TIRUCHANGODU RAMASAMY KHANNAIYANN SARASUWATHI,COIMBATORE vs. DCIT, CENTRAL CIRCLE-1,, COIMBATORE

The grounds raised by the assessee are as follows:

The brief facts of the case are that the assessee is the proprietor of Hindusthan Transformer & Oil Products. The assessee filed her return of income for the A.Y.2014-15 on 31.03.2016 declaring a total income of Rs.1,18,58,960/-. The return was selected for scrutiny under CASS and notices u/s.143(2) and 142(1) were issued in response to which the assessee filed details from time to time.

During the course of assessment proceedings, the AO noticed that there were differences in respect of the value of the properties purchased by the assessee during the year under consideration as against the market value adopted by the stamp duty authorities. On noticing the same, the AO sought for explanation as to why the difference in value of properties should not be brought to tax u/s.56(2)(vii) of the Act. In response, it was submitted that the assessee had not made any payment over and above the purchase price as declared and

Acceding to the request of the assessee, the AO referred the properties for valuation. However, since the assessment was getting time barred by 31.12.2016 and the valuation reports were not received from the valuation cell, without awaiting the valuation reports, the AO completed the assessment. While adopting the stamp duty for the purposes of making addition u/s.56(2)(vii) of the Act, the AO specifically stated that on receipt of report from valuation officer, if any deviation is found, necessary action will be taken as per the provisions of the Act. Apart from this, the AO has also made an addition in respect of long term capital gains arising from sale of property and disallowance of agricultural income, details of which are discussed in ensuing paragraphs.

The AO completed the assessment by passing an order u/s.143(3) dated 31.12.2016 assessing the total income of the assessee at Rs.5,61,21,310/- and raised a demand of Rs.1,68,02,700/-. The AO in completing the assessment made the following additions / disallowances:

Aggrieved by the order of the AO, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [in short “ld.CIT(A)”]. The ld.CIT(A) passed an order u/s.250 of the Act dated 08.09.2025 wherein the ld.CIT(A) had:

Aggrieved by the order of the ld.CIT(A), the assessee filed an appeal before this Tribunal on various grounds challenging the validity of the assessment order, addition u/s.56(2)(vii) of the Act and addition u/s.50C of the Act mentioned in the aforesaid paragraphs forming part of this order.

In this connection, at the outset, the Ld.AR has urged that the assessment order passed in the instant case is not valid since the same was not passed in consonance with the provisions of section 153 of the Act. In this regard, the Ld.AR first drew our attention to a table containing details of properties purchased by the assessee in respect of which addition u/s.56(2)(vii) of the Act were made, details of which are tabulated as under:

Taking into consideration the above tabulated details, the Ld.AR firstly argued that the AO having referred the properties for valuation u/s.56(2)(vii) of the Act, which in turn draws reference to section 50C(2) of the Act, the AO was bound by the statute to await the valuation report especially since clause (iv) to Explanation 1 to section 153 of the Act expressly excludes such period of limitation. The said explanation excludes the period commencing from the date on which the AO makes a reference to the valuation officer u/s.142A(1) of the Act and ending with the date on which the report of the valuation officer is received by the AO. It was submitted by the Ld.AR that the reference to the valuation department was made by the AO on 27.12.2016 and that the AO had ample time to await the valuation reports and then complete the assessment accordingly. However, it was submitted by the Ld. AR that the AO did not await the valuation reports and proceeded to adopt the market value as per stamp duty authorities for the purposes of making addition u/s.56(2)(vii) of the Act and thus such action of the AO was in violation of the provisions of clause (iv) to

The Ld.AR in this connection relied on the decision of the Ahmedabad Bench of this Tribunal in the case of Rajni Arvind Birla v ITO in ITA No.930/Ahd/2025 wherein it was held as under:

The Ld.AR apart from challenging the legality of the assessment order also urged that the assessee is entitled to the benefit of the tolerance band u/s.50C of the Act of 10% in respect of the declared sale consideration and the value determined by the stamp valuation authority, even for the purposes of section 56(2)(vii) of the Act since the provisions of section 56(2)(vii) of the Act invariably refer to the provisions of section 50C(2) as far as valuation of properties are concerned.

