2024 (9) TMI 364 - AT - Income Tax

Addition u/s 56(2)(vii) - difference in value of property - whether the stamp duty value should be taken as full value of consideration? - assessee request to refer the matter to Valuation Officer (DVO) for a fair valuation ignored - HELD THAT - As immovable property was registered with Sub-Registrar Andheri (West), Mumbai and if the carpet area mentioned in the agreement was incorrect then nothing prevented the assessee to get it corrected from the Sub-Registrar, Andheri (West), Mumbai. Assessee has paid stamp duty and registration charges on an area of 783.4 sq ft therefore, it cannot be said that the assessee has not purchased the said immovable property having 783.4 sq ft of area. The question is not whether certain area was usable or not usable, the question for our adjudication is whether the stamp duty value should be taken as full value of consideration for the purpose of Section 56(2)(vii) and as per provision of Section 56(2)(vii) of the Act any immovable property purchased for a consideration which is less than stamp duty value of the property the stamp duty value of such property as exceeds such consideration shall be taken for consideration. In the instant case, the value of the property adopted by the revenue authorities for stamp duty valuation is Rs. 2,00,17,500/- whereas the consideration value of the property mentioned in sale deed is Rs. 1.70 crores, therefore, as per the provision of Section 56(2)(vii) being the difference in value of property is the income of the assessee. We, therefore, do not find any error or infirmity in the findings of the ld. CIT(A). Appeal of the assessee is accordingly dismissed.

Summary

Issues:
- Addition of Rs. 30,17,500/- u/s 56(2)(vii) of the Act
- Failure to refer the matter to Valuation Officer
- Discrepancy in purchase value and stamp duty valuation
- Usable area vs. non-usable area valuation
- Disallowance of addition u/s 56(2)(vii) of the Act

Analysis:
The judgment pertains to an appeal against an order dated 12.10.2023, concerning the addition of Rs. 30,17,500/- u/s 56(2)(vii) of the Act for Assessment Year 2015-16. The assessee contested the addition, arguing that the stamp duty valuation included non-usable areas, which should have been excluded. The AO based the addition on the disparity between the stamp duty value and the purchase consideration of the immovable property. The assessee's plea to refer the matter to the Valuation Officer was disregarded by the authorities.

During scrutiny, it was found that the assessee purchased property for Rs. 2,00,17,500/-, while declaring income of Rs. 8,97,080/-. The AO questioned the source of funds for the property purchase, noting a variance between the stamp duty valuation and purchase value. The assessee contended that the stamp duty value included non-usable areas, leading to an inflated valuation. Despite the explanation, the AO upheld the addition under Section 56(2)(vii) of the Act.

The assessee's appeal to the CIT(A) was unsuccessful, with the contention that the stamp duty value did not reflect the actual usable area. The appellate tribunal noted that the registration details indicated a property area of 783.4 sq ft, on which stamp duty was paid. The tribunal emphasized that the stamp duty value exceeding the purchase consideration mandated inclusion as income, per Section 56(2)(vii) of the Act. The tribunal dismissed the appeal, upholding the addition of Rs. 30,17,500/-.

In conclusion, the tribunal affirmed the addition under Section 56(2)(vii) of the Act, emphasizing the stamp duty value exceeding the purchase consideration. The failure to correct registration details or request valuation adjustment led to the dismissal of the appeal. The judgment highlights the significance of adhering to statutory valuation norms and the implications of discrepancies between purchase consideration and stamp duty valuation on tax assessments.