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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Shri Laliet Kumar & Shri Manjunatha, G.
Per Manjunatha, G. A.M This appeal filed by the assessee is directed against the order dated 20/02/2019 of the learned CIT (A)-7, Hyderabad, relating to A.Y.2014-15.
The assessee raised the following grounds: “1. The order of the Appellate Commissioner is contrary to the law, facts and circumstances of the case.
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The Appellate Commissioner ought not to have partially confirmed the addition made by the Assessing Officer u/s 56(2)(vii)(ii).
The Appellate Commissioner erred in ignoring the fact that the property was a dispute with litigation attached and as such should have taken the value of the property as per the sale deed and not as per the SRO value. 4. The Appellate Commissioner has no jurisdiction in appeal proceedings to call for valuation reports and as such the additions made/sustained on the basis of the same ought to be quashed, 5. The Appellate Commissioner – ceases to have jurisdiction to invoke or press section 142(A) into service either by himself directly or through to Assessing Officer indirectly, and as such the remand report has no evidentiary value. 6. Any other grounds which the appellant may urge either before or at the time during the hearing”.
The brief facts of the case are that the assessee, an individual, filed his return of income for the A.Y 2014-15 on 20/09/2015 admitting total income of Rs.4,51,840/-. The case was selected for scrutiny and during the course of assessement proceedings, the Assessing Officer noticed that the assessee along with 3 others purchased immovable property vide Document No.4457/2013 dated 03.12.2013 for a consideration of Rs.53,75,000/- and paid stamp duty and registration charges of Rs.21,60,130/-. The Assessing Officer further noted that the Fair Market Value of the property for the purpose of stamp duty was at Rs.3,59,98,000/-. The Assessing Officer called upon the assessee to explain as to why provisions of section 56(2)(vii)(ii) of the I.T. Act, 1961 cannot be invoked and assessed the difference in value of the property as income of the assessee. In response, the Page 2 of 10 assessee submitted that the land under consideration is under dispute and assessee did not get the free possession of the property and market title on the property till date and legal dispute is going on in the Court of Law and therefore, guideline value of the property fixed for the purpose of payment of stamp duty cannot be considered as Fair Market Value of the property and difference cannot be assessed as income from other sources. The Assessing Officer after considering the relevant submission of the assessee and also taken note of the provisions of section 56(2)(vii)(ii) of the Act, observed that any receipt, in any previous year, from any person or persons, consideration which is less than the stamp duty value of the property and, if the aggregate value exceeds Rs. 50,000 in a financial year, the difference of such amount shall be chargeable to income tax under the head “income from other sources”. Since there is a difference between the consideration paid for purchase of property and Fair Market value of the property as per stamp duty authorities, the difference amount is assessable to tax as income from other sources and thus, took 1/4th share of the assessee and worked out the difference of Rs.76,55,750/- and assessed under the head “income from other sources”.
Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT (A). Before the learned CIT (A), the assessee challenged the addition made by the Assessing Officer towards deemed income in terms of section 56(2)(vii)(ii) of the Act, and argued that if at all the assessee
Page 3 of 10 disputes the stamp duty value and claims before the Assessing Officer that the value adopted or assessed by the stamp duty authorities exceeds the fair market value of the property and the stamp duty value has been disputed by the assessee, then the Assessing Officer is duty bound to refer it to the Valuation Officer for determining the value of the property. The assessee had also challenged the determination of the fair market value and argued that there is dispute in the title of the property and since the property does not have marketable title, the fair market value fixed by the stamp duty authorities for the stamp duty is not correct fair market value and thus,, the Assessing Officer is erred in making addition u/s 56(2)(vii)(ii) of the I.T. Act, 1961. The learned CIT (A) during the course of appellate proceedings referred the value of the property to the Valuation Officer and the Valuer has determined the share of the property at Rs.56,70,000/-. Based on the valuation report, the learned CIT (A) determined the difference at Rs.43,26,250/- on this issue. The Authorized Representative objected and argued that as per the provisions of section 142A, the learned CIT (A) does not have any power to refer to the Valuation Officer, because as per the said provisions, reference can be made only during the course of pendency of assessement proceedings.
The learned CIT (A), after considering the relevant submissions of the assessee and also taken note of certain judicial precedents including the decisions of the Hon'ble Supreme Court in the case of CIT vs. Kanpur Coal Syndicate (53
Page 4 of 10 ITR 225) and in the case of Jute Corporation of India Ltd vs. CIT (187 ITR 688) rejected the objections raised by the assessee on the powers of the CIT (A) in dealing with the issue and held that the CIT (A) being the first appellate authority have coterminous power with that of the Assessing Officer and thus, once the issue is before the appellate authorities, the appellate authority can decide the issue based on the facts and circumstances available on record. The learned CIT (A) further noted that a reference to the Valuation Officer was made when the appellant raised a legal issue that is was incumbent on the part of the Assessing Officer to send said transaction of value to the DVO. Therefore, the objection raised by the assessee on the powers of CIT (A) is devoid of any merit and thus, rejected. The learned CIT (A) further held that there is no dispute on record to the fact that there is a difference between the consideration paid as per registered document and fair market value of the property as determined by the valuer and therefore, once there is difference between the value, the same needs to be assessed as income from other sources. Thus, rejected the argument of the assessee and sustained the addition to the tune of Rs.43,26,250/- (Rs.56,70,000 – Rs.13,43,750) u/s 56(2)(vii)(ii) of the I.T. Act, 1961.
Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before the Tribunal.
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The learned Counsel for the assessee submitted that the learned CIT (A) is erred in sustaining the addition made by the Assessing Officer towards difference in value of the property u/s 56(2)(vii)(ii) of the Act, without appreciating the fact that when there is no assessment or re-assessment is pending, the Assessing Officer or the learned CIT (A) cannot refer the matter to the valuation officer. The learned Counsel for the assessee referring to certain judicial precedents including the decision of the Hon'ble Kolkata High Court in the case of PCIT vs. M/s. Estate of Late AI YUN HASIN LIU, AOP in submitted that when there is no pendency of any assessment or re-assessment proceedings at the relevant point of time when the Assessing Officer referred to valuation to the District Valuation Officer, the reference to the DVO is bad in law. The learned Counsel for the assessee further referring to the decision of the ITAT Agra Bench in the case of Ramesh Chand Kulshresht & Brother (HUF), dated 10/10/2018, submitted that the reference u/s 142A is not allowed after assessment or re-assessment. The learned Counsel for the assessee further referring to the decision of the ITAT Hyderabad Benches in the case of Dr. G. Premalatha vs. DCIT in ITA No.200/Hyd/2014 dated 5/9/2014 submitted that a similar view has been taken by the Coordinate Bench and held that if there is no pendency of assessment or re-assessement proceedings, reference u/s 142A cannot be made. Since the learned CIT (A) referred the matter to the valuation Cell after the assessment, said reference is invalid and any addition made consequent to the said reference cannot be sustained.
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The learned DR, on the other hand, supporting the orders of the learned CIT (A) submitted that the Hon'ble Supreme Court clearly held in the case of CIT vs. Kanpur Coal Syndicate (1964) 53 ITR 225 (S.C) that, while disposing of the appeal, the AAC has plenary powers and scope on the power is that of Income Tax Officer and that what the Income Tax Officer can do and also direct him to do what he has failed to do. Further, in the present case, reference to the DVO has been made on the legal ground raised by the assessee before the first appellate authority and thus, the assessee is having taken a legal ground on this issue, now cannot raise objection for reference to the DVO and argue that said reference is bad in law. The learned DR further submitted that there is no dispute with regard to the difference in value of the property when compared to the fair market value determined by the DVO. The learned CIT (A) after considering the said valuation report has restricted the addition u/s 56(2)(vii)(ii) of the I.T. Act, 1961 and thus, the order of the learned CIT (A) should be upheld.
