SACHIN VASANT MASURKAR,MUMBAI vs. DCIT, AAYAKAR BHAWAN,MUMBAI

(धििाारण वर्ा / Assessment Year: 2018-2019) Sachin Vasant v/s. DCIT Circle 16(3), Masurkar Mumbai बिाम Office No. 104, 201, 1st Aayakar Bhawan, Mumbai Floor, National 400002 Insurance Building DN Road, Mumbai G.P.O., Mumbai 400001 स्थायी लेखा सुं./जीआइआर सुं./PAN/GIR No: AFWPM9401L .. Appellant/अपीलाथी Respondent/प्रधिवादी धििााररिी की ओर से /Assessee by: Shri Nishit Gandhi राजस्व की ओर से /Revenue by: Shri Aditya M. Rai- SR DR 18.07.2025 स िवाई की िारीख / Date of Hearing घोर्णा की िारीख/Date of Pronouncement 26.08.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 28.01.2025 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year 2018-2019.

2. Addition of Rs. 27,74,700, being the difference between the stamp value and purchase consideration, as Income from other sources u/s 56(2)(x) of the L.T. Act. 2.1 On the fact and in the circumstance of the case, the National Faceless Appeal Centre -CIT (A) ('Ld. CIT (A)) has erred in law and in facts in upholding the addition of INR 27,74,700- made by the learned Assessing Officer on account of being the difference between the stamp value and purchase consideration, as Income from other sources u's 56(2)(x) of the LT. Act. 2.2 The Ld. CIT (A) erred in not considering fair market value which is lower than the annual stamp rates issued by the GoM for the purpose of collection of stamp duty. 2.3 The Ld. CIT (A) erred in not considering the fact that the property was in ruinous condition, likely to fall and dangerous to any person occupying resorting to or passing by such structure and the MCOGM (Municipal Corporation of Greater Mumbai) has already issued notice dated 20/05/2015 to the society u/s 354 of Mumbai Municipal Corporation Act to avoid any mishap to vacate the premises and pull down and to prevent all cause of danger. 2.4 The Ld. CIT (A) has erred in not considering the factual aspects of the case and correct valuation based on natural principles of evaluation of the property. 2.5 The Ld. CIT (A) ought to have consider the valuation report as submitted by the Appellant.

2.6 The Ld. CIT (A) has erred in placing the reliance on the Valuation Report purportedly given by Valuation Department. It is clarified that when the purported inspection were taken the said Building was already undergone measure repairs, renovation and painting from the additional expenses incurred by all the members including the Appellant and therefore the Assessment by the Valuation Officer at the relevant time post repair/renovation of the Building would have not in consonance with the valuation report as submitted by the Appellant as well as the actual site situation when the said flat was purchased.

3. The appellant craves leave to add, to alter or amend the Grounds of Appeal on or before the hearing of this appeal.”

AY 2018-19 Sachin Vasant Masurkar 3.1. Aggrieved with the order of Ld. AO, the assessee preferred an appeal before Ld. CIT(A). In the grounds of appeal taken before Ld. CIT(A), the assessee claimed that Ld. AO had erred in not referring the case to the Valuation Officer (VO) as required under relevant pronounce the Act. During the course of appellate proceedings, the assessee furnished a valuation report dated 10.06.2022 issued by a registered valuer wherein the value of the property was determined at Rs. 64,92,225/- as on 08.01.2018 i.e. the date of transfer. Thereafter, Ld. CIT(A) referred the report submitted by the assessee to the Ld. AO and sought a remand report. During the remand proceedings, Ld. AO referred the said valuation report to the Departmental Valuation Officer (DVO). In response, the DVO submitted his report wherein he determined the value of the property again at the stamp duty value after rejecting the report of the registered valuer. Based on the remand report received from the AO along with DVO’s report, Ld. CIT(A) upheld the action of the AO and confirmed the addition of Rs. 27,74,700/-. Aggrieved with the order of Ld. CIT(A), the assessee has preferred an appeal before the Tribunal.

