ZAHIDA BANO MOHAMMAD YUSUF SHAIKH,MUMBAI vs. INCOME TAX OFFICER, WARD 41(4)(4), MUMBAI

The solitary grievance of the assessee is against the addition made under section 56(2)(vii)(b) of the Act.

We have considered the submissions of both sides and perused the material available on record. The brief facts of the case are that the assessee is an individual, and for the year under consideration, filed her return of income on 30.09.2017, declaring a total income at Rs.4,26,590/. On the basis of the information received from DIT(I & CI), Mumbai that the assessee has entered into a transaction of purchase of immovable property, wherein the assessee has not transacted as per the stamp value rate of the property, notice under section 148 of the Act was issued to the assessee on 22.07.2022. During the proceedings pursuant to the notice issued under section 148 of the Act, it was noticed that the assessee has entered into a transaction of purchase of immovable property for Rs.25 Lakh. However, the value of the said property as determined by the Stamp Duty Authority was Rs.39,74,735/-. Since there was a difference of Rs.14,74,735/- between the registration value and the value determined by the Stamp Duty Authority, the assessee was asked to show cause as to why the difference should not be taxed under section 56(2)(vii)(b) of the Act. In response, the assessee submitted that the said property is MHADA-registered and its value is determined by the relevant state authorities, which make it public by issuing circulars or advertisements. The assessee submitted that she purchased the property well above the price range declared by the MHADA authorities during the year under consideration.

The Assessing Officer (“AO”), vide order dated 02.05.2023 passed under section 147 read with section 144B of the Act, disagreed with the submissions of the assessee and made an addition of Rs.14,74,735/- under section 56(2)(vii)(b) of the Act.

Before the learned CIT(A), the assessee could not respond to any of the notices issued through ITBA. Accordingly, the learned CIT(A) dismissed the appeal filed by the assessee. Being aggrieved, the assessee is in appeal before us.

During the hearing, the learned Authorised Representative (“learned AR”) submitted that the assessee is a senior citizen and is unable to read and write in English. It was further submitted that she is literate only in Urdu, which significantly limits her ability to independently manage and comply with tax-related formalities. Thus, she is compelled to rely on others to handle her tax compliance requirements. It was further submitted that since the notices were issued by the learned CIT(A) through ITBA portal, due to her limitations, the assessee could not respond to any of the notices issued by the learned CIT(A). On merits, the learned AR submitted that pursuant to the query raised under the RTI Act, the assessee came to know that the price of a similar property in a similar locality in MHADA is much below the consideration paid by the assessee. The learned AR submitted that these details were also furnished by the assessee before the AO. However, the same were not taken into consideration while making the impugned addition. The learned AR submitted that the submissions in this regard were also

On the other hand, the learned Departmental Representative vehemently relied upon the orders of the lower authorities.

Having considered the submissions of both sides and perused the material available on record, we find that in the present case, the impugned addition under section 56(2)(vii)(b) of the Act has been made as the assessee purchased immovable property for a consideration which was less than the value determined by the Stamp Duty Authority. As per the assessee, the said property was purchased from MHADA at the value determined by the said authority. It was further the claim of the assessee that the said property, along with flats constructed by MHADA, is for the economically weaker section and does not command the same rate in the open market. In support of its contention that the assessee purchased the property at the higher rate, the assessee has placed reliance upon the information received under the RTI Act.

Before proceeding further, it is relevant to note the provisions of section 56(2)(vii)(b)(ii) which reads as follows: -

Thus, as per the provisions of section 56(2)(vii)(b)(ii) of the Act, if any individual or HUF received any immovable property for a consideration which is less than stamp duty value of the property by an amount exceeding Rs.50,000/-, then the stamp duty value of such property as it exceeding such consideration shall be chargeable to income tax under the head “income from other sources”. The first proviso to section 56(2)(vii)(b) provides that where the stamp duty of the immovable property as referred to in sub-clause (b) is disputed by the assessee on the grounds as mentioned in section 50C(2) of the Act, the AO may refer the valuation of such property to a Valuation Officer. In this regard, it is relevant to note the provisions of section 50C(2) of the Act, which reads as follows: -

In the present case, it cannot be disputed that the value adopted by the stamp duty authority exceeds the value of the residential flats purchased by the assessee on the date of transfer, and the value so adopted is also not in dispute in any appeal, revision or reference before any Authority, Court or High Court. Thus, both the conditions of section 50C(2) of the Act are fulfilled in the present case. Accordingly, we are of the considered view that the AO erred in not referring the valuation of the residential flats to the DVO. Further, the impugned order also suffers from the same vice, as despite recording submission of the assessee in this regard, no reference was made to the DVO for the valuation as per the provision of the Act. Accordingly, in view of the facts and circumstances as noted above, we deem it appropriate to restore this issue to the file of the AO for de novo adjudication after seeking a valuation report from the DVO as per the provisions of the Act. Needless to mention, no order shall be passed without affording a reasonable and adequate opportunity of hearing to the assessee. As a result, the impugned order is set aside, and the grounds raised by the assessee are allowed for statistical purposes.

In the result, the appeal by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 30/01/2026