ITAT Sets Aside Addition for Stamp Duty Value Difference Due to Procedural Lapses

ITAT Sets Aside Addition for Stamp Duty Value Difference Due to Procedural Lapses

1. The Core Dispute: Section 56(2)(vii)(b) Addition

The primary grievance of the assessee was an addition of ₹48,00,000 made by the Assessing Officer (AO).

The Legal Point: Under Section 56(2)(vii)(b), if an individual or HUF purchases a property for a consideration that is less than the Stamp Duty Value (Circle Rate), the difference is treated as “Income from Other Sources” in the hands of the buyer, provided the difference exceeds a certain threshold (₹50,000 or 10% of the consideration).

Assessee’s Argument: The assessee contended that the purchase price was genuine and the market value was not as high as the stamp duty value suggested.

2. Procedural Flaws: The “Ex-Parte” Order

The appeal reached the ITAT because the CIT(Appeals), NFAC, dismissed the assessee’s first appeal in an ex-parte order (without the assessee’s participation).

• The Revenue’s Stand: The CIT(A) passed the order because the assessee failed to comply with notices.

• The Assessee’s Stand: No reasonable opportunity of being heard was afforded, violating the principles of Natural Justice.

3. The ITAT’s Findings and Decision

The ITAT Chandigarh Bench (Shri Laliet Kumar, JM, and Shri Krinwant Sahay, AM) observed a fundamental failure in the appellate process:

• Duty to Decide on Merit: The Tribunal held that even if an assessee fails to appear, the CIT(A) is legally required under Section 250 to pass a reasoned order on the merits of the case based on the material available on record.

• Lack of Finding: In this case, the CIT(A) simply dismissed the appeal due to non-compliance without discussing the validity of the ₹48 Lakh addition or verifying the genuine purchase price.

• Restoration of Justice: To ensure a fair trial, the Tribunal set aside the impugned order and remanded (restored) the case to the file of the CIT(A).

4. Summary of the Final Order

• Impugned Order: Set aside.

• Remand: Restored to the CIT(A) for a decision afresh.

• Instructions: The CIT(A) must provide a reasonable opportunity to the assessee. The assessee is directed to cooperate and furnish necessary evidence (such as valuation reports or evidence of property condition) to justify the lower purchase price.

• Outcome: Appeal allowed for statistical purposes.

Key Takeaways for Property Buyers

• Circle Rate vs. Market Value: If you buy property below the circle rate, be prepared to justify it. Under Section 50C (for sellers) and 56(2) (for buyers), you can request the AO to refer the matter to a Valuation Officer if you claim the circle rate is higher than the actual fair market value.

• The Power of Remand: An ex-parte order is not the end of the road. If the CIT(A) hasn’t discussed the “merits” of your case, the ITAT will likely grant you a second chance.

• Stay Proactive: Ensure your contact details (email and mobile) are updated on the e-filing portal to avoid missing NFAC notices, which leads to these ex-parte “Best Judgment” situations.