Loading judgment…
Facts
The assessee, proprietor of Hindusthan Transformer & Oil Products, filed her return for AY 2014-15. The AO made additions under Section 56(2)(vii) and 50C of the Income Tax Act, 1961, for differences between declared property values and stamp duty valuations. The CIT(A) upheld some additions and restricted others. The assessee appealed to the Tribunal.
Held
The Tribunal held that the tolerance band of 10% is applicable retrospectively from the inception of Section 50C. The AO's assessment order was considered invalid as it was passed without awaiting the DVO's report, violating Section 153. The Tribunal directed the AO to refer the sold property to the valuation cell and consider the 10% tolerance band.
Key Issues
1. Validity of assessment order passed without awaiting DVO's report. 2. Applicability of 10% tolerance band under Section 50C. 3. Addition made under Section 56(2)(vii) and 50C.
Sections Cited
56(2)(vii), 50C, 143(3), 250, 153, 142A(6), 234A, 234C, 50C(2), 16A, 2(7A), 250(4)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI S.S. VISWANETHRA RAVI & SHRI S. R. RAGHUNATHA
आदेश /O R D E R
PER S. R. RAGHUNATHA, AM :
This appeal of the assessee arises from the order passed u/s.250 of the Income Tax Act, 1961 (in short ‘the Act’) dated 08.09.2025 by the Commissioner of Income Tax (Appeals), Chennai – 20 for the assessment year 2014-15 against the order of the Assessing Officer (AO) passed under section 143(3) of the Act dated 31.12.2016.
2. The grounds raised by the assessee are as follows:
:-2-: ITA No: 3135/Chny/2025
1. For that the order of the Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case, to the extent prejudicial to the interests of the appellant and is opposed to the principles of equity, natural justice and fair play.
For that the Commissioner of Income Tax (Appeals) failed to appreciate that the order of the Assessing Officer is without jurisdiction.
Addition of Rs.2,97,85,410/- u/s.56(2)(vii) is not warranted in the facts and circumstances of the case
3. For that the Commissioner of Income Tax (Appeals) erred in upholding the addition to the tune of Rs.2,97,85,410/- made u/s.56(2)(vii) of the Income Tax Act in respect of purchase of immovable property situated at Kalapatti Village, Coimbatore.
4. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the provisions of section 56(2)(vii) of the Income Tax Act are not invocable in the facts and circumstances of the instant case.
For that the Commissioner of Income Tax (Appeals) failed to appreciate that the appellant cannot be penalized by making an addition u/s.56(2)(vii) in the event of non-receipt of valuation report by the Assessing Officer in respect of the impugned property, a fact that has not been disputed at any point in time.
6. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the Assessing Officer could not have made an addition of Rs.2,97,85,410/- u/s.56(2)(vii) if the valuation report was not received at all in respect of the impugned property.
For that the Commissioner of Income Tax (Appeals) failed to appreciate that the Assessing Officer in the event of non-receipt of valuation report from DVO, ought to have accepted the purchase price of the immovable property as mentioned in the sale deed.
8. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the Assessing Officer has not brought any material on record to show that the value of the impugned property is on the higher side apart from the fact that there is a difference between the actual purchase value and the stamp duty value of the impugned property.
9. For that without prejudice to the above, the Commissioner of Income Tax (Appeals) failed to appreciate that the provisions of section 142A(6) were not complied in the facts and circumstances of the instant case.
10. For that without further prejudice to the above, the Commissioner of Income Tax (Appeals) failed to appreciate that the Valuation Officer erred in not complying with :-3-: ITA No: 3135/Chny/2025
the provisions of section 142A(6) of the Income Tax Act and therefore the addition of Rs.2,97,85,410/- could not have been made in the instant case.
Addition of Rs.40,00,000/- u/s.50C is not warranted in the facts and circumstances of the case
11. For that the Commissioner of Income Tax (Appeals) erred in upholding the addition to the tune of Rs.40,00,000/- made u/s.50C of the Income Tax Act in respect of sale of immovable property in 2 undivided half shares.
12. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the Assessing Officer erred in adopting the guideline value as the full value of consideration by invoking the provisions of section 50C of the Income Tax Act despite the fact that the appellant had sought for reference to the DVO in respect of the valuation of the impugned property.
