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Facts
The assessee purchased an immovable property for Rs. 3,49,36,323/- in a public auction. The Assessing Officer made an addition of Rs. 1,16,21,427/- under section 56(2)(vii)(b) of the Act, treating the difference between the stamp duty valuation and the purchase consideration as unexplained investment. The CIT(A) confirmed this addition.
Held
The Tribunal held that the addition under section 56(2)(vii)(b) was not sustainable. The difference between the DVO's valuation and the purchase consideration was within the 10% tolerance band prescribed by law, and the property was purchased through a public auction, with no evidence of any undisclosed payment.
Key Issues
Whether the addition under section 56(2)(vii)(b) is justified when the sale consideration is less than the stamp duty value, and if the difference falls within the permissible tolerance limit.
Sections Cited
56(2)(vii)(b), 55A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: DR. B.R.R. KUMAR, VICE-MS. SUCHITRA KAMBLE
Ratibhai Girdharbhai Kakani, Asst. Commissioner of Vs. 109, Part-2, Shantiniketan Society, Income-tax, Opp. Lajamni Hotel, Mota Circle 1 (3), Varachha, Surat-395006 Surat [PAN : ANMPK 2307 F] (Appellant) .. (Respondent) Appellant represented by : Shri Hiren R. Vepari, CA Respondent represented by: Shri Ashish Kumar, Sr. DR Date of Hearing 22.01.2026 Date of Pronouncement 17.02.2026 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:- This appeal has been filed by the assessee against the order dated 11.09.2025 passed by the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as the “Ld. CIT(A)” for short), under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as the “Act” for short) for Assessment Year 2015-16.
The assessee has raised following grounds of appeal :-
“(i) On the facts and circumstances of the case and as per law, the learned CIT(A) was not justified in confirming addition of Rs. 1,16,21,427/- u/s 56(2)(vii)(b) as unexplained investment in property. (il) The learned CIT(A) was not justified in confirming the addition u/s 56(2)(vii)(b) when the transaction value was above the stamp authority valuation. (iii) The appellant submits that he had purchased the property (Land) in public auction from the co-operative society, hence, there was no justification in sustaining this addition. Ratibhai Girdharbhai Kakani Vs. ACIT Asst. Year : 2015-16 - 2–
(iv) There was no merit in sustaining the addition particularly when the variation between the DVO and the appellant valuation is 9.58% (less than the 10% limit prescribed by Rule 111A r.w.s. 55A) (v) In any case, in the worst, the addition could not have been sustained beyond the DVO valuation.”
The brief facts of the case are that assessee purchased an immovable property through a public auction conducted by a Co-operative Society for a total consideration of Rs.3,49,36,323/-. During the course of assessment proceedings, the Assessing Officer observed that the stamp duty valuation of the property was Rs.4,65,57,750/- and, invoking the provisions of section 56(2)(vii)(b) of the Act, made an addition of Rs.1,16,21,427/- being the difference between the stamp duty value and the actual purchase consideration.
The matter was referred to the Departmental Valuation Officer (DVO), who determined the fair market value of the property at Rs.3,82,83,000/-. The Ld. CIT(A) confirmed the addition made by the Assessing Officer. Aggrieved, the assessee is in appeal before us.
We have heard the rival contentions and perused the material available on record, including the orders of the Assessing Officer and Ld. CIT(A).
5.1 The issue for consideration is whether the addition of Rs.1,16,21,427/- under section 56(2)(vii)(b) of the Act is sustainable.
Straight to the issue:
5.2 The Assessing Officer made an addition of Rs.1,16,21,427/- under section 56(2)(vii)(b) of the Act. The valuation report received from the DVO shows a variation of 9.58% between the value determined by the DVO and the actual consideration paid by the assessee, which is less than the 10% allowable limit Ratibhai Girdharbhai Kakani Vs. ACIT Asst. Year : 2015-16 - 3– recognized in valuation matters under Rule 111A read with section 55A of the Act. Since the value of the property falls within the accepted tolerance band, no addition is called for in the present case.
5.3 Further, we find that the assessee has purchased the property through a public auction from a Co-operative Society. In the absence of any material on record to establish that any amount over and above the stated consideration was paid to the trustees or officers of the society, the allegation of unexplained investment cannot be sustained. Accordingly, the addition is deleted.
In the result, the appeal of the assessee is allowed.
The order is pronounced in the open Court on 17.02.2026 (SUCHITRA KAMBLE) VICE-PRESIDENT Ahmedabad; Dated 17/02/2026 btk