We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. There is no dispute with regard to the difference in value of the property as shown in the registered deed and Fair Market Value of the property determined by the stamp duty authorities for payment of stamp duty. The appellant and three others purchased property for a consideration of Rs.,53,75,000/- and paid stamp duty and registration charges of Rs.21,60,130/-,
Page 7 of 10 whereas the Fair Market Value of the property as per stamp duty authorities was at Rs. 3,59,98,000/-. The Assessing Officer made addition of Rs.,76,55,750/-, being the difference between the purchase consideration and SRO value of the property u/s 56(2)(vii)(ii) of the Act. During the appellate proceedings, the learned CIT (A) referred the valuation of the property for Valuation Cell and the DVO has determined the assessee’s share of value in the property at Rs.56,70,000/-. Therefore, the learned CIT (A) restricted the addition to Rs.43,26,250/-. The assessee raised objection on the powers of the learned CIT (A) in light of provisions of section 142A and argued that the reference u/s 142A cannot be made once the assessment or re-assessment is completed. The assessee has relied upon certain judicial precedents including the decision of the Hon'ble Kolkata High Court in the case of PCIT vs. M/s. Estate of Late AI YUN HASIN LIU, AOP (Supra). We find the Hon'ble Supreme Court in the cases of CIT vs. Kanpur Coal Syndicate (Supra) and Jute Corporation of India vs. CIT (Supra) has explained the powers of the AAC and as per the Hon'ble Supreme Court, the AAC has plenary powers in disposing of the appeal and scope of his power is coterminous with that of the Income Tax Officer and he can do what ITO can do and also direct him to do and what he has failed to do. From the ratio laid down by the Hon'ble Supreme Court, it is an undisputed fact that, in the appeal before the first appellate authority, the learned CIT (A) can do that what Assessing Officer can do and also direct the Assessing Officer to do what he has failed to so. In the present case, the learned CIT (A) has made
Page 8 of 10 reference to the DVO for valuation of the property on a specific legal ground raised by the assessee on this issue. In our considered view, the Assessing Officer should have done this work, however, when the Assessing Officer failed to do what he is supposed to do, the learned CIT (A) stepped into the shoes of the Assessing Officer and referred the valuation of the property to the DVO for determination of the fair market value of the property. In our considered view, when the learned CIT (A) is having coterminous power with that of Income Tax Officer, he can very well refer to the valuation of the property to the DVO in deciding the issue before him and thus, the legal ground taken by the assessee in light of certain decisions of the Coordinate Benches and also the decision of the Hon'ble Kolkata High Court is devoid of any merit and not sustainable in law and thus, rejected.
Having said so, let us come back to the issue on hand. There is no dispute with regard to the fact that there is difference between the consideration paid for purchase of property as per registered sale deed and fair market value of the property as determined by the DVO. The learned CIT (A) determined the fair market value of the property on the basis of the DVO report and difference between the consideration paid by the assessee for purchase of property as per registered sale deed and fair market value of the property as per DVO report has been treated as income from other sources u/s 56(2)(vii)(ii) of the I.T. Act, 1961. In our considered view, when there is a difference between the consideration and fair market value of the property, then the said difference needs to be assessed as income from other sources.
Page 9 of 10 The learned CIT (A) after considering the relevant facts has rightly sustained the addition made by the Assessing Officer towards difference in value property u/s 56(2)(vii)(ii) of the I.T. Act, 1961. Thus, we are inclined to uphold the findings of the learned CIT (A) and reject the grounds taken by the assessee.
In the result, appeal filed by the assessee is dismissed. Order pronounced in the Open Court on 22nd October, 2024. Sd/- Sd/- (LALIET KUMAR) (MANJUNATHA, G.) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated 22nd October, 2024 Vinodan/sps Copy to: S.No Addresses 1 Shri Kwokutla Varakanth Reddy H.No.4-101, Karimguda (V), Rampally (P), Keesara (M) Ranga Reddy Distt. Telangana 2 Income Tax Officer Ward 15(4) IT Towers, Masab Tank, Hyderabad 3 Pr. CIT - Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order
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