For that the Commissioner of Income Tax (Appeals) erred in not acceding to the request of the appellant for reference to the DVO for valuation of the impugned property.
Levy of Interest u/s.234A and 234C
14. For that the appellant objects to the levy of interest under sections 234A and 234C of the Income Tax Act.
PRAYER
For these grounds raised and such other grounds that may be raised, may be altered, amended or modified, with the leave of the Hon’ble Tribunal before or during the hearing of the appeal, it is most humbly prayed that the Hon’ble Tribunal may be pleased to: a) Delete the addition of Rs.2,97,85,410/- made u/s.56(2)(vii) and / or b) Delete the addition of Rs.40,00,000/- made u/s.50C and / or c) Pass such other orders as the Hon’ble Tribunal may deem fit.
The assessee had also raised additional grounds of appeal which are as follows: Ground No.9 For that without prejudice to the above, the Commissioner of Income Tax (Appeals) failed to appreciate that the provisions of section 142A(6) were not complied in the facts and circumstances of the instant case. Ground No.10
:-4-: ITA No: 3135/Chny/2025
For that without further prejudice to the above, the Commissioner of Income Tax (Appeals) failed to appreciate that the Valuation Officer erred in not complying with the provisions of section 142A(6) of the Income Tax Act and therefore the addition of Rs.2,97,85,410/- could not have been made in the instant case.
Ground No.11 For that the Commissioner of Income Tax (Appeals) erred in upholding the addition to the tune of Rs.11,91,900/- made u/s.56(2)(vii) of the Income Tax Act in respect of purchase of one immovable property situated at Pulliakulam Village, Coimbatore and 2 properties situated at Ramanathapuram Village, Coimbatore.
Ground No.12 For that the Commissioner of Income Tax (Appeals) failed to appreciate that the order of the Assessing Officer dated 31.12.2016 is without jurisdiction and is liable to be quashed as the said order had been passed prematurely despite the fact that there was a reference made to the valuation officer and that there was adequate time left for receipt of such valuation reports.
Ground No.13 For that the Commissioner of Income Tax (Appeals) failed to appreciate that the assessment order dated 31.12.2016 is liable to be quashed since the same was passed without taking into consideration the operation of section 153 of the Income Tax Act which excludes the period commencing from the date of reference to a Valuation Officer and until the receipt of such valuation report.
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 :-5-: ITA No: 3135/Chny/2025 alternatively requested the AO to refer the valuation of such properties to the valuation cell of the department.
5. 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:
a) Addition of Rs.3,86,75,110/- u/s.56(2)(vii) of the Act being difference between the value of land declared by the assessee and the market value adopted by the stamp duty authorities in respect of purchase of 4 properties. b) Addition of Rs.40,00,000/- u/s.50C of the Act being difference in the sale value of land and market value adopted by stamp duty authorities in respect of sale of property in two undivided half shares. c) Disallowance of agricultural income of Rs.15,87,241/-.
7. 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:
:-6-: ITA No: 3135/Chny/2025 a) Restricted the addition made u/s.56(2)(vii) of the Act in respect of 3 properties to Rs.11,91,900/- after adopting the value determined by the valuation officer as against Rs.88,90,000/- made in aggregate by the AO during the course of assessment. b) Upheld the addition of Rs.2,97,85,410/- u/s.56(2)(vii) of the Act in respect of the property for which valuation report was not received even during the pendency of appeal proceedings, a fact that was confirmed by the AO. c) Upheld the addition of Rs.40,00,000/- made u/s.50C. d) Restricted the disallowance of agricultural income to Rs.3,21,569/- as against Rs.15,87,241/- made by the AO.
8. 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:
S.No. Particulars of Actual Value Difference Value Revised Date of property consideratio adopted by determined difference valuation (C) = B-A n stamp duty by DVO in report (E) = D-A authorities valuation (A) report & % of (B) variation (D) (E/A) 1. Property located at 5,00,00,000 7,97,85,410 2,97,85,410 5,48,60,000 48,60,000 12.04.2021 Kalapatti Village, Coimbatore, sold by Namakkal Trailer [9.72%] Owners Association vide document
:-7-: ITA No: 3135/Chny/2025 No.388/2014 dated 22.01.2014 2. Property located at 1,50,00,000 1,83,85,000 33,85,000 1,54,60,000 4,60,000 23.06.2017 Pulliakulam Village, (Recd. on Coimbatore, sold by 01.07.2017) R.M.Natarajan vide [3.06%] document No.1957/2013 dated 30.05.2013 3. Property located at 36,00,000 51,84,300 15,84,300 39,16,900 3,16,900 16.12.2017 Ramanathapuram Village, Coimbatore, sold by Jolly Joseph, George Joseph and Jothi Shaji vide [8.80%] document No.2606/2013 dated 23.07.2013 4. Property located at 70,00,000 1,09,20,700 39,20,700 74,15,000 4,15,000 23.06.2017 Ramanathapuram (Recd. on Village, Coimbatore, 01.07.2017) sold by Jolly Joseph, George Joseph and Jothi Shaji vide [5.92%] document No.2605/2013 dated 23.07.2013
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 :-8-: ITA No: 3135/Chny/2025 Explanation 1 to section 153 of the Act, thereby rendering such assessment order invalid.
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 wherein it was held as under:
“23. Section 153(5) read with Explanation 1(iii) provides that the period commencing from the date of reference to the Valuation Officer to the date of receipt of the report is to be excluded for computing the period of limitation. This statutory exclusion is legislative recognition that the Assessing Officer is expected to await the valuation report and that the assessment cannot be completed prematurely. The Assessing Officer, therefore, had sufficient time in law to defer completion of assessment until the DVO’s report was received. The action of finalising the assessment despite the pending reference is contrary to this legislative mandate.
Section 50C(2) of the Act establishes a mandatory procedural safeguard in favour of the assessee whenever the value adopted by the stamp valuation authority is disputed. The provision obliges the Assessing Officer, upon such objection, to refer the valuation of the capital asset to a Departmental Valuation Officer for determination of its fair market value. This mechanism, by incorporation of the procedure prescribed under section 16A of the Wealth-tax Act, 1957, mandates that before finalising such valuation, the Valuation Officer must give the assessee a reasonable opportunity of being heard and to produce evidence in support of the declared value. Failure to adhere to this procedure or to afford the assessee an opportunity to raise objections to the proposed valuation constitutes a violation of the statutory right vested under section 50C(2) and renders the assessment legally unsustainable as being contrary to the principles of natural justice. In the present case, though the Assessing Officer did make the reference, he failed to await the DVO’s determination and instead proceeded to compute capital gains based on the stamp duty valuation. This deprived the assessee of the statutory right to contest the valuation before an independent authority. The violation of section 50C(2), being a procedural safeguard founded on principles of natural justice, renders the assessment unsustainable. ………. 28. In view of the above discussion, we hold that:
i. The assessment order dated 22.09.2021 passed under section 143(3) read with section 144B without awaiting the DVO’s report, when such report was statutorily awaited, is not sustainable.
……….”
:-9-: ITA No: 3135/Chny/2025
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.
13. 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 :-10-: ITA No: 3135/Chny/2025 necessity of substitution of such estimates of the valuation officer in lieu of the stamp duty value of properties for the purposes of section 50C of the Act.
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.
Once legislature very graciously accepts, by introducing the legal amendments in question, that there were lacunas in the provisions of section 50C in the sense that even in the cases of genuine variations between the stated consideration and the stamp duty valuation, anti-avoidance provisions under section 50C could be :-11-: ITA No: 3135/Chny/2025
pressed into service, and thus remedied the law, there is no escape from holding that these amendments are effective with effect from the date on which the related provision, i.e., Section 50C, itself was introduced. These amendments are thus held to be retrospective in effect. In our considered view, therefore, the provisions of the third proviso to Section 50C (1), as they stand now, must be held to be effective with effect from 1st April 2003. We order accordingly……….”