“FACTS: 1. The only issue raised in the present appeal is in respect of the addition of Rs.27,74,700/-made by the Learned Assessing Officer ["the Ld. AO"] u/s 56(2)(x) of the Income Tax Act, 1961 ["the Act"] in respect of property purchased by the Assessee on 8th January, 2018. The Assessee purchased his flat in a building known as Shangrila Dena Jyoti Co-operative Housing Society, Andheri West for Rs. 65,00,000/- whereas the Stam Duty Value (SDV) as per the Stamp Valuation Authorities was Rs. 92,74,700/-. The Assessee submitted before the Ld. AO that the AY 2018-19 Sachin Vasant Masurkar said stamp duty value did not reflect the fair market value of the property. The property was in a dilapidated condition and the MCGM had already issued a notice for vacating the said property stating it was dangerous to occupy the same. The residents of the property challenged the said notice before the Hon'ble High Court and even the High Court refused to stay the vacation of the said property. The Assessee disputed the valuation so made by the Stamp Duty Authorities. He further submitted various documents and evidences to manifest that there was no buyer for the said property and also submitted that the consideration paid by him for the purchase of the said flat was at the Fair Market Value and the SDV was not the correct fair market value. These facts are also accepted by the Ld. AO in his order at pgs. 4 & 5 of Assessment Order. However, the Id. AO added an amount of Rs 27,74,700/- [Rs 92,74,700/- minus Rs.65,00,000/-] in the hands of the Assessee u/s 56(2)(x) of the Act. One of the reasons given by the AO was that the Appellant has not furnished an independent valuers report to corroborate his claim (ref. pg. 5 of AO). The Assessee challenged the said order in appeal before the Learned Commissioner of Income Tax (Appeals) ["the Ld. CIT(A)"]. Before the Ld. CIT(A) the Assessee furnished an independent valuer's report dated 10.06.2022 as per the which the valuation of the flat purchased by the Assessee was arrived at Rs. 64.92 lakhs. This report was specifically filed since the Id. AO never asked for the same from the Assessee but ultimately made the addition on the ground that the Assessee did not furnish a valuation report [ref. pg. 5 of AO). This valuation report alongwith the submissions of the Assessee were then forwarded by the Id. CIT(A) to the AO for his comments. The AO in turn forwarded this to the Departmental Valuation Officer ["the DVO"], who, after a period of more than 1.5 years, instead of furnishing a Valuation simply found some faults with the Valuation report submitted by the Assessee vide his communication dated 03.01.2024. Based on these comments of the DVO, as forwarded by the AO to the CIT(A) ON 27.06.2024, the CIT(A) confirmed the addition made by the Ld. AO u/s 56(2)(x). Against this order of the Ld. CIT(A), the Assessee has filed further appeal before the Hon'ble Income Tax Appellate Tribunal ["the ITAT"]. PROPOSITIONS: 1. Admittedly, the Assessee disputed the Stamp Duty valuation before the AO, which is also part of the assessment order. However, without considering the said submissions, the AO passed the assessment order on the ground basis never confronted to the Assessee. Such an action is grossly unjust 2 On a plain reading of the proviso to section 56(2)(x) it is evident that once the Assessee disputes the SDV before the AO, it is mandatory to refer the matter to DVO for valuation. Admittedly, this was not done. Therefore, the entire addition must be deleted since the same is contrary to the mandate of section 56(2)(x) 3. A similar provision is contained in section 50C of the Income Tax Act and the language of section 50C [so far as reference to DVO is concerned] is Pari materia with that of section 56(2)(x). Now, numerous judicial precedents have held that once the Assessee objects to the SDV, it is mandatory for the AO to refer the valuation to the DVO, failing which the entire addition deserves to be deleted. [Ref. ACIT v/s Lalitha Karan ITA/1130/HYD/2015, et. al.] 4. The word "may" used in the proviso has to be read as shall. This has been so-held in numerous judicial precedents [Ref. ACIT v/s Tarun Agarwal [2018] 97 taxmann.com 346/173 ITD 107 (Agra-Trib), ITO v/s Aditya Narain Verma (HUF)[2017] 88 taxmann.com 840 (Delhi-Trib), et. al.]. Further, in this regard the AY 2018-19 Sachin Vasant Masurkar following observations of the Hon'ble High Court in the case of Sunil Kumar Agarwal v/s CIT-(2015) 372 ITR 83 (Calcutta) are relevant: we are of the opinion that the valuation by the departmental valuation officer, contemplated under Section 50C, is required to avoid miscarriage of justice. The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the District Sub Registrar for the purpose of stamp duty. The legislature has taken care to provide adequate machinery to give a fair treatment to the citizen/taxpayer. There is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused. Even in a case where no such prayer is made by the learned advocate representing the assessee, who may not have been properly instructed in law, the assessing officer, discharging a quasi judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law.".

