2024 (8) TMI 549 - AT - Income Tax

Addition of deemed gift - assessable in the hands of the assessee u/s 56(2)(vii)(b)(ii) or not? - difference between the stamp duty valuation minus actual purchase consideration has been added to the total income of the assessee HELD THAT - We are of the view that 3rd proviso to section 56(2)(vii)(b)(ii) contemplates that in case an assessee disputes the valuation of the property for the purpose of charging stamp duty then as contemplated in sub-section (2) of section 50C AO will make a reference to the DVO for determining the fair market value of the property. Once assessee is disputing to the alleged deeming purchase consideration for the purpose of treating as a gift under section 56(2)(vii)(b)(ii) then it was incumbent upon the ld. 1st Appellate Authority to construe that even if assessee has not made a prayer before the AO he should make a reference to the DVO for the just decision of the appeal. The objective of Commissioner in the first appeal ought to have been to resolve the controversy in a fair manner according to the position of law and not to legalize injustice on technical issues. CIT(Appeals) when realized that the fair market value of the property ought to be determined for the purpose of determining its purchase cost in the hands of assessee then the reference to the DVO ought to have been made. Considering the above we deem it appropriate to set aside both the impugned orders and restore this issue to the file of ld. AO for re-adjudication. AO shall call for a report from the DVO and thereafter determine the alleged purchase consideration in the hands of the assessee for the purpose of section 56(2)(vii)(b)(ii) - Appeal of the assessee is allowed for statistical purposes.

Summary

Issues involved:
Whether deemed gift assessable under section 56(2)(vii)(b)(ii) of the Income Tax Act

Analysis:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) concerning the Assessment Year 2015-16. The primary issue revolved around the assessability of a deemed gift under section 56(2)(vii)(b)(ii) of the Income Tax Act. During scrutiny assessment, it was discovered that the assessee had purchased a property valued at Rs. 1,20,78,000 for stamp duty purposes, while disclosing the purchase price at Rs. 61,97,768. The Assessing Officer added the difference between the stamp duty valuation and the actual purchase consideration (Rs. 58,80,232) to the total income of the assessee. The 1st Appellate Authority noted that the assessee had the option to obtain the proper value through a Valuation Officer (DVO) but since this was not pursued during the assessment, the finding of the Assessing Officer was upheld.

Upon careful consideration, the Tribunal referred to the 3rd proviso to section 56(2)(vii)(b)(ii), which states that if an assessee disputes the valuation of property for stamp duty purposes, the Assessing Officer must refer the valuation to a DVO for fair market value determination. The Tribunal opined that the 1st Appellate Authority should have referred the matter to the DVO even if the assessee did not request it initially. The objective of the first appeal should have been to resolve the matter fairly according to the law, rather than overlooking the issue on technical grounds. Therefore, the Tribunal set aside the previous orders and directed the Assessing Officer to obtain a report from the DVO to determine the alleged purchase consideration for the purpose of section 56(2)(vii)(b)(ii) of the Income Tax Act. Consequently, the appeal of the assessee was allowed for statistical purposes.