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Facts
The assessee purchased an immovable property for Rs. 36,00,000, which was less than the stamp duty value. The AO made an addition of Rs. 79,00,000 under section 56(2)(vii) of the Income Tax Act, treating the difference as income. The CIT(A) upheld this addition.
Held
The Assessing Officer (AO) is duty-bound to refer the matter to the Department Valuation Officer (DVO) when the assessee objects to the property's valuation. The AO's failure to do so, despite the assessee's specific objection and request for reference, renders the assessment incomplete.
Key Issues
Whether the AO was justified in not referring the property valuation to the DVO when the assessee raised objections and whether the addition made under section 56(2)(vii) is sustainable without such reference.
Sections Cited
56(2)(vii), 234A, 234B, 234C, 270A, 147, 144B, 50C(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
(Assessment Year: 2017-18) Deepchand Khetmal Jain National Faceless Appeal Centre Office No. 36, 2nd Floor, 526m Duncan (NFAC) Vs. Road, Ladi Bazar, Girgoan, Mumbai – Delhi 400004. PAN/GIR No.ACYPJ4931B (Assessee) : (Respondent) Assessee by : Shri. Vimal Punmiya : Shri. R. R. Makwana, Sr. DR. Respondent by : 17.10.2024 Date of Hearing Date of Pronouncement : 29.11.2024 O R D E R Per Kavitha Rajagopal, J M: This appeal has been filed by the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) (‘ld.CIT(A) for short),National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2017-18.
The assessee has raised the following grounds of appeal:
1. On the facts and Circumstances of the case the NFAC erred in confirming the addition of Rs.79,00,000/- under section 56(2) (vii) of the Income Tax Act 1961 and thereby erred in confirming and treating the difference between purchase value of immovable property and stamp duty value of the immovable property as income from other sources without appreciating the facts, submission made before the NFAC.
2. The Ld CIT(A) erred in initiating interest u/s 234A,234B and 234C of the Income Tax Act 1961.
3. The Ld. CIT(A) erred in confirming the initiation of the penalty proceeding under section 270A of the Income Tax Act 1961.
(A.Y. 2017-18) Deepchand Khetmal Jain 4. The appellant craves leave to add further grounds or to amend or alter the existing grounds of appeal on or before the date of hearing.”
3. Brief facts of the case are that the assessee is an individual and has filed his return of income dated 15.11.2017 declaring total income at Rs. 2,08,04,286/-. The assessee’s case was reopened vide notice u/s. 148 dated 30.06.2021 for the reason that the assessee has purchased the immovable property for a sale of consideration of Rs. 36,00,000/- which was less than the stamp duty value determined by the Stamp Duty Authority. The learned Assessing Officer (ld. A.O. for short) then passed the assessment order u/s. 147 r.w.s. 144B of the Act dated 26.05.2023 determining total income at Rs. 2,85,19,290/- after making an addition of Rs. 79,00,000/- u/s. 56(2)(vii) of the Act being the difference in the value of consideration as that of the value as per stamp duty.
4. Aggrieved the assessee was in appeal before the first appellate authority, who vide order dated 04.07.2024 upheld the addition made by the learned Assessing Officer (ld. A.O. for short) for the reason that the assessee has not furnished any supporting documentary evidence to controvert the valuation adopted by the Stamp Valuation Authority which was in turn relied upon by the ld. AO.
5. The assessee is in appeal before us, challenging the impugned order of the ld. CIT(A).
6. The learned Authorised Representative (ld. AR for short) for the assessee contended that the lower authorities have not considered the assessee’s submissions which has stated that the said property is a tenanted property and is also a non-cess property which has no scope of redevelopment as no FSI was available to the assessee. The ld. AR further contended that the ld. AO has computed the value considering the property (A.Y. 2017-18) Deepchand Khetmal Jain to be capable of redevelopment and has wrongly considered the benefit of FSI as being available to the assessee. The ld. AR stated that the value determined as per Stamp Duty Authority is exorbitant. The ld. AR also brought our attention to the fact that the ld. AO has not referred this to the Department Valuation Officer (DVO) for determining to stamp duty value inspite of specific request from the assessee. The ld. AR further stated that the ld. AO has also failed to consider the valuation report furnished by the assessee.
The learned Departmental Representative (ld. DR for short) on the other hand controverted the said fact and stated that the assessee has not furnished any details or document to substantiate the difference of value of the property. The ld. DR stated that in the absence of the same, the ld. AO's determination is justified. The ld. DR relied on the orders of the lower authorities.
We have heard the rival submissions and perused the materials available on record. It is observed that the assessee vide letter dated 13.05.2023 enclosed in paper book page no. 47 to 49 has filed his written submission before the learned Assessing Officer (ld. A.O. for short) stating the nature of the property purchased by the assessee that the same is a tenanted and a non-cess property having no FSI which will have a bearing in the determination of the value of the property. Further, from the assessment order it is evident that the assessee has requested the ld. AO during the assessment proceeding for reference to the DVO which was rejected by the ld. AO and proceeded to make an addition u/s. 56(2)(vii) of the Act on the deemed market value as per Stamp Duty Authority. The ld. CIT(A) has also extensively relied on the assessment order.
(A.Y. 2017-18) Deepchand Khetmal Jain 9. From the above factual matrix of the case, it is pertinent to point out that once the assessee objects to the value of the property determined by the ld. AO then the ld. AO is duty bound to refer the matter to the DVO as per the Section 50C(2) of the Act. When there is a specific objection raised by the assessee then it becomes mandatory for the ld. AO to refer the valuation to the DVO which exercise has not been carried out in the present case in hand. We therefore are inclined to remand this issue back to the file of ld. AO to refer the same for valuation to the DVO and needless it is to say that sufficient opportunity is to be given to the assessee before concluding the de novo assessment.
In the result, the appeal filed by the assessee is allowed for statistical purpose. Order pronounced in the open court on 29.11.2024 Sd/- Sd/- (OM PRAKASH KANT) (KAVITHA RAJAGOPAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated: 29.11.2024 Karishma J. Pawar (Stenographer) Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER,