AO's limited scrutiny assessment upheld for property transactions with section 56(2) addition sustained

The ITAT Surat upheld the AO's assessment order in a limited scrutiny case involving property transactions. The AO properly examined two issues: discrepancy between sale consideration reported in ITR versus AIR, and large property investment compared to total income. The tribunal allowed the assessee's claim for additional work expenses on property, deleting the disallowance after finding sufficient evidence of expenditure. However, the addition under section 56(2) was sustained as the assessee failed to provide adequate evidence regarding fair market value despite the matter being referred to DVO for valuation.

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Issues Involved:
1. Sustaining the addition of Rs. 47,38,280/- by AO denying the deduction of additional cost of construction.
2. Sustaining the addition of Rs. 3,04,819/- u/s 56(2) of the I.T. Act, 1961.
3. Charging of interest u/s 234A/234B/234C/234D of the Act.

Summary:

1. Sustaining the Addition of Rs. 47,38,280/- by AO Denying the Deduction of Additional Cost of Construction:
The assessee filed her return for AY 2015-16 declaring a total income of Rs. 6,23,160/-. The case was selected for "limited scrutiny" u/s 143(2) of the Act. The assessee sold a flat for Rs. 95,00,000/- and claimed the cost of the flat at Rs. 1,08,26,113/-, including additional work of Rs. 47,38,280/-. The AO disallowed the additional work cost as the contractors could not be verified, and recomputed the STCG at Rs. 34,12,167/-. The CIT(A) upheld the AO's decision. The Tribunal, however, accepted the assessee's evidence of payments made through banking channels and deleted the disallowance, allowing the ground of appeal.

2. Sustaining the Addition of Rs. 3,04,819/- u/s 56(2) of the I.T. Act, 1961:
The assessee purchased a property for Rs. 7,00,000/- with a co-owner, while the stamp duty value was Rs. 13,09,638/-. The AO added Rs. 3,04,819/- to the assessee's income u/s 56(2)(vii)(b)(ii) of the Act, which was upheld by the CIT(A). The Tribunal dismissed the assessee's appeal, stating that the burden of proof was not discharged with cogent evidence, and no DVO report was provided to reconsider the addition.

3. Charging of Interest u/s 234A/234B/234C/234D of the Act:
This issue was deemed consequential and did not require adjudication.

Conclusion:
The appeal was partly allowed, with the Tribunal deleting the disallowance of Rs. 47,38,280/- but sustaining the addition of Rs. 3,04,819/- and the consequential interest charges. The order was pronounced on 15/05/2024.

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