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:
“11. As regards alternate plea of the assessee that, the difference between guideline value and consideration paid for property is less than the tolerance band fixed by virtue of amendment to section 50C by the Finance Act, 2020 and thus, no addition can be made u/s. 56(2)(vii)(c) of the Act, we find that, the amendment brought to section 50C by the Finance Act, 2018 and further amendment by Finance Act, 2020 is held to be retrospective in nature, as held by ITAT, Mumbai in the case of Maria Fernandes Cheryl v. ITO (International Taxation) [2021] 123 taxmann.com 252/187 ITD 738. We, therefore of the considered view that by virtue of said amendment to section 50C of the Act, if difference between guideline value and consideration paid for purchase of property is less than the tolerance band, then said difference cannot be considered as deemed consideration in the hands of the seller and consequently the provisions of section 56(2)(vii)(c) of the Act cannot be invoked in the hands of the buyer. Since, difference between guideline value and consideration paid for purchase of property in the present case is less than tolerance band, we are of the considered view that no addition can be made u/s. 56(2)(vii)(c) of the Act. Thus, we direct the AO to delete addition made towards difference in value of property u/s. 56(2)(vii)(c) of the Act.”
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 :-12-: ITA No: 3135/Chny/2025 objected to the market value adopted in respect of the impugned sale transaction where the difference was brought to tax u/s.50C of the Act despite being handicapped by the fact that proof in respect of the same could not be produced by the assessee. He cited the principle of preponderance of probability to urge that it was not possible to infer that the assessee would not have objected to the valuation of property sold during the year having objected to the properties purchased during the year under consideration.
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:
“8. For the aforesaid reasons, we are of the opinion that the valuation by the departmental valuation officer, contemplated under Section 50C, is required to avoid miscarriage of justice. The legislature did not intend that the capital gain
:-13-: ITA No: 3135/Chny/2025 should be fixed merely on the basis of the valuation to be made by the District Sub Registrar for the purpose of stamp duty. The legislature has taken care to provide adequate machinery to give a fair treatment to the citizen/taxpayer. There is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused. Even in a case where no such prayer is made by the learned advocate representing the assessee, who may not have been properly instructed in law, the assessing officer, discharging a quasi judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law.”
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.
24. 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
:-14-: ITA No: 3135/Chny/2025 not receive the valuation reports in respect of the said properties until completion of assessment and also that the AO received the valuation reports only in respect of 3 out of the 4 properties referred during the course of appellate proceedings. As regards the property mentioned at S.No.1 of the tabulation in the earlier part of this order, a copy of the said valuation report was produced during the course of hearing before this Tribunal. It is also a fact that post receipt of such valuation reports, there was no amendment made to the assessment order to that effect by the AO.
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:
a) Firstly, though as per the provisions of the Act, the tolerance band is to be reckoned with respect to the difference between the value declared by the assessee and that adopted by the stamp duty authorities, the fact that the estimates of the valuation officer is also a result of an expert valuation, the values arrived by the valuation officer substitute the stamp duty value and for all practical purpose, the tolerance band applicability would now have to be seen with respect to the value declared by the assessee vis- à-vis the value arrived at by the valuation officer in respect of such property.
This substitution is warranted because originally even the stamp duty value is an estimate based on various factors and also due to the usage of the words assessable in the provisions of section 50C of the Act. The above substitution of values is on the premise that the assessee is presented with two alternate mechanisms to dispute the value arrived at by the valuation officer. One being an objection that can be raised in terms of section 16A of the Wealth Tax Act, 1957 before the valuation authorities and the other being the appellate route wherein an objection can be raised against the valuation in terms of provisions of section 50C(2) of the Act.
:-15-: ITA No: 3135/Chny/2025 b) Secondly, we are in agreement of the decision rendered by the Mumbai Bench, followed by the coordinate bench of this Tribunal wherein it is clearly held that the tolerance band of 10% is applicable right from the insertion of the provisions of section 50C of the Act in the statute books. Thus, even in the present case, for A.Y.2014-15, the tolerance band of 10% would apply for the transactions under consideration.
As per the above tabulation, we note that the difference in value for all purchase transactions fall within the tolerance band of 10% and thus in view of the same, no addition u/s.56(2)(vii) of the Act is warranted in the facts of the present case and therefore, we direct the AO to delete the addition made u/s.56(2)(vii) of the Act.
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.
:-16-: ITA No: 3135/Chny/2025 supra and thus the ld.IT(A) in this case could have directed the matter to be referred to the valuation cell of the department, moreover in view of the general powers u/s.250(4) of the Act.
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.
Order pronounced in the open court on 05th March, 2026 at Chennai.