Sunit Kumar Pattanayak Vs ITO (ITAT Kolkata)
Joint Property Purchase: ITAT Directs DVO Valuation and Consideration of Buyer’s Share
The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) restored a property valuation addition to the Assessing Officer after finding that the entire disputed difference had been taxed in one purchaser’s hands despite joint ownership and a jointly sanctioned housing loan.
In Sunit Kumar Pattanayak vs. ITO, Ward-27(1), Haldia, ITA No. 2576/KOL/2026, concerning Assessment Year 2020-21, the Tribunal directed a Departmental Valuation Officer (DVO) reference and consideration of the assessee’s share before deciding the addition under Section 56(2)(x).
Accountant Member Laxmi Prasad Sahu pronounced the order on 14 October 2026, partly allowing the appeal for statistical purposes.
Property Transaction Leads to Reassessment
The Department received information from the District Sub-Registrar-II, Alipore, concerning a property transaction for ₹35 lakh, against a recorded stamp duty value of ₹45,73,550.
The assessee had not filed a return under Section 139. After following the reopening procedure, the Department issued a notice under Section 148.
In response, the assessee filed a return declaring income of ₹2,35,230. The order records that he declared business income at 8% under Section 44AD.
During reassessment, the Assessing Officer examined the property purchase and proposed taxation of the valuation difference under Section 56(2)(x).
Purchase Price Financed Through Housing Loan
The assessee explained that the actual consideration paid to the seller was ₹35 lakh.
Of this amount, ₹25 lakh was financed through a house-building loan from BCCB Bank. Payment details were furnished during the proceedings.
The deed of conveyance recorded that the property was purchased jointly with Anit Pattanayak, the assessee’s brother.
In a subsequent reply, the assessee specifically stated that his ownership share was 50%. He also produced the bank’s loan-sanction document, which recorded the joint borrowing arrangement.
These documents formed the basis of his objection to taxation of the entire difference in his individual assessment.
Entire Disputed Difference Added to One Buyer
Despite the explanation, the Assessing Officer made an addition recorded in the order as ₹10,75,550 under Section 56(2)(x)(b)(B)(i).
The assessee challenged the assessment before the CIT(A).
The first appellate authority observed that no credible independent evidence, such as a registered valuer’s report or comparable sale instances, had been produced to support a value lower than the stamp duty valuation.
It consequently dismissed the appeal through an order dated 22 April 2026.
The assessee then approached the Tribunal, disputing both the absence of independent valuation and attribution of the entire addition to him.
Joint Ownership and DVO Reference Emphasised
Before the Tribunal, the assessee’s representative reiterated that the property and the housing loan were both held jointly.
He relied on the loan-sanction letter naming the brother and submitted that the Assessing Officer had received the relevant documents during assessment.
The representative argued that the valuation dispute should have been referred to the DVO under the mechanism involving Section 50C and the relevant proviso to Section 56(2)(x).
He maintained that direct adoption of the stamp duty value, without that examination, was inappropriate in the circumstances.
The Revenue supported the orders of the lower authorities.
Assessee Seeks Restriction to Fifty Per Cent
The representative requested determination of the property’s correct fair market value through a DVO reference.
He further submitted that, if the resulting value exceeded ₹35 lakh and an addition remained legally warranted, only 50% of the applicable difference should be considered in the assessee’s hands.
This was based on the claimed equal ownership between the brothers.
The submission therefore required two connected inquiries: establishing the correct property value and determining the portion attributable to this assessee.
The Tribunal considered both matters relevant to fresh adjudication.
Tribunal Applies Jurisdictional High Court Decision
The Tribunal noted that the dispute concerned the difference between the purchase price and stamp duty value, taxed under Section 56(2)(x).
It also expressly recognised that the property was jointly purchased and the house-building loan jointly sanctioned, while the full disputed amount had been added to one purchaser’s income.
The Bench referred to Sunil Kumar Agarwal vs. CIT, [2014] 47 taxmann.com 158, decided by the jurisdictional Calcutta High Court.
Following that decision, it held that the Assessing Officer should have referred the valuation dispute to the DVO.
Fresh Valuation and Share-Based Examination Ordered
The Tribunal restored the issue to the Assessing Officer to determine the correct fair market value after obtaining DVO valuation and then decide the matter according to law.
The officer must also consider the assessee’s share in the jointly purchased property and provide a reasonable opportunity of hearing.
The assessee was directed to substantiate his case with cogent documents and avoid unnecessary adjournments.
The appeal was partly allowed for statistical purposes. The Tribunal did not finally delete the addition, accept ₹35 lakh as conclusive value or quantify a reduced addition. Those consequences remain dependent on valuation and examination of the ownership share during the restored proceedings.
Cases Discussed
- Sunil Kumar Agarwal Vs CIT — [2014] 47 taxmann.com 158 (Calcutta High Court); (2015) 372 ITR 83 (Cal). The jurisdictional High Court decision concerning DVO reference in disputes involving stamp duty valuation under Section 50C. The Tribunal followed this judgment while restoring the valuation issue to the Assessing Officer.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is an Appeal filed by the Assessee against the order of the NFAC, Delhi [“the Ld. CIT(A)”, for short], dated 22.04.2026 with DIN & Order No. ITBA/NFAC/S/250/2026-27/1088576026(1), passed u/s 250 of the Income Tax Act, 1961 (“the Act”, for short) for the Assessment Year 2020-21, arising out of the Assessment order dated 03.03.2025 with DIN No.ITBA/AST/S/147/2024-25/1073953324(1) passed u/s 147 r.w.s. 144B of the Act.
