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2021 (12) TMI 1203 - AT - Income TaxAddition u/s. 56(2)(vii) - difference between the stamp duty guideline value and purchase consideration i.e. 50 percent u/s 56(2)(vii)(b) - HELD THAT - AO completely ignored the valuation report of the registered valuer submitted by the assessee and submissions made thereon. AO mechanically applied the provisions of section 56(2)(vii) to bring the difference of stamp duty valuation and actual sale consideration paid by the assessee, without making any efforts to find out the actual cost of property, when in fact the assessee stated that the property when purchased was under litigation and pending before the Civil Court, the AO was not bothered about these impediments and straightaway considered the stamp duty valuation for the purpose of making addition u/s. 56(2)(vii) of the Act. In such circumstances, it was very necessary for the AO to refer the matter to the DVO which he failed to do so. DR submitted that referring the matter to the DVO is only with regard to applicability of section 50C in the case of seller and it is not all required to refer the matter to the DVO u/s. 56(2)(vii) of the Act which is totally misconceived - in our opinion, the addition made by the AO is totally unjustified and cannot be sustained - revenue cannot be allowed a second innings by sending the matter back to the AO to refer the matter to the DVO to ascertain the correct fair market value of the property purchased by the assessee, when assessee all along disputed the valuation of property adopted by the AO for the purpose of registration of the same and the AO failed to find out the correct value of the property both at the assessment stage as well as at the first appellate stage. This was considered by the Agra Bench of the Tribunal in the case of Hari Om Garg 2019 (5) TMI 1834 - ITAT AGRA wherein a view was taken that the Department cannot be allowed a second inning by sending the matter back to the Assessing Officer enabling the revenue to fill the lacunae and shortcomings and further putting the assessee to face a re-trail for no fault of him and to prove before the Assessing Officer that the sale consideration was the fair market value of the property purchased by him - We delete the addition made by the AO u/s. 56(2)(vii)(b) of the Act. This ground of the assessee is allowed. Non-granting of deduction u/s. 54F - AO has not allowed the exemption for the reason that on the date of transfer of immovable property the assessee owned two residential properties, one at Jayanagar and other at Basavanagudi as on 01.04.2013 - residential property situated at Jayanagar was gifted by the assessee to his daughter Ms. Rashmi vide registered gift deed executed on 25.07.2013 - HELD THAT - This property was vested on these four persons vide partition dated 16.8.1991. Originally there was one katha for all these properties and on account of partition, this property was shared between 4 persons. However, this property has been purchased by the assessee by a single Sale Deed as a single property and this property owned by 4 persons cannot constitute distinct and separate properties so as to deny deduction u/s. 54F. For the purpose of convenience on earlier occasion Katha of these properties was in the name of 4 individuals, later after purchasing the above properties the assessee once again got the Katha merged which is kept on record at pages 267 268 of PB. It is observed that the Katha has been transferred in the name of the present assessee and all the properties have been merged to Sy.No.12/1 as a single property. The property though purchased from four Vendors remains as a single property. Being so, the property has to be considered as a single property and deduction u/s. 54F should be granted. See SRI. MAURICE PATRICK DE REBELLO VERSUS THE INCOME TAX OFFICER, WARD 7 (1) , BENGALURU 2021 (1) TMI 213 - ITAT BANGALORE . Being so, the assessee cannot be denied deduction u/s. 54F on the reason that the assessee purchased 4 properties instead of one. DR s objection is that though assessee gifted the property to his daughter on 25.7.2013, the property is still shown in the balance sheet of the assessee as on 31.3.2014. The assessee explained that it is the bona fide mistake by the assessee s CA and the assessee is not well educated on these matters and hence the bona fide mistake committed by the auditor is to be condoned. Admittedly, there is a valid gift deed dated 25.7.2013 in respect of Jayanagar property in favour of assessee s daughter. In the balance sheet prepared by the assessee s CA for the year ending 31.3.2014, the said property has been shown in the name of assessee, which is bona fide error committed by the auditor for which no importance could be given. Appeal of assessee allowed.
Issues Involved:
1. Validity of addition under Section 56(2)(vii)(b) of the Income-tax Act, 1961. 2. Eligibility for exemption under Section 54F of the Income-tax Act, 1961. 3. Indexed cost of acquisition. 4. Levy of interest under Section 234A and 234B. Issue 1: Addition under Section 56(2)(vii)(b) The assessee, along with his wife, purchased a commercial property for ?1,00,00,000 while the stamp duty value was ?1,76,47,000. The Assessing Officer (AO) added 50% of the difference (?38,23,500) to the assessee's income under Section 56(2)(vii)(b), which was upheld by the CIT(A). The assessee argued that the property was under dispute and occupied by tenants, reducing its market value below the stamp duty value. The assessee contended that the AO should have referred the property for valuation to the Valuation Officer, as mandated by Section 50C(2) when the stamp duty value is disputed. The Tribunal noted that the AO failed to refer the matter to the Valuation Officer despite the assessee's objections and the submission of a valuation report indicating a lower market value. Citing various judicial precedents, the Tribunal concluded that the AO's failure to refer the matter to the Valuation Officer was a fatal error and deleted the addition of ?38,23,500. Issue 2: Exemption under Section 54F The AO denied the exemption of ?2,00,23,125 claimed under Section 54F, stating that the assessee owned two residential properties on the date of transfer. The assessee contended that one of the properties was gifted to his daughter before the transfer date, leaving him with only one residential property. The Tribunal observed that the property was indeed gifted before the transfer date, and the AO's reliance on its appearance in the balance sheet was a bona fide error by the auditor. Additionally, the Tribunal addressed the AO's claim that the assessee purchased four residential properties, noting that the properties were purchased through a single sale deed and later merged into a single property. The Tribunal cited judicial precedents that allowed for multiple units to be considered as a single residential house for exemption purposes and concluded that the assessee was eligible for the exemption under Section 54F. Issue 3: Indexed Cost of Acquisition The Tribunal did not specifically address this issue in detail, as the primary focus was on the eligibility for exemption under Section 54F and the addition under Section 56(2)(vii)(b). Issue 4: Levy of Interest under Sections 234A and 234B The Tribunal did not specifically address this issue in detail, as the primary focus was on the eligibility for exemption under Section 54F and the addition under Section 56(2)(vii)(b). Conclusion: The Tribunal deleted the addition of ?38,23,500 made under Section 56(2)(vii)(b) due to the AO's failure to refer the matter to the Valuation Officer. It also allowed the exemption of ?2,00,23,125 under Section 54F, recognizing the gift of one property before the transfer date and treating the purchased properties as a single residential house. The issues related to the indexed cost of acquisition and the levy of interest under Sections 234A and 234B were not addressed in detail.
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