INCOME TAX ACT, 1961

Section 56(2)(vii)(b)

Income from other sources - Addition under section 56(2)(vii)(b) - Difference between purchase consideration and Stamp Duty Valuation of property - Addition made without making reference to DVO

AO noted that assessee purchased a property for a consideration of Rs. 19,50,000, however circle rate of the property as per Stamp Valuation Authority was Rs. 41,34,330. Assessee submitted that he only parted with agreed consideration of Rs. 19,50,000 and the property was situated in a slum area, therefore, fair market value/circle rate as determined by Stamp Valuation Authority, was unreasonably high. However, according AO, the assessee should have contested valuation at the time of registration of property and since he had not done so, he could not contest the circle rate during assessment proceedings. Accordingly, he added the difference in value of the property under section 56(2)(vii)(b), which was upheld by CIT(A). Held: Before making addition by applying provisions under section 56(2)(vii)(b), AO ought to have referred matter to DVO, since assessee objected for value to be taken according to Stamp Valuation Authority. In the instant case, Since the AO made addition under section 56(2)(vii)(b) without making reference to DVO as required by proviso under sub-clause (c) of section 56(2)(vii)(b); the addition under section 56(2)(vii)(b), was deleted.

REFERRED : Sunil Kumar Agarwal v. CIT (2015) 372 ITR 83 (Cal-HC) : 2014 TaxPub(DT) 3763 (Cal-HC) and CIT & Anr. v. Shri Chandra Narain Chaudhri [ITAT No. 287/2011, dated 29-8-2013] : 2014 TaxPub(DT) 2319 (All-HC)

FAVOUR : In assessee's favour.

A.Y. : 2018-19

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