ITO Vs Vivek Omprakash Abrol (ITAT Mumbai)
₹10.55 Crore Stamp-Value Addition Reduced to ₹21.63 Lakh; ₹3.65 Crore Penalty Deleted
Summary: A difference between the stamp duty value and the stated purchase price of land may produce a taxable addition under a deeming provision. Does that difference, without more, prove concealment of income or furnishing inaccurate particulars for section 271(1)(c) penalty? The Mumbai ITAT has answered no on the facts of this case, upholding cancellation of a ₹3,65,31,395 penalty.
The ruling arose from an unusual assessment history. The original addition of ₹10,55,57,660 was substantially reduced by the Assessing Officer himself after receiving a Departmental Valuation Officer’s report. The penalty was nevertheless levied with reference to the original assessment.
From stamp value to DVO value
Vivek Abrol purchased four agricultural land parcels under agreements showing total consideration of ₹5,74,38,100. Their aggregate value according to the stamp duty authorities was ₹16,29,95,760. The Assessing Officer proposed to tax the difference of ₹10,55,57,660 as income from other sources under section 56(2)(vii)(b)(ii).
The Assessing Officer referred the properties to the DVO, but the report had not arrived when the assessment was completed on 27 December 2018. He therefore made the addition using the stamp duty figures.
The DVO’s report, dated 19 December 2019, changed the picture substantially. For three of the four properties, the DVO estimated values below their respective purchase prices. For the fourth, the DVO estimated ₹93,23,000 against purchase consideration of ₹71,59,500, leaving a difference of ₹21,63,500. Acting on a rectification application, the Assessing Officer passed an order under section 154 on 17 July 2020 reducing the section 56(2)(vii)(b)(ii) addition from ₹10.55 crore to ₹21.63 lakh.
The procedural record did not end there. In the quantum appeal, the CIT(A) rejected the DVO valuation and confirmed the addition in the original assessment order. The assessee’s subsequent quantum appeal before the Tribunal was treated as infructuous, in view of the rectification order already passed by the Assessing Officer. The present ITAT order concerned the penalty appeal, not a fresh determination of the correct valuation or quantum addition.
Why the penalty was cancelled
Despite the rectification, the Assessing Officer levied ₹3.65 crore as penalty under section 271(1)(c). The CIT(A) cancelled it, observing that the addition arose from the statutory substitution of a value for the agreed purchase consideration. The Assessing Officer had not found that the assessee paid an amount different from the consideration stated in the agreements or concealed part of the actual price.
The CIT(A) also noted the effect of the DVO report and the subsequent section 154 order. The large original stamp-value difference had not survived the Assessing Officer’s own rectification in that form. Payment of the demand arising under the rectification order did not, by itself, establish that the assessee had concealed the consideration actually paid.
Relying on Mumbai Tribunal decisions concerning additions based on deeming provisions, the CIT(A) held that a deemed addition does not automatically attract section 271(1)(c). The Revenue appealed against that cancellation. The ITAT reviewed the CIT(A)’s reasoning, found no infirmity in it and dismissed the Revenue’s appeal.
Author’s comment
The central distinction is between a taxable difference created by a valuation rule and proof of a false statement about the transaction itself. Section 56(2)(vii)(b)(ii) may operate where the prescribed property value exceeds the consideration. A penalty under section 271(1)(c) requires its own examination of the alleged concealment or inaccuracy. Here, the Assessing Officer did not find that the buyer had paid an undisclosed amount over the price recorded in the purchase documents.
The DVO chronology made the penalty particularly difficult to defend. A ₹10.55 crore addition based on stamp values became ₹21.63 lakh when the Department’s valuer assessed the four properties and the Assessing Officer passed a rectification order. That change showed why the original valuation difference could not simply be treated as evidence of a concealed purchase price.
The decision should be read with its limit. It does not say that every addition under a deeming provision is immune from penalty. If independent evidence shows an unrecorded payment, a false document or another inaccurate factual claim, the penalty question may be different. In Vivek Abrol, the case for penalty rested on the difference between prescribed value and disclosed consideration, without a finding that the disclosed consideration was false. On that record, the Tribunal sustained deletion of the ₹3.65 crore penalty.
Cases Discussed
- Renu Hingorani Vs. AC1T (ITA no. 2210/ Mum/2010) (Mumbai – Tribunal) dated 11.12.2010.
- Asst. Commissioner of Income Tax -14(1) Vs. M/s. Sunland Metal Recycling (ITA No.6454/Mum/2011) dated 10.12.2014(Mumbai-Trib)
- Harish Voovaya Shetty Vs. Income tax Officer (2015) 61(11) ITCL 70 (Mum-Trib.) ITA No. 6383/Mum/2012 dated 03.07.2014
- DCIT Vs. Trans Freight Containers Itd. (ITA No. 2337/Mum/2016) dated 24.02.2017 (Mumbai-Trib.).
- Gunwant Sohanlal Kharodiya Vs. DCIT (1TA No. 650/Mum/2023) dated 08.12.2023 (Mumbai- Trib.).
