of stamp duty for registration of a sale deed and the determination of fair market value for the purposes of Section 56(2)(x) are distinct matters. Payment of stamp duty, by itself, does not dispense with the need to examine a properly raised objection under the applicable statutory provisions. We find that the stamp duty value of the immovable property was disputed by the assessee on the ground that the same exceeded its fair market value. The third proviso to Section 56(2)(x) incorporates the valuation mechanism provided under Section 50C, as far as applicable. In these circumstances, the Assessing Officer was required to duly consider the assessee's objection and the applicability of a reference to the Departmental

ITA No.2267/AHD/2026, AY-2018-19 Nikhil Jethalal Sonani - 7– Valuation Officer. Since no such reference was made and the issue has not been examined through the prescribed valuation mechanism, we deem it appropriate to restore the matter to the file of the Assessing Officer for making a reference to the DVO, subject to the conditions prescribed under Section 50C(2), and thereafter adjudicating the issue afresh in accordance with law, after affording the assessee a reasonable opportunity of being heard. Accordingly, the addition of ₹12,03,033/- is set aside to the file of the Assessing Officer for fresh adjudication in accordance with law. The assessee’s grounds relating to the valuation dispute are allowed for statistical purposes.

6.4 The assessee has also challenged the initiation of penalty proceedings under Section 270A of the Act. Since the underlying quantum addition is being restored to the file of the Assessing Officer for fresh adjudication, the issue relating to penalty shall be considered in accordance with law, depending upon the outcome of the fresh assessment proceedings and the applicable statutory requirements

7.

In the result, the appeal filed by the assessee is allowed for statistical purposes.

The order pronounced in the open Court on 28.10.2026. Sd/- Sd/- Sd/- Sd/- (RAHUL CHAUDHARY) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT (True Copy) Ahmedabad; Dated 28.10.2026 MV

ITA No.2267/AHD/2026, AY-2018-19 Nikhil Jethalal Sonani - 8– JEETENDR Digitally signed by JEETENDRA DEVENDRABHAI UPADHYAY DN: c=IN, o=PERSONAL, A title=6087, आदेश की �ितिलिप अ�ेिषत / Copy of the Order forwarded to : 2.5.4.20=7e5568a89b633f174 b28a80f5e63c638da40b7313f DEVENDR 1. अपीलाथ�/ The Appellant b47ebaefda841cf59d1703, postalCode=380059, 2. ��थ�/ The Respondent. ABHAI st=Gujarat, serialNumber=816dc56e8962 3. संबंिधतआयकरआयु�/ Concerned CIT 11a1a21ccc4abc94ddc94458f UPADHYA 4. आयकरआयु�(अपील) /The CIT(A)- 4a1b37be8e1854e939929510 6d4, cn=JEETENDRA DEVENDRABHAI UPADHYAY 5. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, अहमदाबाद/ DR, ITAT, Ahmedabad Y Date: 2026.10.30 16:16:01 +05'30' 6. गाड�फाईल /Guard file. आदेशानुसार/ BY ORDER,

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