BHAWANI APARTMENT PVT. LTD.,HOWRAH vs. DCIT, CEN. CIR. 3(2), KOLKATA

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ITA 387/KOL/2024Status: DisposedITAT Kolkata12 March 2025AY 2018-193 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the impugned property was not free from encumbrances, and possession was not handed over. The ownership was in litigation with tenants. Therefore, it was deemed fair and reasonable to ascertain the property's status by the AO. This would involve examining the ownership status, ongoing legal disputes, and the presence of tenants. If, after these investigations, there was a deviation between the stamp valuation and the price paid by the assessee, the matter should be referred to the DVO for valuation. The AO was directed to decide the issue afresh after affording the assessee a reasonable opportunity of being heard. The ratio decidendi is that when a property's valuation is disputed due to encumbrances, litigation, or other factors affecting ownership, the AO must refer the matter to the DVO before making an addition under Section 56(2)(x), following established High Court precedents.

What were the facts?

The assessee, Bhawani Apartment Pvt. Ltd., filed an appeal against the order of the Commissioner of Income-tax (Appeals), Kolkata-21, for the assessment year 2018-19. The dispute pertains to an addition of ₹75,57,120/- made by the Assessing Officer (AO) under Section 56(2)(x) of the Income Tax Act. The assessee purchased a property for ₹1,42,88,000/-, paying ₹39,30,880/- through account payee cheques, but stopped further payments due to a dispute arising from the property, which had several tenants. The AO made the addition without referring the matter to the Valuation Officer as mandated by the Calcutta High Court in Sunil Kumar Agarwal Vs. CIT.

What were the issues?

1. Whether the addition of ₹75,57,120/- under Section 56(2)(x) of the Income Tax Act by the AO is valid without referring the matter to the Valuation Officer, as mandated by the Calcutta High Court in Sunil Kumar Agarwal Vs. CIT? Assessee's Contention: The assessee argued that the addition was made without referring the matter to the District Valuation Officer (DVO) as required by Section 55 of the Act, citing the Calcutta High Court's decision in Sunil Kumar Agarwal Vs. CIT. The assessee also submitted that the property was not free from encumbrances, had tenants, and was subject to ongoing legal disputes, which affected its ownership and valuation. The assessee prayed for the issue to be restored to the AO to ascertain the current status, ownership, legal dispute, and impact on valuation, and if a difference exists, to refer it to the DVO under Section 50C(2). Revenue's Contention: The Departmental Representative (DR) fairly agreed to the assessee's proposition and left the final decision to the Tribunal.

Which sections of the Income-tax Act were involved?

Section 56(2)(x),Section 55,Section 50C(2)

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Income Tax Appellate Tribunal, “B” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM

For Appellant: Shri Miraj D. Shah, AR

(Assessment Year:2018-19) DCIT, Cen. Cir. 3(2) Shanti Pally, Eastern Bhawani Apartment Pvt. Ltd. Metropolitan, Opposite Ruby, 4/2, Agrasain Street, Liluah, Vs. Howrah-711204, West Bengal Kasba, Kolkata-711204 West Bengal (Appellant) (Respondent) PAN No. AAECB4525A Assessee by : Shri Miraj D. Shah, AR Revenue by : Shri Bonnine Debbarama, DR Date of hearing: 06.03.2025 Date of pronouncement : 12.03.2025 O R D E R

Per Rajesh Kumar, AM:

1.

This is an appeal preferred by the assessee against the order of the Commissioner of Income-tax (Appeals), Kolkata-21 (hereinafter referred to as the “Ld. CIT(A)”] dated 27.12.2023 for the AY 2018-19.

2.

At the outset, the ld. Counsel for the assessee submitted that the dispute before this Tribunal is only in respect of addition confirmed by the ld. CIT (A) amounting to ₹75,57,120/- as made by the ld. AO u/s 56(2)(x) of the Act without referring the matter to the valuation officer as mandated by the Hon'ble Calcutta High Court in case of Sunil Kumar Agarwal Vs. CIT reported in [2014] 47 taxmann.com 158 (Calcutta). The ld. AR submitted that the assessee, during the year, has purchased a property for a consideration of ₹1,42,88,000/- which had the same stamp valuation. The ld. AR submitted that the assessee handed all the account payee cheques in discharge of the purchase consideration and the seller of the property realized the cheques to

3.

The ld. DR on the other hand fairly agreed to the said proposition, however left the final decision to the wisdom of the Bench.

4.

After hearing the rival contentions and perusing the materials available on record, we find that the impugned property was not free from certain encumbrances and accordingly, the possession was not handed over. We note that the ownership of the property went into litigation with other tenants living in the property. Now, in our opinion, it would be fair and reasonable if the status of the property is ascertained by the ld. AO after examining the status of the ownership, legal dispute going on, tenants in the property and if there is a deviation in the valuation as per stamp valuation and the price

5.

In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 12.03.2025.

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