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

1 Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi - CIT (A) (Ld. CIT (A)), erred in not granting proper, sufficient and adequate opportunity of being heard to the Appellant while framing the assessment order.

2 The Ld. CIT (A) fails to issue the Departmental Valuation Officer observation to the appellant. Thus appellate order passed without issuing renard repord/ Departmental Valuation Officer observation to the appellant to justify the discrepancies. The absence of this report and the failure to provide the appellant with a chance to respond or justify the findings further violates the principles of natural justice. The appellant feels that this action of the Ld. CIT (A) states that order passed by the appellate is an ex-parte order.

3 The impugned Orders resulted in grave injustice and additional tax burden to the Appellant who is a bonafide purchaser and has not misreported the transaction as alleged.

4 The Ld. CIT (A) has not considered any of the grounds both on the merits and in law raised in Appeal.

5 The Ld. CIT (A) has erred in holding proceedings u/s 270 A allegedly for mis- reporting the income.

6 The Ld. CIT (A) has erred in holding that the appellant was non-responsible for Video Conferencing hearing.

7 The Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi - CIT(A) has erred in law and in facts in confirming the action of the Assessing Officer in passing the assesment order w/s 143(3) of the Act which is invalid and bad in law

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.

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 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.

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.

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.

5 The Ld. CIT (A) ought to have consider the valuation report as submitted by the Appellant.

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.

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

Brief facts of the case are that the assessee filed return declaring income of Rs. 40,82,690/- for AY 2018-19 on 31.10.2018. The case was selected for scrutiny for the reason that the assessee had purchased a property at value lower than the stamp duty value. It was noted that the assessee had purchased the impugned property for Rs. 65 lakhs, of which the stamp duty valuation was Rs. 92,74,700/-. The assessee was given a show cause notice by Ld. AO requiring him to explain as to why the difference amount of Rs. 27,74,700/- should not be added to his income u/s. 56(2)(x) of the Act. In response to this show cause notice, the assessee explained that he had sold the property at the market value which was lower than the stamp duty value since the entire building in which the said property flat was located had become dilapidated and dangerous for habitation and hence required immediate eviction. Under these circumstances, there was no buyer ready to buy the said flat. Since the assessee’s submissions were not considered satisfactory, Ld. AO proceeded to make the addition of Rs. 27,74,700/- u/s. 56(2)(x) and passed the order u/s. 143(3) r.w.s. 144B assessing the total income at Rs. 68,67,390/-.

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.

Before us, Ld. AR has filed the following written submissions in support of his contention that the reference to the DVO was mandatory:

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 ( V) as per the Stamp Valuation Authorities was Rs. 92,74,700/-. The Assessee submitted before the Ld. AO that the P a g e | 5 ITA NO. 2060/Mum/2025 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 V 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"].

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

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 V, 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.]

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 P a g e | 6 ITA NO. 2060/Mum/2025 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: