LILA TEJPAL JAIN,MUMBAI vs. COMMISSIONER OF INCOME-TAX (APPEALS), DELHI

Per : Narender Kumar Choudhry, Judicial Member:

This appeal has been preferred by the Assessee against the order dated 27.09.2024, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) under section 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2017-18.

Nature of Consideration Stamp value Difference transaction amount Purchase of Rs.47,00,000/- Rs.57,88,862/- Rs.10,88,862/- immovable property

Therefore, the transaction attracts scrutiny u/s 56(2)(vii)(b)(ii) of the Act. The Assessee failed to file its return of income for the relevant assessment year, due to which the differential amount of Rs.10,88,862/- has escaped taxation. As the Assessee has not submitted any reply with regard to the above, except filing bank statement and computation of income, therefore it was presumed by the AO that the Assessee has nothing to say. The AO ultimately made the addition of Rs.10,88,862/- u/s 56(2) of the Act (being difference between stamp duty value of Rs.57,88,862/- and the purchase price of Rs.47,00,000/-).

“1. The case involved is about differences in market rate/value and because of differences in value comes under section 50C for seller and section 56(2) (vii) (b) for purchaser.

2. Assessee is holding a property in the area having normal property value comes to amount of Rs 57, 88,862. Explanation for differences in value adopted by assessee:-

2. This is how property is different with other property in same locality. a. Construction was of old time.

b. No parking was available. c. Condition of build was not good but it was worst.

Because of above shortcomings, the demand for such property is in not at par with other standard properties. The reason for such difference in value of property is explained above and in actual it is used as office and not shop. So there should be no reason for invocation of section 56(2)(vii) (b) of Income Tax Act.

2) Property for which notice was served is a joint property. Notice was served to both the person and at the end same income is taxed fully in the hands of both the person. When income is known and who have earned it is also known how protective assessment can be made?

When it is a joint property income should be taxed in its proportion of share in such property or fully in hands of Primary joint holder only.

Addition to income under section 56(2)(vii)(b) of Rs 10,88,862 cannot be separately made to both the joint holder of property and it will amounts to double taxation.”

5.1 The Ld. Commissioner therefore by observing “that during the course of appellate proceedings, no additional ground(s) of appeal was/were taken by the Assessee and no additional evidence was filed”, ultimately affirmed the aforesaid addition of Rs.10,88,862/- made by the AO, by dismissing the appeal of the Assessee. The Assessee being aggrieved is in appeal before this Court.

“With reference to the above captioned reference & subject and in continuation of our earlier submission, we hereby beg to submit grounds of Appeal against the order passed u/s 147 dated 06/05/2023 as under:

1) Location of the office: -. The Location in which assessee is holding property is not at par with the other property in the same area.

2) Normal Valuation not applicable to every single property: - Value of property as calculated by ready reckoner is not applicable to every single property. The value of property under scrutiny is not matched with the rate of ready reckoner because of following reasons:-

- Construction was of old time. - No parking was available - Condition of build was not good but it was worst. (Same could be confirmed through Picture attached)

Because of above shortcomings, the demand for such property is in not at par with other standard properties hence the valuation is below the standard.

3) Double taxation: - Property for which notice was served is a joint property. Notice was served to both the person and at the end same income is taxed fully in the hands of both the person.

When income is known and who have earned it is also known how protective assessment can be made? When it is a joint property income should be taxed in its proportion of share in such property or fully in hands of Primary joint holder only. Addition to income under section 56(2)(vii)(b) of Rs 10,88,862 cannot be separately made to both the joint holder of property and it will amounts to double taxation.”

6.1 The Ld. Commissioner, by considering the aforesaid reasons given by the Assessee for difference in valuation, observed that the reasons given by the Assessee for the difference in stamp duty valuation and purchase consideration, is not tenable as the Assessee has not given any other reasons/documents to substantiate its claim, except a photograph, which also does not justify the iteration for explaining the difference.

7.1 The Assessee further claimed that even otherwise the property is a joint property. Though the notice was served to both the joint owners, however at the end, the differential amount was taxed fully in the hands of Assessee only. When income is known and who have earned is known, then how protective assessment can be made. The Assessee further claimed that when the property is a joint property then the income should be taxed in its proportion of shares in such property but not fully in the hands of primary joint holder only. Even the same addition u/s 56(2)(vii)(b) of the Act, cannot be made separately in the hands of both the joint holders of the property, as it will amount to double taxation.

7.2 From that above, it is clear that admittedly, the authorities below have not considered the aforesaid contentions vis-à-vis reasons for low price of property and the property was purchased and held in joint ownership and therefore, if any differential amount is to be taxed then the same is required to be taxed proportionately in the hands of both the joint owners but not in one hand entirely.

Thus, this Court for the just and proper decision of the case and in the interest of substantial justice, is inclined to remand the instant case to the file of the AO for determination afresh by considering the aforesaid contentions raised by the Assessee as well as calling for the valuation report from the DVO, if desires so. Thus, the case is accordingly remanded to the file of the AO.

Order pronounced in the open court on 30.01.2025.