6. It is further submitted that even before the CIT(A) mere comments are provided on the valuation given by the Assessee, rather than providing a fair and separate valuation of the said flat. The Assessee submits that the entire approach is to somehow confirm the addition in the hands of the Assessee. In the humble submission of the Assessee additions made in contumacious disregard of the law must be deleted and it is prayed accordingly.

7. The Assessee further submits, that the present appeal is filed by the Assessee. In the humble submission of the Assessee, in terms of section 254 of the Income Tax Act an order of the Hon'ble Tribunal cannot be passed for making up for the deficiency in the Assessment Order. It has been held that the Hon'ble Tribunal can neither perform the assessment nor make good the flaws in the assessment so as to cover up the shortfalls of the AO. In fact, the Hon'ble Tribunal cannot set aside a matter to make good a deficiency in the assessment order [Ref. ACIT v/s Anima Investment Ltd.- (2000) 73 ITD 125 (TM) relied on with approval in CIT v/s R. N. Jayaprakash (2020) 269 Taxman 527 (Madras), DCIT w/s Rohtas Projects Ltd.(2006) 100 ITD 113 (Lucknow) (TM), ITO v/s Pawan Kumar Gupta-(2010) 131 TTJ 92 (Delhi), et. al.).

8. Further, in a number of cases, it has been held that no second innings could be given to the Assessing Officer in a case where he glaringly and blatantly fails to disregard the law. It is also a settled law that the Assessing officer cannot be given a second innings and that the Tribunal is not empowered to remand the matter by issuing directions so as to sustain the addition [Ref. Raj Kumar Jain v/s ACIT- (1994) 208 ITR (AT) 22 (All) (TM), et. al.]. In the present case, the DVO has already made AY 2018-19 Sachin Vasant Masurkar negative comments on the valuation report provided by the Assessee but without stating as to what exactly is the flaw in the valuation. Therefore, remanding the matter back for reference to the DVO would serve no purpose and also since more than 8 years have already elapsed since the purchase of the property. Not just that, it would also amount to giving a premium to the AO for disregarding the law. It is therefore prayed that the addition made by the Ld. AO be deleted.

5. In response of the submissions made by Ld. AR, the Ld. DR has also filed a counter reply as under: “1. Assessment u/s. 143(3) r.w.s. 144B was completed on 03.09.2021. Valuation report submitted by assessee is dated 10.06.2022. During appellate proceeding before Ld. CIT(A) DVO has given his report on 03.01.2024. The details of variation in value is as under: As per agreement by assessee Rs. 65,00,000/- Stamp duty value Rs. 92,74,7000/- As per the valuer of assessee Rs. 64,92,225/- DVO valuation [No change suggested in stamp duty value] Rs. 92,74,700/- 2. In assessment order, it is no where mentioned that assessee had requested to AO the valuation from the DVO. The section 50C(2)(b) reads as under: “The value so adopted or assessed [or assessable] by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court. The Assessing officer MAY refer to valuation of the capital asset to a valuation officer” 2(a). The word used in MAY. It can not be read as shall. For the relevant of word in Statute, I rely on the judgment of Hon’ble Supreme Court in the case of Orissa state Warehousing Corp. vs. Commissioner of Income Tax [1999] 103 taxman 623(SC) dated 01.04.1999 – copy enclosed. Under the circumstances, as there was not specific request from Assessee, the AO had not referred to the DVO. 3. The method to be used for valuation of the property is a prerogative of the DVO. AO can not interfere in valuation. I also rely on the judgment of Hon’ble ITAT Pune Bench AY 2018-19 Sachin Vasant Masurkar in the case of Anil Murlidhar Deshmukh vs. ITO Ward 3(2), Nashik [2019] 101 tamann.com 93 (Pune-Trib) Dated 13.12.2018 – copy enclosed.”

