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2023 (8) TMI 1335 - AT - Income TaxAddition u/s 56(2)(vii)(b) - Purchase of immovable property below circle rate / stamp value - difference between the value as per the Valuation Report and the sale consideration/agreement value - non reference of matter to DVO - HELD THAT - As before making addition applying provision of section 56(2)(vii)(b) in the facts and circumstance of the case, AO ought to have referred the matter to the Valuation Officer (DVO), since the Assessee objected for the value to be taken according to the stamp valuation authorities. In the present case, the AO has made addition u/s 56(2)(vii)(b) without making reference to the valuation officer as required by proviso under sub clause (c) of section 56(2)(vii)(b). In this context, it is gainful to refer to the decision of ITO Vs. Aastha Goel 2018 (10) TMI 500 - ITAT DELHI wherein addition was made under section 56(2)(vii)(b) and it was held that in the absence of the reference to the valuation officer, the addition made was deleted. ITAT also rejected the request of the Department to set aside the matter to the file of the Assessing Officer for referring the case to the Valuation Officer. We not accept the DR s request to restore the matter back to AO for referring the valuation of flat to DVO because that will tantamount to condoning the erroneous action of AO and consequently allowing a second inning for no fault of assessee. This would tantamount to breathing fresh life to an order which on the facts on records exposes the arbitrary and whimsical action of AO and so is unsustainable in law. Therefore, the addition made by AO u/s 56(2)(vii)(b) is directed to be deleted. Decided in favour of assessee.
Issues involved:
The main issue in this case is the addition of Rs. 21,84,330 under section 56(2)(vii)(b) of the Income Tax Act, 1961. Details of the Judgment: Issue 1: Addition under section 56(2)(vii)(b) of the Act The assessee objected to the addition made by the Assessing Officer (AO) regarding the valuation of a property purchased, claiming it was situated in a slum area and the circle rate was unreasonably high. The AO added the difference between the stamp valuation and the purchase consideration to the assessee's income. The CIT(A) confirmed this addition. However, the Tribunal held that the AO should have referred the matter to the Valuation Officer (DVO) as per the provisions of the Act. Citing precedents, the Tribunal emphasized the duty of the AO to act fairly and follow the legal course, including referring to the valuation officer when objections are raised. As the AO did not refer the matter to the DVO, the addition made under section 56(2)(vii)(b) was deemed unsustainable in law. Therefore, the Tribunal directed the deletion of the addition of Rs. 21,84,330. In conclusion, the Tribunal allowed the appeal of the assessee, and the addition made by the AO under section 56(2)(vii)(b) was directed to be deleted.
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