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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL
ORDER \nPER SIDDHARTHA NAUTIYAL, JM:\nThe present appeal has been preferred by the Assessee against the\norder of the Learned Commissioner of Income Tax (Appeals), National\nFaceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)']\ndated 21/05/2025 passed u/s.250 of the Income Tax Act, 1961 (hereinafter\nreferred to as 'the Act') for the Assessment Year (AY) 2018-2019.\n2. The assessee has raised the following grounds of appeal:\n“Your appellant being aggrieved by the order passed by the learned Ld.\nCommissioner of Income-tax (Appeals) [hereinafter referred to as 'Ld. CIT\n(Appeals)'], Income tax Department, National Faceless Appeal Centre (NFAC)\npresents this appeal against the same on the following amongst other grounds:\n1. The Ld. CIT (Appeals) has erred in facts and on law in confirming the action of\nAO making addition of Rs 18,10,640/- invoking the provisions of Section 56(2)(x) of\nthe Act. On facts and circumstances of the case, the provisions of Section 56(2)(x)\nare just not attracted in case of Appellant and entire addition made being incorrect\nand illegal is ought to have been deleted. The same be held now.\n2. The Ld. CIT (Appeals) has erred in confirming the addition made of Rs 18,10,640/-\nwithout appreciating the fact that the consideration paid by Appellant is higher. than\nprevailing jantri rate applicable to agriculture land at that time. It is submitted that\nthe land purchased by Appellant is an agriculture land only and additional Jantri\ncollected merely because of Proposed Draft TP Scheme announced by AUDA. On\nfacts and circumstances of the case, the entire addition made wrongly interpreting\nprovisions of Section 56(2)(x) of the Act and being completely illegal and\nunjustifiable be deleted in the interest of justice. The same be held accordingly.\n3. The Ld. CIT (Appeals) has erred in not appreciating the fact that the land\npurchased by the appellant was an agriculture land on the date of purchase and not\nat all N.A. Land at that time. On facts and circumstances of the case, by no stretch\nof imagination, the provisions of Section 56(2)(x) be applied in this case considering\nland purchased as N.A. Land and the addition made being totally wrong and baseless\nbe deleted accordingly.\n4. The lower authorities has failed in appreciating the fact that the consideration paid\nby Appellant to the seller party has been duly accepted by income tax authorities in\ncase of seller and there is no addition on this count in case of seller invoking\nprovisions of Section 50C or any other provisions of the Income tax Act. It is therefore\nsubmitted that once consideration paid has been accepted in case of seller, the same\nis ought to have been accepted in case of buyer applying principal of natural justice.\nThus, the addition made applying Section 56(2)(x) being unwarranted and unjust\nbe deleted accordingly.\n5. Your appellant craves leave to add, alter and/or to amend all or any of the grounds\nbefore the final hearing.”\n2.
The assessee has raising the following additional grounds of appeal:\n“1 The Ld. Assessing Officer has erred on facts and in law in invoking the provisions\nof section 56(2)(x) of the Income-tax Act, 1961 by mechanically adopting the stamp\nduty valuation (SDV) of the property in question without referring the matter to the\nDepartmental Valuation Officer (DVO) despite the assessee's specific objection.\n2 The Ld. AO has failed in appreciating the provisions of Section 56(2)(x) read with\nsection 50C(2) of the Act mandates him that once the assessee disputes the\ncorrectness of the stamp duty valuation, it is obligatory on the part of the AO to refer\nthe valuation of the property to the DVO. In view of this, the entire addition made of\nRs 18,10,640/- without referring matter to DVO for valuation property is\nunsustainable and bad in law and the same be deleted in the interest of justice.\"\n3. The brief facts of the case are that the assessee, Shri Ishwarbhai\nGordhanbhai Prajapati, filed his return of income for Assessment Year 2018–\n19 declaring a total income of Rs.11,66,770. The assessee derived income from\nhis proprietary business, M/s. Shree Bootbhavani Construction Co., as well\nas income under the heads “House Property,” “Capital Gains,” and “Other\nSources.\" During the course of assessment, the Assessing Officer (“AO")\nnoted that the assessee had jointly purchased agricultural land for a total\nconsideration of Rs.22,30,320, while the stamp duty valuation of the same\nproperty was Rs.40,40,960. The AO observed that there was a difference of\nRs.18,10,640 between the purchase price and the value adopted for stamp\nduty purposes. The Assessing Officer invoked the provisions of section\n56(2)(x) of the Act and treated this difference as income from other sources,\nholding that the assessee had received property for consideration less than\nits fair market value. Consequently, the AO made an addition of Rs.\n18,10,640 to the returned income, and computed the total income at Rs.\n29,77,410. Being aggrieved by the said addition, the assessee preferred an\nappeal before the Commissioner of Income Tax (Appeals) [CIT(A)].\n4. Before the CIT(A), the assessee submitted that the land purchased was\nagricultural land and not non-agricultural (N.A.) land, as erroneously\nassumed by the AO. The assessee submitted that the land fell under a\nproposed draft Town Planning (T.P.) Scheme of the Ahmedabad Urban\nDevelopment Authority (AUDA), which was not yet finalized. Due to the\ndraft scheme, the Sub-Registrar's Office had charged higher stamp duty\ntreating the land as N.A. land, although, in reality, the land continued to\nretain its agricultural character. The assessee further contended that the land\nwas purchased at a rate higher than the prevailing jantri rate applicable for\nagricultural land, and therefore, no addition under section 56(2)(x) of the Act\nwas justified. The assessee also pointed out that the AO had wrongly\nassumed a 40% deduction for acquisition by AUDA, whereas no such\nacquisition had actually taken place, and the purchase deed clearly\nmentioned ownership of the entire plot. To support his claim, the assessee\nfiled copies of the purchase deed, jantri rate certificate, ledger account of the\nseller (Jayantibhai Kalubhai) showing payments made since July 2013, and\nother supporting documents. The assessee submitted that the transaction was\ngenuine and the consideration paid was in accordance with the fair market\nvalue of the agricultural land at the time of purchase.\n4.
