Hirji Parbat Gada Vs ITO (ITAT Mumbai)
In a significant ruling, the Mumbai ITAT has provided substantial relief to a real estate dealer by quashing additions on account of undervaluation of land purchases & remanding a separate issue on property sales for fresh adjudication. .
Assessee, engaged in the business of real estate trading, had purchased multiple land parcels at prices lower than the stamp duty valuation. AO treated the differential value between the purchase price & the stamp duty value as “income from other sources” u/s 143(3) on a protective basis, pending a report from DVO. The difference worked out to ₹6.92 crore. Subsequently, upon receipt of DVO report, AO passed an order u/s 154 reducing the addition to ₹1.85 crore.
In appellate proceedings, CIT(A) not only upheld the addition but changed its character from “income from other sources” to unexplained investment u/s 69.
For AY 2016-17, the AO invoked section 43CA on the ground that certain properties were sold at consideration lower than the stamp duty valuation. As the DVO report was not available before the completion of assessment, the addition was made on the basis of the deemed value u/s 43CA.
Tribunal noted that the assessment was completed u/s 143(3) without considering DVO’s report. The DVO’s detailed report, which valued the property at a higher figure compared to Assessee’s computation, was received subsequently on 20.06.2017. Assessee, on the other hand, furnished a separate valuation report from a registered valuer & placed full reliance upon it. A perusal of the assessment order reveals that AO, while framing the assessment u/s 143(3), had considered the assessee’s submissions & referred the matter to the DVO. However, CIT(A) proceeded to adopt new facts & made the addition u/s 69, thereby invoking a provision different from that applied by AO. Tribunal held that such an approach is perverse, arbitrary, & amounts to an assumption of jurisdiction contrary to law.