- Alranieez Construction (P) Ltd. Vs. CIT (2023) (Mum. -Trib.) 202 1TD 379.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT MUMBAI
This appeal is filed by revenue against the order of learned Commissioner of Income Tax- (Appeals), NFAC Delhi, dated 20.02.2026 for Assessment Year 2016-17 in deleting the penalty levied under section 271(1)(c) of the Act.
2. Heard rival contentions and perused the orders of the authorities below and findings of the learned CIT(A). On perusal of the findings of learned CIT(A) we observe that in the course of assessment proceedings the Assessing Officer noticed that the assessee purchased agricultural land for Rs.5,74,38,100/- as against market value by stamp duty authorities at Rs.16,29,95,760/- and the difference of Rs.10,55,57,660/- was proposed to treat as income from other sources under section 56(2)(vii)(b)(ii) of the Act. The Assessing Officer meanwhile also referred the matter to the DVO. However as on the date of completion of assessment under section 143(3) on 27.12.2018 since the assessing officer did not receive the valuation report, he completed the assessment by making an addition of Rs.10,55,57,660/-.
3. When the appeal was pending before the learned CIT(A), the DVO passed report dated 19.12.2019 estimating the fair market value of three properties out of four at the value less than the respective purchase consideration. However, in respect of one of the properties the fair market value was estimated at Rs. 93,23,000/- as against purchased consideration of Rs.71,59,500/- leaving a difference of Rs.21,63,500/-. The assessee filed a rectification application before Assessing Officer and the Assessing Officer passed rectification order under section 154 read with section 143(3) on 17.07.2020 revising the total income to Rs.1,61,29,510/-, after considering the DVO’s report and reduced the addition made under section 56(2)(vii)(b)(ii) of the act to Rs.21,63,500/- as against Rs.10,55,57,660/- as was made in the assessment order. However, it is observed from the learned CIT(A) order that the valuation adopted by the DVO was rejected by the learned CIT(A) while disposing of the quantum appeal and sustained the addition made in the assessment order.
4. We observed that, on appeal by the assessee the tribunal for the assessment years 2016-17, in ITA No. 3493/Mum/2024 by order dated 07.01.2025, held that the appeal became infructuous for the reason that the assessing officer passed order under section 154 rectifying the quantum addition made under section 143(3) of the Act.
5. Taking note of all these facts, the learned CIT(A) held that very basis for making addition under section 143(3) in the assessment order passed dated 27.12.2018 was rectified under section 154 dated 17.07.2020, reducing the quantum addition based on the valuation report and the addition has been made purely on the basis of deeming provisions of the Act, and following various judicial decisions held that the income/addition resulting from application of deeming provision does not ipso facto attract the penalty under section 271(1)(c) of the Act, observing as under :
“5.2.1 The present appeal is preferred against the Penalty order u/s 271(1)(c) of the Act dated 27.03.2025 passed by the AO levying penalty of Rs.3,65,31,395/- u/s 271(1)(c).
5.2.2 During the assessment proceedings it was observed that the appellant in F.Y.2015-16 had purchased Agricultural land situated at village Malvani, Malad and entered into 4 agreements for a total consideration of Rs.5,74,38,100/- as against Assessed Market value by Stamp Duty Authorities at Rs. 16,29,95,760/- leaving difference of Rs. 10,55,57,660/-,
In the course of the assessment proceedings, the AO issued Show cause Notice u/s 142(1) dated 14.12.2018 requiring the appellant to show cause as to why the difference between Purchase consideration and Assessed market Value by stamp duty authorities i.e. Rs. 10,55,57,660/- should not be charged as Income from other Sources u/s. 56(2)(vii)(b)(ii) of the Act.
The AO subsequently referred the matter to the Valuation officer for valuation of property u/s.56(2) r.w.s.50C of the Act. However, in view of the assessment being getting time barred, the AO passed the assessment order u/s. 143(3) on 27.12.2018, after making addition of Rs. 10,55,57,660/- u/s.56(2)(vii)(b)(ii) of the Act without receipt of report of Departmental Valuation Officer(DVO).
The appellant filed appeal before the Ld. CIT(A) against the order of the Ld. AO.
In the meantime, the appellant received DVO’s Order u/s 55A of the Act dated 19.12.2019 on 03.02.2020, estimating the FMV of all 4 properties. As per the DVO’s report, the FMV of 3 properties were estimated at value less than respective purchase consideration. However, in respect of one property FMV was estimated at Rs. 93,23,000/- as against purchase consideration of Rs. 71,59,500/- leaving a difference of Rs. 21,63,500/-.
The appellant filed Rectification application to rectify the Total income at Rs. 1,61,29,510/- by taking the additions u/s. 56(2)(vii)(b) at Rs. 21,63,500/- as against additions of Rs. 10,55,57,660/- in the assessment order. The AO consequently passed Rectification order u/s. 154 r.w.s 143(3) dated 17.07.2020 revising the total income at Rs. 1,61,29,510/- after considering DVO’s report and rectified the addition made u/s.56(2)(vii)(b)(ii) to Rs. 21,63,500/- as against Rs. 10,55,57,660/- in the assessment order and raised demand of Rs. 11,85,851/-.
