Case Law Details
Shadaksharaswamy Doddagangavadi Veeraiah Vs ITO (ITAT Bangalore)
Bangalore ITAT Deletes Entire Addition on Flat Purchase- Arbitrary 1/5th Estimate Rejected, BBMP Demolition Notice Explains Lower Purchase Value
The Bangalore ITAT deleted the entire addition made against a Karnataka Police Head Constable in a reassessment case arising out of purchase of a residential flat for ₹42 lakh as against a stamp duty value of ₹55.81 lakh. The Tribunal held that the CIT(A)’s action of sustaining 1/5th of the alleged unexplained investment purely on estimate basis was arbitrary and without any foundation. The assessee had explained the source of investment through bank payments, housing loan, agricultural income and wife’s earnings.
The Tribunal noted that out of ₹42 lakh investment, substantial payments were through banking channels and housing loan, while only ₹2 lakh was claimed to be paid from agricultural income derived from family agricultural lands measuring over 20 acres. The assessee’s wife was also earning as a school teacher and tutor and had disclosed taxable income in her return. Accordingly, the ITAT held that there was no justification to sustain even ₹5.70 lakh u/s 69 merely on ad hoc basis.
On the addition relating to difference between stamp duty value and actual consideration, the Tribunal accepted the assessee’s contention that the flat could not command guideline value because the BBMP had initiated demolition proceedings for unauthorized construction. The assessee produced BBMP notices and demolition-related communications as additional evidence before the Tribunal. The ITAT observed that the AO ought to have referred the matter to the Valuation Officer instead of mechanically adopting stamp duty value. Reliance was placed on the Kolkata High Court ruling in Sunil Kumar Agarwal v. CIT for the proposition that such reference is necessary even if the assessee does not specifically request it.
The Tribunal also pointed out that the AO had invoked the wrong statutory provision by making the addition under section 56(2)(vii)(b), though for AY 2020-21 the applicable provision was section 56(2)(x)(b). Considering the demolition proceedings and surrounding circumstances, the ITAT accepted that the actual purchase price represented the fair market value of the flat and deleted the entire differential addition of ₹13.81 lakh.
The Tribunal further condoned a delay of 35 days in filing the appeal, emphasizing that substantial justice must prevail over technicalities, especially where the assessee alleged negligence and non-representation by the earlier tax practitioner.
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