2025 (1) TMI 810 - AT - Income Tax

Revision u/s 263 - stamp duty paid was on higher side due to technical issues with stamp authorities - addition made as income from other sources u/s 56(2)(vii)(b) being 1/3 share of the assessee on the ground of discrepancy and stamp duty in as much as there is no discrepancy and the addition made is erroneous without appreciating the facts of the assessee. HELD THAT - We find that the assessee vide letters had requested to refer the valuations of property to DVO as per the provisions of sec-50C of the Act. AO ought to have appreciated when the assessee objects to said valuation, then the AO is bound to refer the valuation to DVO in accordance with provisions of Sec 55A of the Income-tax Act. No evasive approach can be adopted for applying deeming provisions without considering the objections of referring the matter to DVO. The Coordinate Benches of the Tribunal in the case of Amar Shiv Construction Pvt Ltd. 2017 (12) TMI 1889 - ITAT AHMEDABAD and Jayshree Kothari 2018 (10) TMI 1593 - ITAT HYDERABAD held that such action on the part of the Assessing Officer cannot be sustained. Appeal of the assessee is allowed.

1. ISSUES PRESENTED and CONSIDERED

The judgment primarily revolves around the following core legal questions:

Whether the learned CIT(A) erred in upholding the assessment order that included an addition of Rs. 21,42,857/- under Section 56(2)(vii)(b) of the Income-tax Act, 1961, due to the alleged discrepancy in the stamp duty value and the consideration value of the property?
Whether the Assessing Officer failed to appropriately consider the objections raised by the assessee regarding the valuation of the property and the applicability of Section 56(2)(vii)(b)(ii) of the Act?
Whether the delay in filing the appeal by the assessee should be condoned?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Addition under Section 56(2)(vii)(b)

Relevant legal framework and precedents: The primary legal provision in question is Section 56(2)(vii)(b) of the Income-tax Act, which deals with the taxation of income from other sources when the consideration for an immovable property is less than the stamp duty value. The precedents cited include the cases of Amarshiv Construction v/s. DCIT and Jayashree Kothari v/s. ITO, which discuss the necessity of referring valuation disputes to the Departmental Valuation Officer (DVO).
Court's interpretation and reasoning: The Tribunal noted that the Assessing Officer should have referred the valuation dispute to the DVO when the assessee objected to the valuation. The failure to do so was deemed an error.
Key evidence and findings: The assessee provided evidence of paying an additional stamp duty of Rs. 3,15,000/- and claimed a refund due to a misunderstanding. The assessee also argued that the consideration value was not less than the Jantri value rate certified by the Sub-Registrar.
Application of law to facts: The Tribunal applied the provisions of Section 50C and Section 55A, emphasizing the necessity of referring the valuation to the DVO when contested by the assessee.
Treatment of competing arguments: The Tribunal considered the arguments of both the assessee and the Department. The Department supported the CIT(A)'s order, while the assessee argued for a re-evaluation of the property value.
Conclusions: The Tribunal concluded that the addition of Rs. 21,42,857/- was not justified without a proper valuation by the DVO. Therefore, the appeal was allowed in favor of the assessee.

Issue 2: Condonation of Delay

Relevant legal framework and precedents: The legal principle involves the condonation of delay in filing appeals when a reasonable cause is demonstrated.
Court's interpretation and reasoning: The Tribunal found the reasons provided by the assessee for the delay to be satisfactory and condoned the delay.
Key evidence and findings: The assessee submitted an affidavit explaining the reasons for the 139-day delay in filing the appeal.
Application of law to facts: The Tribunal applied the principle of condoning delays when justified by reasonable cause.
Treatment of competing arguments: There were no significant competing arguments against the condonation of delay.
Conclusions: The delay in filing the appeal was condoned, allowing the Tribunal to hear the case on its merits.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The Assessing Officer ought to have appreciated when the assessee objects to said valuation, then the Assessing Officer is bound to refer the valuation to DVO in accordance with provisions of Sec 55A of the Income-tax Act."
Core principles established: The Tribunal reinforced the necessity of referring valuation disputes to the DVO when the assessee contests the valuation under Section 56(2)(vii)(b) and Section 50C. Additionally, it emphasized the importance of considering the assessee's objections in valuation matters.
Final determinations on each issue: The appeal was allowed, and the addition of Rs. 21,42,857/- was set aside. The delay in filing the appeal was condoned, and the Tribunal directed that the valuation should be referred to the DVO for a fair assessment.

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