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Income Tax Appellate Tribunal, DELHI BENCH, ‘F’: NEW DELHI
Before: SHRI SHAMIM YAHYA & SHRI ANUBHAV SHARMA
ORDER PER SHAMIM YAHYA, AM,
These are appeals by two assessees directed against the respective orders of the Ld. CIT(A), Kanpur, both dated 22.11.2021 pertaining to the Assessment Year 2017-18.
Since, the issues are common and connected and the appeals were heard together, these are being consolidated and disposed of together for the sake of convenience by this common order.
For the sake of reference, we are referring to grounds of appeal in “1. That on the facts and circumstances of the case and under the law, the Commissioner of Income Tax (Appeal) -4, Kanpur erred in confirming the action of the assessing officer to make addition of Rs.7,97,500/- to the income of the appellant by referring to the alleged report from DVO in respect of all the four different properties purchased by the appellant at the market value under four different documents. The addition made is based on surmises, conjectures and on hypothetical observations, the same is bad in law.
2. That on the facts and in law and under the circumstances, the Commissioner of Income Tax (Appeal)-4, Kanpur erred in confirming the action of the assessing officer to make addition on the plea that the DVO has worked out higher value, while the report is a mere estimate by the DVO. The report of the DO used by the assessing officer to make addition is not only unjustified, unwarranted and bad in law.
3. That on the facts and in law and under the circumstances, the assessing officer erred in making addition by using the report of the DO which was never confronted to the appellant. No specific notice was issued nor any opportunity was allowed to submit explanations. The addition is based on surmises, conjectures and on hypothetical reasonings.
4. That the penalty initiated under section 271AAB(1) and thus interest charged under section 234A/B/C is thus illegal and bad in law.
4. The assessee has raised additional grounds which read as under:-
“6.The Assessing Officer has erred in law and in facts in invoking the provisions of section 56(2)(vii) of the Act without considering the fact that the property was purchased at the circle rate and there was no understatement whatsoever. Hence, the section, which triggers only if the property is purchased at less than the circle rate, has been wrongly invoked, therefore, the addition of Rs.7,97,500/- deserves to be deleted.” 5. We have heard both the parties and perused the records. Referring to the decision of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. vs CIT (229 ITR 383), we admit the additional grounds. Since, the additional grounds goes to the root of the matter, we adjudicate the same first.
Brief facts of the case are that in this case the assessee has purchased four properties at circle rates with his brothers and has 1/4th share in all four properties. The Ld. AO has referred the valuation of the property purchased by the assessee to the Department Valuation Officer and assessed the difference between the purchase price i.e. circle rate/stamp duty value and the value determined by the DVO amounting to Rs.7,97,500/- treated as income of the assessee u/s 56(2)(vii) r.w.s. 69 of the Act.
Now, the additional ground raised by the ld. Counsel for the assessee states that the purchase has been done at circle rate and there is no understatement whatsoever. It is the submission of the ld. Counsel for the assessee that the section i.e. 56(2)(vii) triggers only of the property is purchased at less than the circle rate. In this regard, we may gainfully refer to the section 56(2)(vii) of the Act as under:-
“56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources", if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head "Income from other sources", namely :— (vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009 but before the 1st day of April, 2017, (b) any immovable property,—
(i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; (ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration: Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of this sub-clause: Provided further that the said proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property; Provided that where the stamp duty value of immovable property as referred to in sub-clause (b) is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub- section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of sub-clause (b) as they apply for valuation of capital asset under those sections: Relevant Provisions of section 50C Section 50C(2) Without prejudice to the provisions of sub-section (1), where— (a) the assessee claims before any Assessing Officer that the value adopted or assessed or assessable by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed or assessable by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act.
It is amply clear that this section can be invoked only if the consideration at which the property is purchased is less than the stamp duty value of such property. Further, this section can be invoked only if the circle rate of the property was more than the price at which the property was purchased and the property can be referred to DVO only if the assessee disputes the stamp duty value of the property. Thus, it is the plea of the assessee that invocation of section 56(2)(vii) is itself wrong.
After careful consideration, we find ourselves in agreement with the proposition that the sanguine provision of concerned section duly mandate that value of property purchased has to be less than circle rate for the difference to be added. Hence, we allow the additional ground raised by the assessee. Hence, the assessment is held to be invalid.
Since, the additional ground/legal ground has been allowed by which the action of the authorities below have been held to be not legal, adjudication of other grounds is only of academic interest only, hence, we are not engaging into the same.
Our above adjudication applies mutatis mutandis to both appeals.
In the result, both appeals of the different assessees are allowed.
Order pronounced in the open court on 11th May, 2023.