AERO PACK PRODUCTS PRIVATE LIMITED,NAVI MUMBAI vs. INCOME TAX OFFICER, MUMBAI

The solitary grievance of the assessee is directed against the adjustment of ₹52,52,000/- made under section 56(2)(x) of the Act by the Centralised Processing Centre, Bengaluru, while processing the return under section 143(1). The assessee contends that the said adjustment is unsustainable both on facts and in law, particularly in view of the valuation subsequently determined by the Departmental Valuation Officer.

The material facts, in brief, are that the assessee-company purchased leasehold rights in an industrial property situated at Panvel for a total consideration of ₹2,82,72,000/-. For stamp duty purposes, the value adopted by the Stamp Valuation Authority was ₹3,35,23,942/-. Based on the disclosure made in the tax audit report in Form No. 3CD (Clause 29(b)), the CPC, while processing the return, treated the difference between the stated consideration and the stamp duty value as income under section 56(2)(x) and made an adjustment of ₹52,52,000/-.

In appellate proceedings, the learned first appellate authority, acknowledging the assessee’s objection to the stamp duty valuation, directed the Assessing Officer to make a reference to the Departmental Valuation Officer. In pursuance thereof, a reference was made on 16.12.2024, and the DVO, after conducting the requisite valuation exercise, submitted his report dated 28.10.2025, determining the fair market value of the property at ₹2,99,03,000/-.

It is an undisputed position that the said DVO’s report was called for at the instance of the first appellate authority itself and was very much available on record. However, while passing the impugned appellate order dated 25.09.2025, the learned CIT(A) has completely omitted to consider, discuss, or even advert to the valuation determined by the DVO and has proceeded to confirm the adjustment merely on the basis of the stamp duty value. Such an approach, in our considered view, is wholly unsustainable. Once a reference to the DVO is made and a report is obtained, the same cannot be ignored, particularly when it substantially alters the very foundation of the addition.

On a careful examination of the DVO’s report, it is evident that the difference between the consideration paid by the assessee and the fair market value determined by the DVO works out to only about 5.77%. The statutory scheme governing section 56(2)(x), read with the third proviso thereto, clearly incorporates the tolerance band envisaged in section 50C of the Act. The third proviso to section 50C expressly provides that where the difference between the consideration declared and the value adopted or assessed by the stamp valuation authority does not exceed the prescribed margin of 10%, the declared consideration shall be deemed to be the full value of consideration.

Applying the said statutory tolerance to the facts of the present case, once the fair market value as determined by the DVO is taken into account, the variation falls well within the permissible range. Consequently, the deeming fiction under section 56(2)(x) ceases to operate, and no addition can be sustained on account of such marginal variation. The legislative intent behind introducing the safe harbour provision is to obviate precisely such inconsequential adjustments arising from minor valuation differences, and the present case squarely falls within that protective ambit.

In these circumstances, the adjustment made under section 56(2)(x) cannot be sustained on merits. However, since the DVO’s report has not been formally examined and given effect to at the level of the jurisdictional Assessing Officer, we deem it appropriate, in the interest of procedural propriety, to restore the matter to the file of the jurisdictional Assessing Officer for the limited purpose of verifying the DVO’s valuation report and granting consequential relief strictly in accordance with law and the observations made herein. No further enquiry beyond this limited verification shall be undertaken.

In the result, the appeal of the assessee is allowed in the manner indicated above.