1. The CIT(A) examined the facts, written submissions, and case records.\nThe CIT(Appeals) observed that although the assessee had described the\nproperty as agricultural land, the very fact that it was covered under a\nproposed AUDA scheme and that stamp duty was charged at rates\napplicable to urban land indicated that the land had lost its agricultural\ncharacter. The CIT(A) noted that the assessee did not provide any evidence\nregarding the distance of the land from the municipal limits, which could\nhave established its agricultural status. According to the CIT(A), when land\nis covered by an urban development scheme and the stamp value is\ndetermined on the basis of N.A. land rates, it cannot be treated as purely\nagricultural for the purpose of income-tax assessment. In view of these\nobservations, the CIT(A) held that the AO was justified in invoking the\nprovisions of section 56(2)(x) and making the addition of Rs.18,10,640\ntowards the difference in value. The CIT(A) accordingly confirmed the\naddition made by the AO and dismissed the appeal of the assessee.\n5. The assessee is in appeal before us against the order passed by\nCIT(Appeals) dismissing the appeal of the assessee.\n6. We have heard the rival contentions and perused the material on\nrecord. The Counsel for the assessee submitted that the land documents\nclearly establish that the property purchased is agricultural land, and this\nfact has been consistently mentioned in the registered sale deed and other\nland records. It was contended that merely because the stamp duty authority\nlevied duty treating the land as non-agricultural (N.A.), owing to the\nproposed draft T.P. Scheme by the Ahmedabad Urban Development\nAuthority (AUDA), it would not change the actual land use or character of\nthe property. The Counsel pointed out that the assessee had paid a price\nhigher than the prevailing jantri rate applicable for agricultural land, and\ntherefore, there was no reason or justification for invoking section 56(2)(x) of\nthe Act. The Counsel further submitted that the land in question is registered\nwithin the “Agricultural Taluka” records, which itself confirms its\nagricultural nature. He also drew our attention to page 52 of the Paper Book,\nbeing an Extract of the Rural Land Record (Form No. 7) dated 19.07.2023,\nwhich shows that even after purchase, the land continues to be classified as\nagricultural land. The Counsel submitted that no conversion proceedings\nhave been initiated or completed to convert the land into non-agricultural use\neven till date. Hence, the land retains its agricultural character in law and in\nfact.\n7. After considering the submissions of both sides and examining the\ndocuments on record, we find force in the contentions advanced by the\nlearned Counsel for the assessee. The sale deed and the Form No. 7 extract\ndemonstrate that the land purchased is agricultural and not non-agricultural.\nThe charging of higher stamp duty by the Sub-Registrar's Office based on a\ndraft AUDA scheme would not, in our view, alter the inherent nature of the\nland. It is a settled legal position that stamp duty valuation or classification\nfor fiscal purposes does not determine the character of the property under\nthe Income-tax Act. The fact that the assessee has paid consideration higher\nthan the jantri rate applicable to agricultural land further supports that there\nwas no underreporting of value or benefit derived by the assessee that could\nwarrant the application of section 56(2)(x) of the Act. We also note that the\nAssessing Officer's assumption that 40% of the land was acquired by AUDA\nis factually incorrect, as no such acquisition has taken place and the draft T.P.\nScheme remains unapproved. Therefore, the addition made by the AO\nunder section 56(2)(x) of the Act by treating the property as non-agricultural\nand applying non-agricultural rates is not sustainable in law or on facts.\nConsidering the totality of circumstances, including the nature of the land,\nthe evidence produced, and the fact that the assessee has paid more than the\njantri value, we hold that the addition of Rs.18,10,640/- made under section\n56(2)(x) of the Act is unwarranted and unjustified.\n7.
1. Accordingly, we set aside the order of the learned CIT(A) and direct\nthe Assessing Officer to delete the addition of Rs.18,10,640/- made under\nsection 56(2)(x) of the Act.\n8. In the result, the appeal of the assessee is allowed.\nOrder pronounced in the Open Court on\n04/11/2025 at Ahmedabad.\nSd/-\n(DR. BRR KUMAR)\nVICE PRESIDENT\nSd/-\n(SIDDHARTHA NAUTIYAL)\nJUDICIAL MEMBER\nअहमदाबाद/Ahmedabad, दिनांक/Dated\n04/11/2025\nटी.सी. नायर, व.नि.स./T.C. NAIR, Sr. PS\nआदेश की प्रतिलिपि अग्रेषित/