In this connection, it was submitted by the Ld.AR that during the pendency of appeal, the ld.CIT(A) sought for a report from the AO regarding the receipt of valuation reports in respect of the properties tabulated above. The AO in response confirmed receipt of valuation reports in respect of properties mentioned at S.Nos.2 to 4 tabulated above and also stated that no valuation report was received in respect of property mentioned at S.No.1. On verification of the valuation reports furnished by the AO and the value declared by the assessee, the ld.CIT(A) adopted the estimates of the valuation officer and revised the addition u/s.56(2)(vii) of the Act. As far as the valuation report for property mentioned at S.No.1 is concerned, it was submitted by the Ld.AR that a copy of the same was obtained by the assessee from the office of the valuation cell only after the passing of the order by the ld.CIT(A).

The Ld.AR drawing reference to the table above submitted that the estimates arrived by the valuation officer substitutes the stamp duty value of the properties and that for the purposes of seeking the benefit of tolerance band of 10%, the comparison now is to be made between the value declared by the assessee and with the estimates of the valuation officer. Moreover, the Ld.AR contended that the usage of the words “adopted or assessed or assessable” in section 50C(1) of the Act would bring within its ambit the market value as determined by the stamp duty authorities or the estimates arrived at by the valuation officer. The usage of the words assessable would further indicate the

The Ld.AR further drew our attention to column (E) wherein the percentage of variation was arrived at and on verification of the same, it was noted that the variation in respect of all properties purchased by the assessee fell within the tolerance limit of 10%. It was in this background that the Ld.AR submitted that no addition u/s.56(2)(vii) of the Act is warranted in the facts and circumstances of the case.

The Ld.AR further stated that the tolerance band of 10% would be retrospectively applicable right from the inception of the provisions of section 50C of the Act, i.e., from the year 2003 and in this regard drew our attention to the decision of the Mumbai Bench of this Tribunal in the case of Maria Fernandes Cheryl v ITO [2021] 85 ITR(T) 674 (Mumbai Tribunal), specifically to end of Para 7 wherein it was held as under: “………..The reasons assigned by the CBDT, i.e., "the variation between stamp duty value and actual consideration received can occur in respect of similar properties in the same area because of a variety of factors, including the shape of the plot or location," was as much valid in 2003 as it is in 2021. There is no variation in the material facts in this respect in 2021 vis-à-vis the material facts in 2003. What holds good in 2021 was also good in 2003. If variations up to 10% need to be tolerated and need not be probed further, under section 50C, in 2021, there were no good reasons to probe such variations, under section 50C, in the earlier periods as well. We are, therefore, satisfied that the amendment in the scheme of Section 50 C(1), by inserting the third proviso thereto and by enhancing the tolerance band for variations between the stated sale consideration vis-à- vis stamp duty valuation to 10%, are curative in nature, and, therefore, these provisions, even though stated to be prospective, must be held to relate back to the date when the related statutory provision of Section 50C, i.e. 1st April 2003. In plain words, what is means is that even if the valuation of a property, for the purpose of stamp duty valuation, is 10% more than the stated sale consideration, the stated sale consideration will be accepted at the face value and the anti- avoidance provisions under section 50C will not be invoked.

The Ld. AR further relied on the decision of the coordinate bench of this Tribunal in the case of Thiduvil Balakrishnan v DCIT [2023] 151 taxmann.com 484 (Chennai Tribunal) wherein it was held as under:

As far as the addition u/s.50C of the Act of Rs.40,00,000/- is concerned, the Ld.AR stated that the assessee sold a property in two undivided half shares for a consideration of Rs.40,00,000/- for each undivided half share whereas the market value adopted by stamp duty authority was Rs.60,00,000/- for each undivided half share and the difference of Rs.20,00,000/- for each undivided half share was taxed u/s.50C of the Act.

