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Facts
The assessee, an LLP engaged in renting and real estate, purchased an immovable property for Rs. 4,76,50,200. The Assessing Officer (AO) referred the property's valuation to the DVO, who assessed it at Rs. 11,36,27,400. The AO applied Section 56(2)(x) of the Income Tax Act and added Rs. 6,59,77,200 to the assessee's income. The CIT(A) dismissed the appeal, leading to this ITAT appeal.
Held
The ITAT held that the entire transaction was with an entity of the State Govt. of West Bengal, and there was no reason to infer suppression of purchase price. The Tribunal also reasoned that the State Govt. would not sell property below the circle rate.
Key Issues
Whether the addition made by the AO under Section 56(2)(x) based on the enhanced valuation by the DVO was justified, considering the property was purchased from a State Government entity at a contractually determined price.
Sections Cited
56(2)(x)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, KOLKATA
Kanha Villa LLP, 50, Suburban School Road, Bhawanipore, Kolkata- 700025 [PAN: AAUFK9291R] ……..…...…………….... Appellant vs. Income Tax Ward 29(1), Kolkata, Aayakar Bhawan (Dakshin)-2, Gariahat Road (South), Kolkata - 700068 ................................ Respondent Appearances by: Assessee represented by : Ramesh Patodia Sonal Agarwal, ARs Department represented by : Abhijit Adhikary, Addl. CIT, Sr. DR Date of concluding the hearing : 18.11.2025 Date of pronouncing the order : 19.11.2025 O R D E R
PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
The ITAT Registry has reported a delay of 155 days in the filing of this appeal. The assessee has requested for condonation of the said delay through a very detailed affidavit running into 6 pages. For the sake of brevity it needs to be briefly mentioned that the assessee was unaware of the first appellate order and only came to know about it once penalty proceedings were initiated by the Ld. AO. Considering the reasons given in the said detailed affidavit the delay is hereby condoned and the appeal is admitted for adjudication.
This appeal arises from order u/s 250 of the Income Tax Act, 1961 Kanha Villa LLP (hereafter “the Act”) dated 13.08.2024, passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereafter “the Ld. CIT(A)”].
2.1 In this case, the assessee is an LLP engaged in the business of renting and real estate during the year under consideration. The assessee purchased an immovable property (Synthesis Business Park) from the State Govt. of West Bengal. The consideration paid was Rs. 4,76,50,200. During the course of assessment proceedings, the Ld. AO made a reference to the DVO, who assessed the value of the property at Rs. 11,36,27,400. It appears that the assessee had all along informed the authorities below that the transaction was effectively with the State Govt. of West Bengal and hence there was no question of under-valuing the property for any kind of gain whatsoever. However, the Ld. AO proceeded ahead to make the reference to the DVO and thereby obtaining an enhanced valuation of the said property. Needless to say, the provisions of section 56(2)(x) of the Act were applied and an amount of Rs. 6,59,77,200/- was added as income from other sources.
2.2 The assessee carried this matter in appeal where he could not succeed on the basis of finding given on pages 36 to 37 of the impugned order.
2.3 Further aggrieved, the assessee has approached the ITAT with the following revised grounds:
“I. FOR THAT the action of the Learned CIT (Appeals), Kolkata in dismissing the appeal without dealing with the individual grounds of appeal including the additional grounds in relation to addition of Rs. 6,59,77,200/- under Section 56(2)(x) of the Income Tax Act is arbitrary, unjustified, unwarranted and illegal. II. FOR THAT the Learned CIT (Appeals) arbitrarily dismissed the appeal on an erroneous understanding that: (i) M/s. Bengal Sharchi Housing Development Ltd. is the vendor even though the vendor is West Bengal Housing Infrastructure Development Corporation Ltd.
Kanha Villa LLP (ii) The District Valuation Officer had not considered the objections of the appellant regarding valuation of the property on account of fault of the appellant. (iii) The market value as mentioned in the sale deed is nothing but the stamp duty value. The aforesaid action of the Learned CIT (Appeals) is arbitrary, unjustified, unwarranted and illegal. III. FOR THAT the Learned CIT (Appeals) arbitrarily denied the opportunity of personal hearing to the appellant on the basis of erroneous observation that the appellant failed to submit request through registered e-filing account and such action of the Learned CIT (Appeals) is arbitrary, unjustified, unwarranted and illegal. IV. FOR THAT the Learned CIT (Appeals) as also the Learned Assessment Unit failed to appreciate the difference between the meaning of the terms "fair market value" and "stamp duty value", as the provisions of Section 56(2)(x) of the Act only mandates comparison of "stamp duty value" and "consideration" and not otherwise and the action of the Learned Assessment Unit as well as Learned CIT (Appeals) in arriving at a conclusion that the market value as mentioned in the sale deed is nothing but the stamp duty value is arbitrary, unjustified, unwarranted and illegal. V. FOR THAT on the facts and circumstances of the case the addition of Rs. 6,59,77,200/- under Section 56(2)(x) of the Income Tax Act is liable to be deleted. VI. FOR THAT the impugned orders of the Learned CIT (Appeals) as also the Learned Assessment Unit are otherwise erroneous in law and/or on facts and is liable to be set aside. VII. FOR THAT the appellant craves indulgence to add, amend, alter and/or modify the Grounds of Appeal on or before the hearing of this appeal.”
3. Before us, the Ld. AR argued with the help of a paper book and stated that since the plot of land was purchased from M/s West Bengal Housing Infrastructure Development Corporation Limited (WBHIDCO), there was no question of any under reporting of purchase consideration and the assessee was duty bound to enter into a contract with the WBHIDCO in terms of conditions prescribed by them. The Ld. AR presented the contract for our perusal (pages 37 to 69 of the paper book). It was the submission by the Ld. AR that it was an authorised representative of the State Govt. entity that had signed the contract and the sale value had been decided by the said State Govt. entity alone. It was the submission that the Ld. AO Kanha Villa LLP had misdirected himself in terms of estimating the market value at a higher figure through reference to the DVO. The Ld. AR vehemently denied that there was any under reporting of the purchase price.
3.1 The Ld. DR relied on the orders of authorities below.
We have carefully considered the rival submissions and have gone through the documents before us including the relevant papers concerning the impugned transaction. It is seen that the whole transaction took place with an entity of the State Govt. of West Bengal. Thus, we find no reason to infer any substance in the allegation of suppression of purchase price. We also do not find any reason to believe that the State Govt. would be selling any property at anything less than the circle rate. Accordingly, the contention of the assessee is acceptable and the impugned addition is directed to be deleted.
In result, appeal of the assessee is allowed.