7.1 Before Ld. CIT(A), the assessee filed a valuation report from a registered valuer. Ld. CIT(A) referred the same to the Ld. AO and sought a remand report. Therefore Ld. AO, in these further referred this report to the DVO, who after AY 2018-19 Sachin Vasant Masurkar considering the registered valuer’s report upheld the Stamp Duty Valuation (SDV). Based on this report, Ld. CIT(A) dismissed the assessee’s appeal.

7.2. Ld. AR has heavily relied of the decision of Hyderabad ITAT bench in the case of ACIT vs. Lalith Karan 2017(1) TMI 505- ITAT Hyderabad wherein it has been held that when the AO did not refer the matter to DVO, he cannot be give a second chance to make good his deficiencies.

7.3. However, we note that the facts of this case are different from the case in hand as in that case the assessee had made a specific request before the AO for making a reference to the DVO. However, Ld. AO did not accept the request of AO and proceeded to make the impugned addition after invoking section 50C of the Act. In the present case, the assessee did not make any request for reference to the DVO nor he submitted any valuation report from registered valuer before the AO. However, during first appellate proceedings, before submitting the remand report called for by Ld. CIT(A), the AO on his own referred the assessee’s valuation report to the DVO who supported the SDV after rejecting the registered valuers report. Thus, Ld. CIT(A) has confirmed the addition after considering the DVO’s report submitted by AO in response to the valuation report submitted by the assessee during appellate proceedings.

7.4. We note that even though the AO did not refer the matter to the DVO, however, during remand proceedings, in all fairness, Ld.AO has referred the valuation report submitted by the assessee to the DVO for his report / comments. Thus, the assessee is left into no cause of grievance in this regard.

7.5. In various decisions cited by the Ld. AR, there was a specific request by the assessee before the AO, for making a reference to the DVO which is not the case here. In this regard, Hon’ble Jurisdictional High court in the case of Rallis India vs CIT(A) [2015] 56 taxmann.com 282 (Bom) has held that when the AO failed to make enquiry u/s. 55A which passing assessment order, the Ld. CIT(A) during appellate proceedings before him can make such enquiry by making reference to the DVO either himself or directing the assessing officer to do so.

7.6. In our considered opinion, in the present case also, Ld. CIT(A), has take note of the DVO report at the stage of remand proceedings. However, we note that the Ld. CIT(A), before relying the DVO’s report, did not give the assessee proper opportunity to file his objections. We are therefore, of the view that the assessee should have been given proper opportunity to submit his objections to the DVO’s report by Ld. CIT(A). Accordingly for this limited purpose, we restore the matter to Ld. CIT(A) for providing due opportunity to the assessee for filing his objections and to deal with his submissions and pass a reasoned order.

AY 2018-19 Sachin Vasant Masurkar Order pronounced in the open court on 26 .08.2025. Sd/- Sd/- NARENDER KUMAR CHOUDHRY RENU JAUHRI (न्याधयक सदस्य/JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER) Place: म ुंबई/Mumbai दिन ुंक /Date 26.08.2025 दिव्य रमेश न ुंिग वकर/ स्टेनो आदेश की प्रधिधलधप अग्रेधर्ि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त / CIT 4. दवभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण DR, ITAT, Mumbai 5. ग र्ड फ ईल / Guard file. सत्याधपि प्रधि //True Copy// आदेशाि सार/ BY ORDER,