In this connection, the Ld.AR submitted that the assessee having objected to the adoption of market value by stamp duty authorities in respect of the purchase transactions during the impugned year and consequent request of reference to the valuation cell for valuation of these properties, has also

However, it was submitted by the Ld.AR that there is no specific reference of a request being made by the assessee to the AO to refer the valuation of the property sold, difference of which was taxed u/s.50C of the Act, unlike there being a specific reference by the AO in his order regarding reference of valuation of properties purchased during the year by the assesse. It was further submitted by the Ld.AR that the assessee during the course of appeal proceedings, had specifically requested the ld.CIT(A) to refer the property for valuation for the purposes of section 50C of the Act, a fact that is recorded by the ld.CIT(A) in his order.

The Ld.AR submitted that the ld.CIT(A) had denied the request for referring the property for valuation on the pretext that the provisions of section 50C of the Act mandate that such request for reference to valuation ought to be made by the assessee before the AO and that the ld.CIT(A) not falling with the definition of Assessing Officer as per section 2(7A) of the Act cannot accede to such request placed before him.

In this regard, the Ld.AR placed the decision of the Hon’ble Calcutta High Court in the case of Sunil Kumar Agarwal v CIT [2015] 372 ITR 83 (Calcutta) wherein the Hon’ble Court held as under:

The Ld.AR also urged the fact that the appellate proceedings are infact continuation of assessment proceedings as held by the Hon’ble Madras High court in the case of CIT v Indian Express (Madurai) (P.) Ltd. [1983] 140 ITR 705 (Madras) and that taking into consideration the above cited decisions, it was submitted that the ld.CIT(A) ought to have acceded to the request of the assessee to refer the property for valuation for the purposes of section 50C of the Act despite the assessee not having specifically placed a request in respect of the same before the AO.

On the other hand, the Ld. DR relied on the findings of the lower authorities.

We have heard the rival contentions and perused all the material available on record before us and gone through the orders of the lower authorities along with the case laws relied on. We note that the crux of the issues involved in this case revolve around the validity of the reference made to the valuation officer for the purposes of additions u/s.56(2)(vii) and 50C of the Act respectively and the applicability of the tolerance band of 10% to the impugned transactions.

We note that in the instant case, the assessee has purchased 4 properties in respect of which there was a difference between the values declared by the assessee and that of the value adopted by the stamp duty authorities and that on specific reference, the AO had referred the valuation of the said properties to the valuation cell. It is an undisputed fact that the AO did

At this juncture, we note that one of the arguments raised by the Ld.AR was in respect of the applicability of the tolerance band of 10% in respect of the purchase transactions. We find considerable force in the arguments of the Ld.AR regarding the applicability of the tolerance band of 10% multi-fold reasons in the facts of the present case and they are:

Coming to the issue of addition u/s.50C of the Act of Rs.40,00,000/-, we note that there is no explicit reference in the assessment order regarding the assessee requesting that the property sold during the year under consideration may be referred to the valuation cell in terms of section 50C(2) of the Act and also that the specific request made in this regard during the course of appeal proceedings had been rejected for reasons already discussed in the aforesaid paragraphs.

Be that as it may, we find considerable force in the argument of the Ld.AR that despite there being no reference of an explicit request made by the assessee to the AO to refer the matter to the valuation cell in terms of section 50C(2) of the Act, the AO in discharging his quasi-judicial function was duty bound to refer the matter to the valuation cell in the interest of justice to ascertain the market value of the property. Our view is supported by the decision of the Hon’ble Calcutta High Court in the case of Sunil Kumar Agarwal supra which was placed on record by the Ld.AR.

In fact, going one step further, we are also in agreement with the Ld.AR regarding the proposition that appellate proceedings are continuation of assessment proceedings as held in CIT v Indian Express (Madurai) (P.) Ltd.

Therefore, as far as the adjudication for this issue is concerned, we deem it appropriate to direct the Assessing Officer to refer the property sold during the year to the valuation cell of the department and thereafter adopt the estimates of the valuation officer. Also, in case the difference between the estimates of the valuation officer and the value of the property sold declared by the assessee fall within the tolerance band of 10%, the benefit of the same may be given to the assessee.

Since the grounds relating to the merits of the case are adjudicated in favour of the assessee, the grounds raised on the legality of the assessment order becomes academic in nature and hence left open.

In the result the appeal of the assessee is partly allowed.