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Facts
The assessee, an individual, filed her return of income declaring Rs. 4,84,590/-. The case was selected for scrutiny due to investment in immovable property. The Assessing Officer added Rs. 4,06,816/- under section 56(2)(x) of the Act, citing a difference between the purchase price and the valuation report exceeding 5%. The CIT(Appeals) dismissed the assessee's appeal.
Held
The Tribunal held that the addition of Rs. 4,06,816/- based on fair market value as against the cost of construction was unsustainable in law as the DM Circle rate cannot be equated with the cost of construction. However, considering the registration value of the property at Rs. 60,15,959/-, the burden was on the assessee to prove the sale deed value was correct, which she failed to do.
Key Issues
Whether the addition made by the AO under Section 56(2)(x) of the Act based on the difference between the sale deed value and the valuation report is justified, and whether the valuation conducted by the DVO is correct.
Sections Cited
56(2)(x)
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Income Tax Appellate Tribunal, KOLKATA-PATNA ‘e-COURT’, KOLKATA
Before: Shri Duvvuru RL Reddy, Vice-(KZ)
Assessment Year: 2018-2019 Amita Singh,………………………….……..……Appellant Prop. M/s. Singh Auto Centre, Village- Helwanta, Post-Kudra, Kaimur-881108, Bihar [PAN:BHZPS1664R] -Vs.- Assessment Centre, …………………………...Respondent Delhi, National Faceless Appeal Centre, New Delhi Appearances by: Shri Rakesh Kumar, Advocate, appeared on behalf of the assessee Shri Ashwani Kr. Singal, JCIT, appeared on behalf of the Revenue Date of concluding the hearing: January 02, 2025 Date of pronouncing the order: March 21, 2025 O R D E R
The present appeal is directed at the instance of assessee against the order of ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 7th August, 2024 passed for Assessment Year 2018-19.
(A.Y. 2018-2019) Amita Singh 2. Brief facts of the case are that the appellant-assessee is an individual, who filed her return of income for assessment year 2018-19 on 29.10.2018 declaring total income of Rs.4,84,590/-. The case of the appellant was selected for scrutiny for the reason that the assessee invested in immovable property. Accordingly notices under section 143(2) and 142(1) were sent to the assessee. In response to the said notices, the assessee filed her reply on 12.06.2020 and 11.09.2020. The assessee also submitted the details of Sale Deed, Bank Statement etc. After considering the details filed by the assessee, the ld. Assessing Officer has added an amount of Rs.4,06,816/- under section 56(2)(x) of the Act. The reason for the addition is that the difference between the actual purchase price as per sale deed and the valuation report is more than 5%. Aggrieved by the order of ld. Assessing Officer, the assessee preferred an appeal before the ld. CIT(Appeals).
After considering the written submission filed by the assessee, the ld. CIT(Appeals) dismissed the appeal filed by the assessee.
On being aggrieved, the assessee preferred an appeal before the Tribunal and raised eleven grounds but the main grievance of the assessee is that “the ld. CIT(Appeals) has erred in affirming the adding sum of Rs.4,06,816/- by treating the said amount as income from other sources, which is wrong, illegal and unjustified and invoking section 56(2)(x) of the Act is not applicable in the case of the appellant”.