2. Briefly stated, the facts of the case are that, as per the information available with the Income Tax Department from the District Sub-Registrar-II, Alipore, South 24 Parganas, West Bengal, the Assessee had undertaken a transaction of Rs.35,00,000/-, whereas the stamp duty value of the said asset was Rs.45,73,550/-, and the Assessee had not filed a return of income u/s 139 of the Act. Accordingly, after following the due procedure to reopen the case, notice u/s 148 of the Act was issued to the Assessee. In response to the notice u/s 148 of the Act, the Assessee filed a return of income declaring income at Rs.2,35,230/-. From the documents, it was noticed that the share of purchase of the immovable property was not furnished by the Assessee, and the immovable property was purchased jointly with Anit Pattanayak as per the deed of conveyance I-6262/19. The Assessee filed a return of income u/s 148 of the Act, declaring income at the rate of 8% u/s 44AD of the Act in ITR-3. Further, in response to the notice u/s 142(1) of the Act, it was informed that the SRO value was Rs.45,73,550/-, and the differential amount of Rs.10,75,550/- was proposed to be taxed u/s 56(2)(x) of the Act for the current year. The purchase value of Rs.35,00,000/- was accepted. In this regard, the Assessee furnished a reply on 26.02.2024, which is incorporated in the Assessment Order. It was submitted that the purchase price paid to the seller was Rs.35,00,000/- only, out of which Rs.25,00,000/- was taken as a House Building Loan from BCCB Bank, and the details of the payments were furnished. Further, notice u/s 142(1) of the Act was issued to the Assessee, and the Assessee furnished a reply on 02.09.2024, wherein it was submitted that the property was purchased jointly with his brother, Shri Anit Pattanayak, and that the Assessee’s share was 50% of the property. In this regard, the loan sanctioned by the bank was submitted, wherein it was clearly mentioned that the loan was taken jointly, which is also incorporated in the Assessment Order. Considering the submission of the Assessee, as per dvo-request-assessee.html” title=”TaxGuru: Section 50C” target=”_blank” rel=”noopener”>Section 50C of the Act, the Assessing Officer made an addition of the differential amount of Rs.10,75,550/- in the hands of the Assessee u/s 56(2)(x)(b)(B)(i) of the Act and added it back to the total income of the Assessee. Aggrieved by the order of the Assessing Officer, the Assessee filed an Appeal before the Ld. CIT(A), who observed that the Assessee had not brought on record any credible or independent evidence, such as a Valuation Report from a registered valuer or comparable sales, to substantiate the claim that the payment value of the property was lower than the stamp duty value, and dismissed the Appeal of the Assessee. Aggrieved by the above order, the Assessee is in Appeal before this Tribunal.
3. The Learned Counsel reiterated the submissions made before the Lower Authorities and submitted that all the documents required by him were furnished during the course of the assessment proceedings. The loan was taken jointly, and the property was also purchased jointly. In this regard, the bank’s House Building Loan sanction letter was produced, wherein it was clearly mentioned that the name of Shri Anit Pattanayak is also included. However, the Assessing Officer, without referring the matter to the DVO, stated that the entire difference amount of Rs.10,75,550/- had been added in the hands of the Assessee, which is completely wrong. The Assessing Officer should have referred the matter to the DVO as per Section 50C of the Act. The ld. CIT Appeal also did not properly appreciate the relevant provision referred to by the Assessing Officer u/s 56(2)(x) of the Act, wherein it is clear that if the value of the property declared by the Assessee is disputed, then it is mandatory to refer the matter to the DVO for the determination of the correct fair market value of the property. In this regard, he also referred to Section 56(2)(x) of the Act and the relevant proviso.
4. He further requested that the issue may be sent to the Assessing Officer for the determination of the correct fair market value and that, if it is found that the F.M.V. is more than Rs.35,00,000/-, then 50% of the difference amount should be added to the value in the hands of the Assessee because the property was purchased jointly. Accordingly, as per Section 56(2)(x), the Assessee is liable for a 50% share, not the entire amount of the difference.
5. On the other hand, the Ld. DR relied on the orders of the Lower Authorities.
6. Considering the rival submissions and perusing the material available on record and the orders of the Authorities below, I noted that the dispute is regarding the addition made by the Assessing Officer u/s 56(2)(x) of the Act r.w.s. the proviso, concerning the difference between the purchase value of the property and the stamp duty value as determined by the SRO. The Assessing Officer made the addition in the hands of the Assessee to the total difference amount, whereas the property was jointly purchased and the House Building Loan was also sanctioned jointly. During the course of the hearing, the Learned Counsel referred to the provisions of Section 50C of the Act, and the third proviso to Section 56(2)(x) of the Act is applicable to the present facts of this case. Accordingly, the Assessing Officer should have referred the matter to the DVO as per the judgment of the Jurisdictional High Court of Calcutta in the case of Sunil Kumar Agarwal Vs. CIT [2014] 47 taxmann.com 158 (Kolkata). The matter should have been referred to the DVO as per Section 50C of the Act. Respectfully following the above judgment, I restore this issue to the file of the Assessing Officer for determination of the correct fair market value of the property after referring the matter to the DVO and decide the issue as per law. Considering the share of the Assessee in the joint property, a reasonable opportunity of being heard be given to the Assessee, and the Assessee is directed to substantiate his case with cogent documents and not seek unnecessary adjournments for the early disposal of the case.
7. In the result, Appeal of the Assessee is partly allowed for statistical purposes.
Order pronounced on 14.10.2026.
