MICHAEL AROKIA RATHAN,CHENNAI vs. ITO, NCW-17(2), CHENNAI

The solitary issue is whether the CIT(A) is justified in confirming addition made u/s.56(2)(viib) of the Act amounting to Rs.8,80,000/-.

Brief facts of the case are as follows:- The assessee, an individual had filed return of income for assessment year 2017-18 on 02.08.2018 declaring total income of Rs.11,89,510/-. The assessment was completed u/s.143(3) of the Act vide order dated 20.12.2019. In the said assessment order, the AO has made addition of Rs.8,80,000/- u/s.56(2)(viib) of the Act. The said additionu/s.56(2)(viib) of the Act, was made for the reason that the assessee had purchased a flat on 30.10.2016 for a consideration of Rs.65 lakhs. However, for the purpose of stamp duty, assessee had paid stamp duty for the value of flat at Rs.73,80,000/-. Therefore, difference for the consideration paid by the assessee and stamp duty value amounting to Rs.8,80,000/- was brought to tax u/s.56(2)(viib) of the Act. It is to be mentioned that during the course of assessment proceedings, the assessee has objected to adoption of stamp duty value as the consideration paid by him for the purchase of flat on 30.10.2016. The assessee had claimed that flat was purchased by him is an old apartment and stamp duty value fixed is highly excessive. It was further stated that - 3 - the building which was purchased by previous owner about 10 years back was registered for the value of Rs.24.00 lakhs was not given any depreciation when the assessee purchased the apartment on 30.10.2016. It was submitted by the learned AR that old apartment has been purchased by the assessee as a third owner. On the plea of the assessee, the AO had referred the matter to the DVO to ascertain fair market value as on date of purchase of the apartment. Since assessment was getting time barred, the AO completed the assessment without awaiting for the report of the DVO.

The learned DR supported orders of the AO and CIT(A).

We have heard rival submissions and perused material on record. Admittedly, in this case during the course of assessment proceedings, the issue of determination of fair market value of the apartment purchased by the assessee on 30.10.2016 was referred to the DVO. However, it is submitted that DVO has not given the valuation report as on today. The AO completed the assessment by bringing to tax the difference amount between consideration paid and stamp duty value / guideline value amounting to Rs.8,80,000/- u/s.56(2)(viib) of the Act. It is a fact that assessee during the course of assessment proceedings had strongly objected to adoption of purchase consideration at Rs.73,80,000/-, instead of Rs.65.00 lakhs paid by the assessee. It was stated by the assessee that he had purchased the flat as third owner and the flat being very old, the stamp duty value fixed by the State Government for the apartment is highly excessive. Since the AO, in para 5 of his order stated that - 5 - he had referred the matter to DVO to ascertain fair market value of the apartment as on the date of purchase, we deem it appropriate to restore the matter back to the files of the AO. If the AO has referred the matter to the DVO and the DVO has given his report as regards fair market value of the impugned apartment, the AO shall adopt the same. In spite of the AO having referred the matter to DVO and the DVO having not submitted any report, we deem it appropriate to direct the assessee to furnish valuation report from the independent valuer to ascertain fair market value of the impugned apartment (as on the date of purchase) within a period of six months from the date of receipt of this order and same shall be adopted (If the DVO report is not received before the aforementioned date). It is ordered accordingly.