2023 (1) TMI 1065 - AT - Income Tax

Addition u/s 56(2)(vii)(b) - difference in the consideration paid for purchase of a property and the guideline value fixed by the SRO - contention of the Assessee was that the guideline value fixed by the SRO is not the fair market value of the property and thus, had requested the Assessing Officer to refer the valuation of the property to the DVO - DVO had not submitted the report when the assessment was getting time barred and therefore, the Assessing Officer completed the assessment without waiting for the DVO s report and had made the additions towards the differential amount as per the provisions of Section 56(2)(vii)(b) - HELD THAT - We find that once the Assessing Officer has referred the valuation of the property to the DVO, then he ought to have waited for the DVO s report to ascertain the fair market value of the property for the purchase as per the provisions of Section 56(2)(vii)(b) of the Income Tax Act, 1961. Since the Assessing Officer has made the additions without waiting for the DVO s report, we are of the considered view that the issue needs to be remitted back to the file of the Assessing Officer to reconsider the issue afresh after taking into account the report submitted by the DVO. Hence, we set aside the issue and remit back the matter back to the file of the Assessing Officer and direct the Assessing Officer to redo the assessment and consider the issue in accordance with law after taking into account the valuation report submitted by the DVO. Appeal of the Assessee treated as allowed for statistical purposes.

Summary

Issues:
1. Addition of differential amount between consideration paid for property purchase and guideline value under Section 56(2)(vii)(b) of the Income Tax Act, 1961.

Analysis:

Issue 1: Addition of differential amount under Section 56(2)(vii)(b) of the Income Tax Act, 1961

The case involved the assessment year 2014-2015 where the Assessee declared a total income and agricultural income. The Assessing Officer reopened the assessment under Section 147 of the Act due to the difference in consideration paid for a property and the guideline value fixed by the Sub-Registrars' Office (SRO). The Assessee requested referral to the Departmental Valuation Officer (DVO) for determining the property's correct market value. However, the DVO did not provide the valuation report within the assessment period, leading to the Assessing Officer making an addition under Section 56(2)(vii)(b) of the Act.

The Assessee appealed the addition before the Commissioner of Income Tax (Appeals) but was unsuccessful, leading to the appeal before the ITAT Chennai. The Assessee argued that the assessment should be redone after considering the valuation report from the DVO. The Departmental Representative supported the addition under Section 56(2)(vii)(b) of the Act.

Upon review, the ITAT Chennai noted the difference in consideration paid and the guideline value, emphasizing the need to assess this difference as the Assessee's income under Section 56(2)(vii)(b) of the Act. The ITAT Chennai found fault with the Assessing Officer for not waiting for the DVO's report before making the additions. As a result, the ITAT Chennai set aside the issue and directed the Assessing Officer to redo the assessment after considering the DVO's valuation report, thereby allowing the Assessee's appeal for statistical purposes.

In conclusion, the ITAT Chennai's judgment focused on the correct application of Section 56(2)(vii)(b) of the Income Tax Act, 1961, emphasizing the importance of waiting for the DVO's valuation report before making additions related to property transactions to ensure a fair assessment process.

This summary provides a detailed analysis of the judgment, outlining the issues involved and the ITAT Chennai's decision regarding the addition of the differential amount under Section 56(2)(vii)(b) of the Income Tax Act, 1961.