TaxTMI 
TaxTMI 
2026 (1) TMI 1627
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....for scrutiny on account of alleged receipt of a specific information pointing to tax evasion. The Assessing Officer ('AO' for short) issued statutory notices under Section 143(2) and 142(1) of the Income Tax Act, 1961 ('Act' for short), in response to which the appellant filed his reply and furnished information as asked for. From the details supplied by the appellant, it was disclosed that the assessee had purchased a flat situated at Warden Court, August Kranti Marg, Mumbai on 12.04.2017 for a consideration of Rs. 2,65,00,000/-. The assessee had obtained a Valuation Report in respect of the flat from a Registered Valuer, M/s. M.A. Toke. The Valuer, by his report dated 02.05.2017, had determined the Market Value (MV) of the property on the date of transaction at Rs.2,50,00,000/-. It is undisputed that as per the Stamp Duty Valuation (SDV), the flat was valued at Rs. 3,79,15,000/-. The AO has noticed that the assessee did not challenge the valuation made by the Stamp Valuation authority at the time of registration of the Conveyance. 3. Be that as it may, during the assessment proceedings, the assessee challenged the applicability of Section 56(2)(x) of the Act and requested the ....
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....t with the said view. The Division Bench has observed that the 10% variation can be considered only in relation to the stamp duty valuation and not the FMV determined by the DVO. In that view of the matter, the Division Bench by order dated 06.03.2025 has required this appeal to be placed before the Special Bench. The President by an order dated 18.09.2025 has directed the appeal to be placed before the Special Bench. Rival submissions : 9. We have heard the learned counsel for appellant and the learned DR for the respondent-Revenue. With their assistance we have gone through the record. 10. It is submitted by the learned AR that the valuation determined by the DVO under Section 50C(2) of the Act replaces the SDV under Section 50C(1) of the Act. He, therefore, submitted that the safe harbour provision as introduced by the third proviso ought to be applied vis-à-vis FMV determined by the DVO. The learned AR has taken us through the chronology of events by which the provisions as contained in Section 50C, 43CA and 56 of the Act were introduced. It is submitted that all these sections create deeming fiction which are required to be taken to their logical end. He submit....
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....submit that the introduction of safe harbour limit is essentially in view of rationalisation of Section 43CA, 50C and 56 of the Act. The learned AR has also referred to certain guidelines for valuation of immoveable property issued by the Director of Income Tax in 2009. 12. The learned DR has submitted that the third proviso to Section 56(2)(x) of the Act cannot apply to assessment year 2018-19 to which the appeal relates. It is next submitted that even otherwise the third proviso speaks of the stamp duty value of immoveable property which has to be interpreted strictly. He, therefore, submitted that the decisions holding that the third proviso to Section 56(2)(x) of the Act would apply also in relation to the FMV determined by the DVO do not lay down the law correctly. It is submitted that the Division Bench vide referral order dated 06.03.2025 has rightly come to the conclusion that the safe harbour limit of 10% can only be applied in relation to SDV in view of the clear wording of the third proviso to Section 50C(1) of the Act and the corresponding Section 56(2)(x)(b)(B)(ii) of the Act. The learned DR pointed out that in para 9.2 of the referral order, the Division Bench has ....
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.... applies from assessment year 2019-20. In this regard, it is significant to note that the Division Bench in para 9.1 of the referral order dated 06.03.2025 has already held that the amendment is curative and retrospective in nature. The issue referred to this Special Bench is also not on the question whether the amendment is retrospective in nature. Therefore, it is neither necessary nor possible to dwell on the same. Thus, the only question with which we are dealing with is about the applicability or otherwise of the safe harbour limit in relation to the FMV determined by the DVO. 14. The third proviso to Section 50C and the cognate Section 56(2)(x) of the Act was introduced by the Finance Act, 2018. The explanatory note 16 to the same reads as under :- "16. Rationalization of section 43CA, section 50C and section 56 16.1 Before amendment by the Act, for computing income from business profits (section 43CA), capital gains (section 50C) and other sources (section 56) arising out of transactions in immovable property, the higher of sale consideration or stamp duty value was adopted. The difference was taxed as income both in the hands of the purchaser and the se....
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....ces an element of a hypothetical market. The expression "if sold" does not contemplate actual sales or actual sate of market. The expression "Open Market" does not contemplate a purely hypothetical market exempt from restriction imposed by law. The fair market value excludes sentimental value advertisement, brokerage, stamp-duty, commission etc. for affecting the sale transaction." (Emphasis supplied) 17. It is well settled that valuation of an asset involves some amount of guess work and estimation. No valuer can pinpoint the actual value of an asset. Therefore, there would always be difference between the value determined by two or more independent valuers. There cannot be a more glaring example of this position than the present case, where three sets of valuation of the very same property determining the value at different figures are available on record. The sale consideration, on the contrary, is the actual consideration which is paid by a willing purchaser to a willing seller having regard to the nature and facilities enjoyed by the property and the market rate prevailing. We further note that once the assessee disputes the SDV and solicits a reference to the D....