Addition u/s 56(2)(vii)(b) deleted in absence of DVO’s report as building was old

Addition u/s 56(2)(vii)(b) deleted in absence of DVO’s report where the building on the land purchased was 30 years old

In a recent judgment, ITAT Chennai deleted addition u/s 56(2)(vii)(b) as there was no DVO’s report as on the date of impugned order and the subject building was 3 years old construction.

ABCAUS Case Law Citation:
4589 (2025) (06) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) National Faceless Appeal Centre (NFAC) in confirming addition u/s 56(2)(vii)(b) of the Income Tax Act, 1961 (the Act).

The Appellant assessee along with another purchased a building and paid sale consideration which was less than the stamp duty valuation of the same. As a result the assessee paid differential stamp duty to the Registrar. A show cause notice was issued seeking objection why his share of 50% being the difference in the value of the property should not be brought to tax under section 56(2)(vii)(b) of the Act.

The assessee objected the same and requested to refer the matter to the DVO. Since the assessment was time barring, the Assessing Officer, without awaiting DVO’s report, added the differential value in the property being assessee’s 50% share to the total income of the assessee under section 56(2)(vii)(b) of the Act.

Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the CIT(A). The CIT(A), having no submissions from the assessee, confirmed the addition made by the Assessing Officer.

Before the Tribunal, the assessee submitted that there was no difference in land value and sale consideration. It was submitted that the land value was the same as with stamp valuation, but, however, there was alleged difference on account of building value adopted by the assessee as against value taken by the registering authority. The assessee contended that the building was 30 years old. That there was no value to the said old building and the value adopting registering authority was very high. He requested to adopt the value offered by the assessee.

The Tribunal noted that admittedly details of building were attached to the sale deed, wherein, it was clearly noted that the age of the building is 30 years old and it was an old construction. The assessee offered a lower sum for land and building, but, however, the stamp valuation authority valued the building forn an higher amount and in consequence to which, the assessee paid differential stamp duty.

The Tribunal further observed that admittedly, there was no DVO’s report as on the date of impugned order passed by the CIT(A) or even at the time of passing the assessment order. The Revenue did not bring on record any DVO report in support of Assessing Officer’s contention.

The Tribunal in the absence of DVO report, accepted the contention of the assessee for valuing the property. Therefore, the addition made on account of difference between the stamp duty value of building was accordingly deleted.

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