2023 (3) TMI 470 - AT - Income Tax

Addition u/s 56(2)(vii)(b) - assessee has purchased two parcels of land for a sale consideration - Special Deputy Collector (Stamps) had valued the property price more than sale consideration - assessee has not asked the Assessing Officer to refer the matter to the DVO to ascertain the fair market value and dismissed the appeal of the assessee - HELD THAT - Admittedly, there is a difference between the sale consideration and the value adopted by the Special Deputy Collector (Stamps). It is a fact that the assessee has not requested the AO to refer the matter to the DVO to ascertain the FMV. In our opinion, the assessee should have asked the AO to refer the matter to the DVO to ascertain FMV. Assessee has raised the issue before the ld. CIT(A) and CIT(A) did not consider this for the reason that the assessee has not asked for reference to DVO before the AO. Under these facts and circumstances, we are of the opinion that one more opportunity to the assessee to substantiate his claim and to make a request to the AO to refer the matter to the DVO to ascertain FMV. We set aside the order passed by the ld. CIT(A) and remit the matter back to the file of the Assessing Officer and by considering the request of the assessee, the AO shall refer the matter to the DVO to ascertain the FMV and decide the issue afresh in accordance with law by allowing an opportunity of being heard to the assessee - Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues:
1. Disallowance under section 56(2)(vii)(b) of the Income Tax Act, 1961.
2. Referral to the District Valuation Officer (DVO) under section 50C(2) of the Act.

Disallowance under section 56(2)(vii)(b) of the Income Tax Act, 1961:
The appeal was against the order of the Commissioner of Income Tax (Appeals) concerning the assessment year 2017-18. The Assessing Officer disallowed a difference amount in the purchase of land, invoking section 56(2)(vii)(b) of the Act. The ld. CIT(A) upheld this disallowance, stating that the Assessing Officer had given opportunities for substantiation and the differential amount was added after due inquiry. The assessee did not request a reference to the District Valuation Officer (DVO) for fair market value (FMV) assessment. The Tribunal noted the substantial difference between sale consideration and stamp valuation, emphasizing that the assessee should have asked the Assessing Officer to refer the matter to the DVO. The Tribunal set aside the CIT(A)'s order, remitting the matter back to the Assessing Officer for reconsideration, directing a reference to the DVO to ascertain FMV.

Referral to the District Valuation Officer (DVO) under section 50C(2) of the Act:
The assessee contended that under section 50C(2) of the Act, in cases of significant differences between sale consideration and stamp valuation, the Assessing Officer must refer to the DVO for FMV valuation. The ld. DR supported the lower authorities' orders, arguing that as the request for DVO referral was made only before the CIT(A), it was not necessary. The Tribunal observed that although the assessee did not request DVO referral before the Assessing Officer, raising the issue before the CIT(A) should have been considered. Therefore, the Tribunal allowed the appeal, providing the assessee with an opportunity to substantiate the claim and directing the Assessing Officer to refer the matter to the DVO for FMV determination.

In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the importance of requesting a referral to the DVO for FMV assessment in cases of substantial differences between sale consideration and stamp valuation.