(A.Y. 2018-2019) Amita Singh 5. I have heard both the sides. The assessee also filed the written submission. It was the submission of the assessee that the assessee and her husband entered into an agreement with the builders dated 5th September, 2015 for purchase of flat bearing no. 402, 4th Floor, Keshav Apartment, Varanasi for a consideration of Rs.39,94,884/-, which includes Rs.2,50,000/- for one car parking and Rs.1,50,000/- for transformer and generator. He further submitted that at the time of agreement, cash of Rs.11,000/- was paid on 08.12.2014. Thereafter as per the schedule of the payment mentioned in the agreement, the assessee made the cheque payments on five occasions for an amount of Rs.38,33,884/- plus cash of Rs.11,000/-. The case of the appellant as well as her husband was selected for scrutiny. In the case of appellant, the matter was referred to the Valuation Cell and the difference of Rs.4,06,816/- between the actual purchase price consideration of Rs.38,44,884/- and the fair market value of the property fixed at Rs.42,51,700/-, which was subject to the addition and the same was confirmed by the ld. CIT(Appeals). He further submitted that the Valuation Cell relied on the DM Circle rate for determining the fair market value by adopting rate of construction at Rs.24,000/- per sq. mtr., whereas the cost of construction was required to be determined by the Valuation Cell being an expert and thus the observation of the ld. CIT(Appeals) that fair market value is based on estimation of actual ongoing rate of similar property in the same locality by the DVO runs counter to the method adopted by the DVO. He also relied on the decision of the ITAT, Hyderabad Bench reported in 82 ITD 1 at page 9, wherein it has been held that “where two or more methods of valuation are available for (A.Y. 2018-2019) Amita Singh determining the cost of construction and the statute does not provide for any particular method to be adopted, therefore, the opinion of the method of the valuation should be given to the assessee, as otherwise it would cost grave prejudice to the assessee”. Therefore, the addition of Rs.4,06,816/- based on fair market value as against the cost of construction is unsustainable in law for the reason that DM Circle rate cannot be equated with the cost of construction. Alternatively, he submitted that the limit of 5% has been enhanced to 10% by Finance Act, 2020 w.e.f. 01.04.2021. The provision is a procedural provision and it will accordingly apply retrospectively and thus the date of its applicability w.e.f. 01.04.2021 corresponding to assessment year 2021-22 would directly fetch of the principles of purposive construction to be given to a procedural provision as held by the Hon’ble Supreme Court in the case of CIT -vs.- Vatika Township reported in (2014) 367 ITR 466 (SC). Therefore, he pleaded to set aside the orders passed by the lower authorities.
On the other hand, ld. Departmental Representative submitted that the cost of construction was Rs.38,44,884/- but the registration value of the property as per the Registering Authorities was Rs.60,15,959/-. However, the ld. A.R. relied on the valuation determined by the Valuation Officer, who after examining all the merits and demerits, valued the property at Rs.42,51,700/-. The difference is only Rs.4,06,884/- (Rs.42,51,700/- minus Rs.38,44,884/-). Therefore, the DVO has very liberally valued the property at Rs.42,51,700/-, though the stamp duty valuation of property is Rs.60,15,959/-. Therefore, the
I have perused the material available on record. It is an undisputed fact that the Registering Authorities valued the property at Rs.60,15,959/- and the DVO valued the property at Rs.42,06,884/- but the assessee purchased the property at Rs.38,44,884/- (as per the consideration mentioned in the Sale Deed). The only contention of the assessee is that the DVO has not properly valued the property. On this aspect, the contention of the ld. D.R. is that the original registration value of the property as per the valuation of the sub-register is Rs.60,15,959/- and the difference between the original sale consideration and the valuation determined by the DVO is only Rs.4,06,884/-. Therefore, there is no reason to believe that the DVO has not valued the property correctly. After considering the submissions of both the parties, I am of the view that when the registration value of the property is Rs.60,15,959/-, the burden lies on the assessee to establish that the value of the property mentioned in the Sale Deed is true and correct. In this case, the assessee has not given even any valid evidence to believe that the value of the property is only Rs.38,44,884/-. However, the matter was referred to the DVO and DVO has valued at Rs.42,51,700/-. Admittedly the registration value is Rs.60,15,759/-. Therefore, after considering the above facts and circumstances, I have no hesitation to come to the conclusion that there is no infirmity in the orders passed by the ld. Assessing Officer as well as the ld. CIT(Appeals) and also, I do not find any infirmity in the valuation made by the DVO.
(A.Y. 2018-2019) Amita Singh Therefore, there is no valid reason in the arguments of the ld. Counsel for the assessee saying that DVO has not properly valued the property. Hence, the grounds raised by the assessee are liable to be dismissed.
In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on 21/03/2025.