Appeal allowed due to lack of natural justice in Income Tax Act assessment.

The appeal challenging the addition under section 56(2)(vii) of the Income Tax Act for the assessment year 2014-15 was allowed. The court found that the assessment order was passed without giving the assessee a proper opportunity to respond to the show cause notice, violating natural justice. The failure to wait for the Departmental Valuation Officer's report and consider objections raised during the appeal process were also noted. Consequently, the addition was set aside, directing the Assessing Officer to delete it. The appeal was allowed in favor of the assessee.

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Issues involved:
The appeal challenges the addition made under section 56(2)(vii) of the Income Tax Act for the assessment year 2014-15, based on discrepancies in the sale consideration of purchased lands compared to the value determined by the Stamp Valuation Authority. The primary issues include the lack of opportunity given to the assessee before passing the assessment order, failure to consider objections raised during the appeal process, and the failure to wait for the report of the Departmental Valuation Officer (DVO) before making a decision.

Assessee's Grounds of Appeal:
The assessee contested the addition under section 56(2)(vii) as being without jurisdiction, illegal, and void ab initio, due to alleged misconstruction of the law. Specific objections were raised regarding the failure to serve a show cause notice in time, lack of opportunity for a hearing, and the necessity to refer the matter to the DVO for fair market value assessment.

Assessee's Arguments:
The authorized representative for the assessee highlighted that the assessment order was passed without providing an opportunity for the assessee to respond to the show cause notice, which was received after the order was passed. Additionally, objections were raised regarding the valuation method used by the Assessing Officer, emphasizing the need to involve the DVO for fair market value determination.

Department's Response:
The departmental representative supported the lower authorities' decisions, stating that the matter should not be restored for a de novo assessment. The revenue representative also defended the merit of the additions made by the Assessing Officer.

Judicial Findings:
Upon careful consideration of submissions and records, it was observed that the assessment order was passed without affording the assessee a proper opportunity to respond to the show cause notice. The failure to wait for the DVO report and the lack of consideration for objections raised during the appeal process were deemed violations of natural justice. Consequently, the addition under section 56(2)(vii) was set aside, directing the Assessing Officer to delete the said addition. As a result, the grounds of appeal raised by the assessee were allowed, and the appeal was ultimately allowed in favor of the assessee.

Final Decision:
The appeal challenging the addition under section 56(2)(vii) for the assessment year 2014-15 was allowed, with the order pronounced in open court on 02/08/2023.

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