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Facts
The assessee filed an appeal against the CIT(A)'s order for AY 2015-16, which sustained an addition of Rs. 11,59,091/- made under section 56(2)(vii)(b) of the Income Tax Act, 1961. This addition arose from a difference between the stamp duty value and the actual consideration paid for a property, where the Assessing Officer failed to refer the matter to the Departmental Valuation Officer (DVO) despite the assessee's request. The assessee also challenged the jurisdiction of the AO.
Held
The Tribunal, relying on precedents, held that the Assessing Officer's failure to refer the property valuation to the DVO, as mandated by Section 50C(2) and the proviso to Section 56(2)(vii)(b) of the Act, renders the addition unsustainable. Consequently, the impugned appellate order was set aside, and the Assessing Officer was directed to delete the addition of Rs. 11,59,091/-. The other grounds related to jurisdiction were deemed academic.
Key Issues
Whether an addition under section 56(2)(vii)(b) is sustainable when the Assessing Officer fails to refer property valuation to a Departmental Valuation Officer despite the assessee's request, and whether the assessment order is valid if issued by a non-jurisdictional officer.
Sections Cited
143(3), 143(2), 139(1), 139(5), 142(1), 127, 56(2)(vii)(b), 50C, 120(3)
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Income Tax Appellate Tribunal, LUCKNOW BENCH ‘SMC’, LUCKNOW
Before: SHRI ANADEE NATH MISSHRA
2015-16 against impugned appellate order dated 10/01/2025 (DIN & Order No.ITBA/APL/S/250/2024- 25/1072063307(1) of Commissioner of Income Tax (Appeals) [“CIT(A)” for short]. In this appeal the assessee has raised the following grounds:
“1. That the Ld. CIT(A) has erred in law and on facts in sustaining the impugned assessment order ignoring the fact that the order passed under section 143(3) issued by the Ld. A.O. without Assessment Year:2015-16 2 adjudicating the grounds in the appellant's case taken before CIT(A).
That the Ld. CIT (A) has erred in law and on facts in sustaining the impugned assessment order ignoring the fact that the notice issued under section 143(2) of The Income Tax Act, 1961 was issued mechanically through CASS and not by ACIT, Range -3 which is also accepted by the Ld. A.O. therefore, the impugned Assessment order is illegal, void-ab -initio and liable to be quashed.
That the Ld. CIT (A) has erred in law and on facts in sustaining the impugned assessment order ignoring the fact that the notice u/s 143(2) of the Income Tax Act, 1961 (Appeals), dated 20.09.2016 was issued by ACIT, Range-3, Lucknow, being the non- jurisdictional officer, therefore the impugned assessment order is illegal, void-ab-initio and deserves to be quashed.
That the Ld. CIT (A) has erred in law and on facts in sustaining the impugned assessment order ignoring the fact that the notice u/s 143(2) of the Income Tax Act, 1961 dated 20.09.2016 was issued by ACIT, Range-3, Lucknow, however, the case was transferred to Income Tax Officer-3(4), without any order u/s 127 of the Income Tax Act, 1961 therefore the impugned assessment order is illegal, void-ab-initio and deserves to be quashed.
That the Ld. CIT (A), has erred in law and on facts in sustaining the impugned assessment order ignoring the fact, that objections in the jurisdiction which was raised by the appellant during the assessment proceedings which were not disposed off in accordance with law therefore, the impugned assessment order is illegal, void-ab-initio and deserves to be quashed.
That the Ld. CIT (A), has erred in law and on facts in sustaining the impugned assessment order ignoring the fact, that arbitrary addition of Rs.11,59,091/- u/s 56(2)(vii)(b) r.w.s 50C made by Ld. AO of the Income Tax Act, 1961 without making reference to the Department Valuation Officer.
That the Ld. CIT (A), 1ms erred in law nnd on fuels in sustaining the impugned assessment order ignoring the fact, an Assessment Year:2015-16 3 arbitrary addition of Rs.11,59,091/- made under section 56(2)(vii)(b) of The Income Tax Act, 1961 by ld. AO without any proper basis which is wholly unjustified, much too high and deserves to be deleted.
The CIT (A), has erred in law und on facts in sustaining the order of the Ld. A.O., which is insupportable in law and on facts and is also contrary to the principles of natural justice and equity is unsustainable in law and liable to be deleted.”
(B) In this case assessment order dated 27/12/2017 was passed u/s 143(3) of the I. T. Act whereby the assessee’s total income was assessed at Rs.23,84,351/- (rounded off to Rs.23,84,350/-). In the aforesaid assessment order, an addition of Rs.11,59,091/- was made u/s 56(2)(vii)(b) of the Act. The assessee’s appeal against the assessment order was dismissed by learned CIT(A) vide impugned appellate order dated 10/01/2025. The present appeal has been filed by the assessee against the aforesaid appellate order dated 10/01/2025. In the course of appellate proceedings in Income Tax Appellate Tribunal, paper book was filed in two parts containing the following particulars:
Assessment Year:2015-16 Assessment Year:2015-16 Assessment Year:2015-16 Assessment Year:2015-16 Assessment Year:2015-16 8 (B.1) The paper book also contained a synopsis, which is reproduced below:
Assessment Year:2015-16 Assessment Year:2015-16 Assessment Year:2015-16 Assessment Year:2015-16 Assessment Year:2015-16 Assessment Year:2015-16 14 (C) At the time of hearing, the learned Authorized Representative for the assessee placed reliance on the aforesaid synopsis. He also placed reliance on the following precedents:
(1) Order of ITAT, Lucknow Bench in the case of Nirmal Singh vs. Income Tax Officer, (2) Order of ITAT, Mumbai Bench in the case of Mohd Ilyas Ansari vs. Income Tax Officer [2021] 123 taxmann.com 122 (Mumbai- Trib) (3) Order of ITAT, Agra Bench in the case of Hari Om Garg vs Income Tax Officer, (4) Order of ITAT, Hyderabad Banch in the case of ACIT vs. Lalitha Karan in (5) Order of ITAT, Agra Bench in the case of Dr. Sanjay Chobey (HUF) vs. ACIT, (6) Order of ITAT, Amritsar Bench in the case of Dev Brat Sharma vs. Income Tax Officer, Assessment Year:2015-16 15 (7) Order of ITAT, Delhi Bench in the case of Income Tax Officer vs. M/s Aditya Narayan Verma (HUF) [2017] 88 taxmann.com 840 (Delhi-Trib) (8) Order of ITAT, Delhi Bench in the case of ACIT vs. Anima Investment Ltd. [2000] 73 ITD 125 (Delhi)(TM) (9) Order of ITAT, Mumbai Bench in the case of Suresh C. Mehta vs. Income Tax Officer, I.T.A. No.33/Mum/2011 (10) Judgment of Hon'ble Madras High Court in the case of CIT vs. L. G. Ramamurthy [1977] 110 ITR 453 (Madras) (11) Judgment of Hon'ble Gujarat High Court in the case of Sayaji Iron & Engg. Co. vs. CIT [2002] 121 Taxman 43 (Gujarat) (12) Judgment of Hon'ble Gujarat High Court in the case of Uttar Gujarat Vij Co. Ltd. vs Income Tax Officer [2024] 162 taxmann.com 201 (Gujarat) (13) Order of ITAT, Mumbai Bench in the case of Tata Sons Ltd. vs. ACIT [2016] 76 taxmann.com 126 (Mumbai) (14) Order of ITAT, Lucknow Bench in the case of Income Tax Officer vs. Arti Securities & Services Ltd. [2021] 123 taxmann.com 395 (15) Order of ITAT, Allahabad Bench in the case of Obeetee Pvt. Ltd. vs. CIT, I.T.A. No.161/All/2015 (16) Judgment of Hon'ble Patna High Court in the case of Bimla Singh vs. CIT [2009] 308 ITR 71 (Patna) (17) Order of ITAT, Nagpur Bench in the case of Yashoda Builders and Developers vs. ACIT, I.T.A. No.302/Nag/2024 (18) Judgment of Hon'ble Bombay High Court in the case of Bharat Jayantilal Patel vs. UOI, I.T.A. No.302/Nag/2024 (19) Judgment of Hon'ble Bombay High Court in the case of Bayer Material Science (P.) Ltd. vs. DCIT [2016] 66 taxmann.com 335 (Bombay)
In particular, learned Authorized Representative for the assessee placed reliance on Division Bench orders of Co-ordinate Bench of the Income Tax Appellate Tribunal, Lucknow in the case of Nirmal Singh vs. Income Tax Officer, (supra) and in the case of Prachi Leathers Pvt. Ltd. vs. Addl. CIT, (supra).
(C.1) The learned Departmental Representative relied on the assessment order and on the impugned appellate order of learned CIT(A).
