Loading judgment…
Facts
The Assessing Officer made additions under Section 56(2)(vii)(b) for the difference between the property's registered value and consideration, and under Section 69 for unexplained registration charges. The CIT(A), in a rectification order, deleted both additions, reasoning that the property was bought from relatives (making Section 56(2)(vii) inapplicable) and the stamp duty was paid from the assessee's son's account. The Revenue appealed, contending that the CIT(A) wrongly admitted new evidence during rectification without giving the AO an opportunity for examination.
Held
The Tribunal observed that the CIT(A) admitted additional evidence in rectification proceedings without allowing the AO to verify it, violating natural justice. Consequently, the case was remanded back to the AO for a fresh examination of both the property purchase from relatives as per the second proviso to Section 56(2)(vii)(b) and the explanation of payment for stamp duty.
Key Issues
Whether the CIT(A) correctly admitted new evidence during rectification proceedings under Section 154 and properly applied the second proviso to Section 56(2)(vii)(b) and Section 69, without providing the AO an opportunity to verify.
Sections Cited
143(3), 154, 56(2)(vii)(b), 69, 250, 257
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI JAGADISH
PER JAGADISH, A.M : Aforesaid appeal filed by the Revenue for Assessment Year (AY) 2014-15 arises out of the order of Learned Commissioner of Income Tax (NFAC), Delhi [hereinafter “CIT(A)”] dated 13.08.2024 in the matter of assessment framed by the Assessing Officer [AO] u/s. 143(3) of the Income-tax Act, 1961 (hereinafter “the Act”) on 30.12.2016. The & CO NO.34/Chny/2025 :- 2 -:
assessee has also filed Cross Objections against the order of the Ld. CIT(A).
The ground of appeal raised by the Revenue are as under:
“1' The order of the CIT (A) is contrary to facts of the case and law.
2. The ld' CIT(A) has erred in adjudicating merit' the rectification application on without appreciating the provisions of section 154 of the Act which clearly says, mistake apparent from the record only can be rectified.
3. The ld' CIT(A) has erred in adjudicating merit' the rectification application on without appreciating without the provisions of section 154 of the Act & assigning any reason as to what was the mistake apparent from the record w.r.t. appellate order dt. 13.08.2024.
4. The Ld. CIT(A) erred in accepting new evidences/arguments, which were produced first time produced during the appellate/rectification proceeding only & adjudicating the issue based on such new evidences, without appreciating the Rule 46A of the IT Rule.
5. The ld' CIT(A) erred in accepting new evidences/arguments, which were produced first time produced during the appellate/rectification proceeding only & adjudicating the issue based on such new evidences, without exercising the powers confer upon him by virtue of sub section 4 of section 257 of the Act.
6. The Ld. CIT(A) has erred in deleting the addition of Rs. 9,33,910/- by stating that the said payment was made by the bank account of the assessee's son, without analysis. of bank account, without giving proper detail of payments made & without examining the source of income of the son.
For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the Ld. CIT(A) be set aside and that of the Assessing Officer be restored.”
The assessee has acquired a property for a consideration of Rs.31,32,255/-. The AO made enquiries from the Joint Sub-Registrar, Vridhachalam and found that the value determined by the Registrar's & CO NO.34/Chny/2025 :- 3 -:
Department was Rs. 2,91,35,700/-. Accordingly, the AO invoked the provisions of Section 56(2)(vii)(b) of the Act and made additions of Rs.2,62,5,700/-. The AO also made an addition of Rs.9,33,910/- as unexplained investment in respect of registration charges paid, as the assessee has disclosed stamp duty of only Rs. 2,32,255/- against Rs.11,66,165/- actually paid. Aggrieved, the assessee filed an appeal before the Ld. CIT(A), which was dismissed ex-parte. Subsequently, the assessee filed a rectification application u/s. 154 of the Act and the Ld. CIT(A), upon considering the rectification application, held that the property was purchased from the wife and sons of the assessee’s late brother, i.e., from a relative, section 56(2)(vii) of the Act, is not applicable, in view of second proviso to section 56(2)(vii). The Ld. CIT(A) also deleted the addition of Rs. 9,33,910/- towards undisclosed investment in stamp duty, as the assessee furnished documentary evidence that the payment was made from her son’s bank account.
The Revenue is in appeal against the deletion of additions by the Ld. CIT(A) through the rectification order passed u/s 154 of the Act.
The Ld. Departmental Representative (DR), has submitted that the Ld. CIT(A) admitted new evidence during the rectification proceedings u/s. 154 of the Act, which is not permissible under Rule 46A of the Income-tax Rules, 1962, especially as the AO was not & CO NO.34/Chny/2025 :- 4 -: given an opportunity to examine such evidence. The Ld. DR contended that rectification u/s. 154 of the Act is limited to mistakes apparent from the record, and adjudicating the issue based on new evidence goes beyond the permissible scope of rectification.
The Ld. Authorized Representative (A.R) of the assessee has submitted that the assessee has purchased plot of land from her sister-in-law which was originally in the name of her brother and passed to legal heirs namely sister-in-law and her children. The Ld. AR has submitted that Section 56(2)(vii)(b) of the Act does not have any application as the property was purchased from the relatives as provided in the proviso to the above section. The Ld. AR has submitted that there is no violation of Rule 46A of the Rules as the rule provided that if assessee was prevented by sufficient cause for producing the evidences, the same can be admitted. The Ld AR submitted that the stamp duty value was finally determined only in 2019, it could not be produced during the assessment.
We have heard the rival submissions and perused the materials available on record. The AO has made the additions u/s. 56(2)(vii)(b) of Rs. 1,16,74,500/- and Rs. 1,45,61,200/-, along with addition of Rs. 9,33,910/- u/s 69 in respect of payment of stamp duty. The Ld CIT(A)
& CO NO.34/Chny/2025 :- 5 -: has initially dismissed the appeal ex-parte. However, subsequently on the rectification application filled by assesseeu/s. 154 r.w.s 250 of the Act, the Ld. CIT(A) deleted the additions stating that the property was purchased from relatives and therefore as per second proviso to section 56(2)(vii) of the Act, the addition does not hold. The Ld CIT(A) also deleted the addition of Rs.9,3,910/- made u/s 69 of the Act as the stamp duty was paid from assessee’s son’s bank account. We find that the Ld. CIT(A), during 154 proceeding has admitted additional evidences in respect of relationship with the transferor of property and the sale deed. The A.O was not provided opportunity to verify the evidences or to examine the applicability of second proviso to section 56(2)(vii) of the Act, which is contrary to the principles of natural justice. Accordingly, we deem it fit to restore the matter to the file of the AO for fresh examination of both the issues and in case it is found that the property was indeed purchased from relatives as defined in the second proviso to Section 56(2)(vii)(b) of the Act, and the payments were duly explained, the addition shall not survive. In light of the above, the appeal filed by the Revenue is allowed for statistical purposes.
& CO NO.34/Chny/2025 :- 6 -:
C.O No.34/Chny/2025 7. So far as the Cross Objections filed by the assessee is concerned, the C.O was filed in support of the appellate order passed by the Ld. CIT(A). However, since the matter has been remitted back to the A.O, the Cross Objections filed by the assessee have become infructuous and accordingly dismissed.
In the result, the appeal filed by the Revenue is allowed for statistical purposes and the C.O filed the assessee is dismissed.
Order pronounced on 13th day of June, 2025 at Chennai.