Mandatory referral to Valuation Officer required when stamp valuation is alleged to exceed fair market value, making non-referred additions unsustainable.

Where an assessee contests that stamp valuation exceeds fair market value and requests referral, the Assessing Officer must refer valuation to the Valuation Officer; failure to make that reference renders an addition under the provision dealing with receipt of immovable property unsustainable. Applying precedents where mandatory reference was held necessary, the impugned monetary addition was deleted and the Assessing Officer directed to remove the addition, resulting in a partly allowed appeal in favour of the assessee.

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Issues: Whether the addition of Rs. 11,59,091/- made under section 56(2)(vii)(b) of the Income-tax Act, 1961 without referring valuation to the Valuation Officer is sustainable.

Analysis: The Assessing Officer made an addition under the provision concerning receipt of immovable property, without making a reference to the Valuation Officer despite the assessee's request that the stamp valuation exceeds the fair market value. The Tribunal examined the statutory mandate for referral to the Valuation Officer under the provision corresponding to section 50C(2) and the proviso to the provision under which the addition was made, and relied on co-ordinate precedents (including a Division Bench order of the Tribunal and decisions of other Benches) holding that where the assessee alleges that the stamp valuation exceeds fair market value and requests reference, the Assessing Officer must refer the valuation to the Valuation Officer and failure to do so renders the addition unsustainable. Applying those authorities to the facts of the case, and noting that the Assessing Officer did not make the mandatory reference, the Tribunal found the addition to have no legs to stand.

Conclusion: The addition of Rs. 11,59,091/- under section 56(2)(vii)(b) is deleted and the Assessing Officer is directed to delete the said addition; the appeal is partly allowed in favour of the assessee.

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