Property purchase below district valuation triggers section 56(2)(x) addition despite no proven on-money transaction

ITAT Mumbai upheld CIT-A's order confirming addition under section 56(2)(x) where assessee purchased property for consideration less than district valuation officer's valuation. Tribunal rejected assessee's argument that department must prove on-money transaction before invoking anti-avoidance provision. Court found no infirmity in DVO's valuation report, noting assessee was given opportunity to object and objections were considered. CIT-A properly accepted DVO's independent valuation based on similar sale instances. Addition confirmed as difference between actual consideration and departmental valuation. Appeal decided against assessee.

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Issues Involved:

1. Addition of Rs. 25,886,000 on account of difference in property value determined by TPO and the value taken by the appellant under section 56(2)(x).
2. Confirmation of addition based on DVO's valuation under section 50C read with section 56(2)(x)(b).
3. Alleged denial of natural justice due to reliance on DVO's report without considering the appellant's evidence.
4. Request for admission of additional evidence due to insufficient opportunity to present the case.

Summary:

Issue 1: Addition of Rs. 25,886,000 on Account of Property Value Difference
The assessee challenged the addition of Rs. 25,886,000, which was based on the difference between the property value determined by the TPO and the value declared by the appellant under section 56(2)(x). The property in question was purchased for Rs. 168,000,000, but the stamp duty value was Rs. 28,35,05,907. The DVO valued the property at Rs. 19,36,86,000, resulting in an addition of Rs. 11,55,05,907 under section 56(2)(x)(b).

Issue 2: Confirmation of Addition Based on DVO's Valuation
The CIT(A) confirmed the addition based on the DVO's valuation report dated 10/3/2023, which valued the property at Rs. 19,36,86,000. This was in contrast to the appellant's declared value of Rs. 168,000,000. The CIT(A) reduced the addition to Rs. 2,58,86,000 based on the DVO's report.

Issue 3: Alleged Denial of Natural Justice
The appellant argued that the CIT(A) erred in relying solely on the DVO's report without giving sufficient opportunity to present their case, including the government valuer's report. The appellant claimed that the valuer's report was not considered, and the DVO's report was accepted without scrutiny.

Issue 4: Request for Admission of Additional Evidence
The appellant requested the admission of additional evidence, arguing that they were not given a proper opportunity to present the true value of the property. The CIT(A) referred the matter to the AO for a remand report, which led to the valuation by the DVO.

Judgment:

The Tribunal found no merit in the appellant's arguments. It held that section 56(2)(x) is an anti-avoidance provision and does not require proof of on-money transactions. The DVO's report, which considered six instances of nearby property sales, was found to be credible and without infirmity. The Tribunal upheld the CIT(A)'s decision, confirming the addition based on the DVO's valuation. The appeal filed by the assessee was dismissed.

Conclusion:

The Tribunal upheld the CIT(A)'s order, confirming the addition under section 56(2)(x)(b) based on the DVO's valuation. The appeal by the assessee was dismissed, and the order was pronounced in the open court on 26.02.2024.

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