However, the CIT(A) passed order u/s 250 dated 26.10.2023, rejecting the valuation made by DVO and confirming the addition made in the assessment order.
The appellant filed appeal before the Hon’ble ITAT against this order of the CIT(A).
The Hon’ble Income Tax Appellate Tribunal, Bench “F”, Mumbai passed the appeal order dated 07.01.2025 for A.Y.2016-17 in ITA No. 3493/Mum/2024 and held the appeal infructuous.
Thereafter, in response to penalty SCN the appellant filed reply dated 17.03.2025 drawing the attention of the AO the decision of the Hon’ble Income Tax Appellate Tribunal, Bench “F”, Mumbai and requested to drop the penalty proceedings based on the decision of Hon’ble Tribunal in para 6 and 7 of the ITAT Order.
However, rejecting the submission of the appellant the AO passed the order u/s 271(1)(c) dated 27.03.2025, levying penalty of Rs.3,65,31,395/-.
5.2.3 During the present appellate proceeding the appellant submitted that no penalty can be levied based on the additions made in the assessment order u/s. 143(3) dated 27.12.2018, which forms the basis of impugned penalty proceedings, when the assessment order u/s. 143(3) dated 27.12.2018 itself stands substituted by Rectification order u/s 154 dated 17.07.2020, and submitted that the order levying penalty is null and void and liable to be cancelled.
The appellant cited judicial decisions of jurisdictional Hon’ble Bombay High Court and jurisdictional Mumbai Tribunal favoring his case.
5.2.4 I have examined the facts of the case and submissions of the appellant.
5.2.5 In this case the assessment order u/s 143(3) dated 27.12.2018 which forms the basis of impugned penalty proceedings was rectified by order u/s 154 dated 17.07.2020 wherein valuation report of DVO was taken into consideration and addition made u/s 56(2)(vii)(b)(ii) was reduced to Rs. 21,63,500/- as against Rs. 10,55,57,660/-. CIT(A) rejected the valuation report of the DVO observing anomalies in the report and confirmed the addition made by the AO in his assessment order dated 27.122.2018. It is also undisputed fact that the appellant has paid the demand raised u/s 154.
5.2.6 The pertinent issue in the present case is whether penalty levied on the basis of addition made u/s 56(2)(vii)(b)(ii) tantamount to furnishing inaccurate particulars of income or concealment of income.
It is observed that the addition has been made purely on the basis of deeming provisions of the Act i.e. section 56(2)(vii)(b)(ii). The AO has not given any finding that the purchase consideration is less than the purchase consideration admitted and mentioned in the sale deed.
5.2.7 Various decisions of the jurisdictional Mumbai Tribunal have held that addition resulting from application of deeming provisions does not ipso facto attract the penalty u/s 271(1)(c).
Reliance is placed on the following decisions delivered in case of section 50C/56(2)(x), the ratio present facts of the case as under:
1. Renu Hingorani Vs. AC1T (ITA no. 2210/ Mum/2010) (Mumbai – Tribunal) dated 11.12.2010.
2. Asst. Commissioner of Income Tax -14(1) Vs. M/s. Sunland Metal Recycling (ITA No.6454/Mum/2011) dated 10.12.2014(Mumbai-Trib)
3. Harish Voovaya Shetty Vs. Income tax Officer (2015) 61(11) ITCL 70 (Mum-Trib.) ITA No. 6383/Mum/2012 dated 03.07.2014
4. DCIT Vs. Trans Freight Containers Itd. (ITA No. 2337/Mum/2016) dated 24.02.2017 (Mumbai-Trib.).
5. Gunwant Sohanlal Kharodiya Vs. DCIT (1TA No. 650/Mum/2023) dated 08.12.2023 (Mumbai- Trib.).
6. Alranieez Construction (P) Ltd. Vs. CIT (2023) (Mum. -Trib.) 202 1TD 379.
5.2.8 It is observed that in the present case also, the additions were made by the AO by applying the provisions of section 56(2)(vii)(b)(ii) of the Act, and it is further evident from the penalty order that the AO had not questioned the actual consideration paid by the appellant but the addition was made purely on the basis of deeming provisions of the Act, and it is also observed that the AO has not given any finding that the actual purchase consideration was less than the purchase consideration admitted and mentioned in the sale agreement. The only fact which is of some relevance is that the appellant has paid the tax as per rectification order u/s 154. But this fact in itself does not establish that the appellant had concealed the purchase price paid by him. Consequently, after observing the ratio in the above judicial pronouncements and respectfully following the decisions of the jurisdictional Tribunal as above, the levying of penalty u/s 271(1)(c) is not found fit, the penalty u/s 271(1)(c) levied by AO is fully cancelled.
Grounds of appeal 2 and 3 are allowed.”
6. On careful perusal of the findings of the learned CIT(A) and the reasoning given by the learned CIT(A) for deleting the penalty levied under section 271(1)(c) of the Act, we do not find any infirmity in the order passed and therefore findings are hereby sustained. The grounds raised by the revenue are rejected.
7. In the result, the appeal of the revenue is dismissed.
Order pronounced in the Open Court on 21-09-2026