Assessment Year:2015-16 16 (C.2) Both sides have been heard. Materials on record have been perused. It is not in dispute that the assessee requested the Assessing Officer to make a reference to Departmental Valuation Officer (“D.V.O.” for short) for determination of fair market value of the property. It is also not in dispute that the Assessing Officer did not make a reference to D.V.O. despite specific request made by the assessee. In these facts, the Division Bench of the Income Tax Appellate Tribunal, Lucknow has already taken a view in favour of the assessee in the case of Nirmal Singh vs. ITO (supra), the relevant part of which is reproduced below:
8. We have heard both sides. We have perused the materials available on records. It is not in dispute that vide letter dated 11/11/2021, the assessee requested for reference to Valuation Officer for determination of fair market value of the property purchased by the assessee and the property sold by the assessee. The provisions of Section 50C(2) of the Act as well as proviso to Section 56(2)(vii)(b) of the Act;mandate reference by the Assessing Officer to the Valuation Officer when the assessee claims before the Assessing Officer that the value adopted or assessed or assessable Stamp Valuation Authority exceeds the fair market value of the property as on the date of transfer. It is also not in dispute that the Assessing Officer failed to make reference to Valuation Officer, as mandated by the aforementioned provisions of law. In this regard, we find that the issue is squarely covered in favour of the assessee by order of Co-ordinate Bench of ITAT Delhi in the case of ITO Vs. M/s. Aditya Narain Verma (HUF) (supra). In this case, the request of the Departmental Representative that the matter may be set aside to the file of the Assessing Officer for referring the case to Valuation Officer, was rejected. The relevant portion of the order is reproduced as under: - “4.1 On the very perusal of the provisions laid down under section 50C of the Act reproduced hereinabove, we fully concur with the finding of the ld. CIT (Appeals) that when the assessee in the present case had - claimed before Assessing Officer that the value adopted or assessed by the stamp valuation authority under sub section (1) exceeds the fair market value of the property as on the date of transfer, the Assessing Officer should have referred the valuation of the capital asset to a valuation officer instead of adopting the value taken by the state Assessment Year:2015-16 17 authority for the purpose of stamp duty. The very purpose of the Legislature behind the provisions laid down under sub section (2) to section 50C of the Act is that a valuation officer is an expert of the subject for such valuation and is certainly in a better position than the Assessing Officer to determine the valuation. Thus, non-compliance of the provisions laid down under sub section (2) by the Assessing Officer cannot be held valid and justified. The Hon'ble’ jurisdictional High Court of Allahabad in the case of Shashi Kant Garg (supra) has been pleased to hold that it is well settled that if under the provisions of the Act an authority is required to exercise powers or to do an act in a particular manner, then Bat power has to be exercised and the act has to be performed in that manner alone and not in any other manner. Similar view has been expressed by the other decisions cited by the Ld. AR in this regard hereinabove. The first appellate order on the issue is thus upheld. The grounds are accordingly rejected.
Respectfully following the aforesaid order of Delhi Bench of ITAT of Delhi in the case of ITO Vs. M/s. Aditya Narain Verma (HUF) (supra), we hold that the additions made by the Assessing Officer amounting to Rs.2,14,22,053/- and Rs.49,11,947/-, as aforesaid, without reference to the Valuation Officer as mandated by law, has no legs to stand and is unsustainable; having regard to applicable law as well as facts and circumstances of the present case before us. Accordingly, we set aside the impugned appellate order dated 03/01/2024 of the Ld. CIT(A) and we direct the Assessing Officer to delete the aforesaid additions of Rs. 2,14,22,053 and Rs. Rs.49,11,947/-.
Since we have already directed the Assessing Officer to delete the aforesaid additions of Rs. 2,14,22,053 and Rs. Rs.49,11,947/-, the remaining arguments advanced by both sides are merely academic in nature and need not to be adjudicated.”
The orders in the case of Mohd Ilyas Ansari vs. Income Tax Officer [2021] 123 taxmann.com 122 (Mumbai-Trib), Hari Om Garg vs Income Tax Officer, ACIT vs. Lalitha Karan in Dr. Sanjay Chobey (HUF) vs. ACIT, Dev Brat Sharma vs. Income Tax Officer, Income Tax Officer vs. M/s Aditya Narayan Verma (HUF) [2017] 88 taxmann.com 840 (Delhi-Trib) also support the case of the assessee.
Assessment Year:2015-16 18 (C.2.1) Considering the synopsis filed from the assessee side [referred to in foregoing paragraph (B.1) of this order], the relevant precedents mentioned earlier in this order and submissions made at the time of hearing, it is found that the issue in dispute in the present appeal regarding aforesaid addition of Rs.11,59,091/- is covered in favour of the assessee and against Revenue vide order of Lucknow Bench of ITAT in the case of Nirmal Singh vs. ITO (supra). It is also covered in favour of the assessee, vide aforesaid precedents in the cases of Mohd Ilyas Ansari vs. Income Tax Officer [2021] 123 taxmann.com 122 (Mumbai-Trib), Hari Om Garg vs Income Tax Officer, ACIT vs. Lalitha Karan in Dr. Sanjay Chobey (HUF) vs. ACIT, Dev Brat Sharma vs. Income Tax Officer, Income Tax Officer vs. M/s Aditya Narayan Verma (HUF) [2017] 88 taxmann.com 840 (Delhi-Trib). Respectfully following these precedents and in the specific facts and circumstances of the present case, the impugned appellate order of the learned CIT(A) is set aside and the Assessing Officer is directed to delete the aforesaid addition of Rs.11,59,091/-.
(D) As the aforesaid addition of Rs.11,59,091/- has been deleted, ground No. 6 of appeal is treated as allowed. The remaining grounds of appeal are merely academic (as the addition of Rs.11.59.091/- has already been deleted); hence not being decided.
(Order pronounced in the open court on 30/01/2026)