Firoz Khan Jamil Khan Pathan Vs ITO (ITAT Nagpur)
DVO Report Received After Assessment Warrants Fresh Examination of Section 56(2)(x) Addition
Background of the Case
The assessee had purchased an immovable property during the previous year relevant to Assessment Year 2019-20 but had not filed his return of income.
The Department received information through the Insight Portal under the High-Risk CRIU/VRU category indicating that the property had been purchased for consideration lower than its stamp duty value. The information also referred to deduction of tax under Section 194-IA.
The Assessing Officer initiated reassessment proceedings, passed an order under Section 148A(d) and issued a notice under Section 148 on 31 March 2023.
The resulting assessment involved two distinct questions: the taxability of the difference between the purchase consideration and the stamp duty value, and the adequacy of the explanation for the funds used to purchase the property.
Addition Under Section 56(2)(x)(b)
The Assessing Officer recorded that the assessee had purchased the property for ₹10,00,000, whereas its value for stamp duty purposes was ₹33,23,000.
The purchase deed was executed on 27 November 2018.
After calling for details and issuing a show-cause notice, the Assessing Officer rejected the assessee’s explanation and treated the difference of ₹23,23,000 as income from other sources under Section 56(2)(x)(b).
The officer also questioned the source of the purchase consideration. Being dissatisfied with the details and clarifications furnished, he made a separate addition concerning the funds used for acquiring the property.
The reassessment order was passed on 6 March 2024, determining total income at ₹42,03,220.
CIT(A) Confirms the Assessment
The assessee challenged the additions before the CIT(A).
The appellate authority considered the grounds of appeal, statement of facts and findings recorded by the Assessing Officer but upheld the assessment and dismissed the appeal.
The assessee consequently approached the Tribunal, contending that the explanations and supporting material had not received proper consideration.
A central submission was that the Departmental Valuation Officer’s report was received only after the assessment had been completed and was material to determining the value to be adopted for the property.
Assessee Relies on Distress Sale and Subsequent Valuation
Before the Tribunal, the authorised representative submitted that the property had been acquired through a distress sale.
The assessee relied on the DVO’s valuation report contained in the paper book and argued that it had an important bearing on the addition arising from the difference between the purchase consideration and the stamp duty value.
The report was dated 31 March 2024, whereas the assessment order had already been passed on 6 March 2024.
The assessee therefore sought a fresh opportunity before the lower authority to have the valuation issue examined with the benefit of that report.
The Departmental Representative supported the CIT(A)’s order.
Tribunal Finds That the DVO Report Was Unavailable During Assessment
The Tribunal examined the chronology and found that the DVO’s report post-dated the assessment order.
It therefore recorded that the report was not available with the Assessing Officer when the assessment was completed.
Considering the overall facts and circumstances, the Tribunal restored the valuation issue, together with the supporting evidence, to the Assessing Officer for fresh adjudication.
The Tribunal did not reproduce the value determined by the DVO or quantify any resulting reduction in the addition. Its decision was to require reconsideration of the issue after examining the subsequently available report.
Source of Purchase Funds Also Restored
On the second issue, concerning the source of funds used to acquire the property, the assessee referred to audited financial statements and the availability of own funds placed in the paper book.
The authorised representative submitted that these records supported the explanation for the purchase consideration.
The Tribunal considered that the assessee should receive one further opportunity to substantiate the source through relevant evidence and information.
Accordingly, this issue was also restored to the jurisdictional Assessing Officer.
The order contains an internal variation in describing this addition: the appeal ground refers to ₹11,96,480 under Section 69, while the factual narration refers to ₹10,00,000 under Section 69A. The operative direction restores the source-of-funds dispute without resolving that discrepancy.
Decision and Directions
The Tribunal set aside the CIT(A)’s order and remitted both disputed issues to the jurisdictional Assessing Officer for fresh adjudication.
It directed that the assessee be provided an adequate opportunity of hearing. The assessee was correspondingly required to cooperate by furnishing the necessary information and evidence.
The appeal was allowed for statistical purposes.
Significance of the Ruling
The decision highlights the need to examine a material valuation report that became available after completion of the assessment, alongside the evidence explaining the purchase funds.
The Tribunal did not finally delete either addition, accept the distress-sale contention or hold that the source of investment stood proved. Those questions remain open for the Assessing Officer’s fresh examination.
The relief granted was a fresh adjudication on both valuation and source, with an effective opportunity for the assessee to establish his case.
FULL TEXT OF THE ORIGINAL ORDER OF ITAT NAGPUR
The assessee has filed the appeal against the order of CIT(A)/NFAC, Delhi passed u/sec250 of the Act. The assessee has raised the following grounds of appeal:-
“1. Whether on the facts and circumstances of the case, the Ld. CIT(A) was justified in affirming the order of the AO in making an addition to the tune of Rs. 23,23,000/- u/sec. 56(2)(x)(b) of the Income Tax Act, 1961.
2. Whether on the facts and circumstances of the case, the Ld. CIT(A) was justified in affirming the order of the AO in making an addition to the tune of Rs. 11,96,480/- u/sec. 69 of the Income Tax Act, 1961.
3. The appellant craves leave to add or alter any other ground that may be taken at the time of hearing of this case.”
2. The brief facts of the case are that, the Income tax department has received information from Insight Portal under High Risk CRIU/VRU that the assessee has purchased property below the stamp duty value as per SRO and the provisions section 56(2)(x)(b) are applicable and TDS u/sec 194IA of the Act was deducted and the assessee has not filed the return of income for A.Y.2019-20.The Assessing Officer (A.O) has reason to believe that the income has escaped assessment and followed the due process of law and passed the order u/sec. 148A(d) of the Act and issued notice u/sec. 148 of the Act dated 31.03.2023. The A.O on perusal of the facts and information available on record, found that the assessee has purchased property for a consideration of Rs. 10,00,000/- whereas market value of the property is Rs. 33,23,000/-. Therefore, Ld. AO has called for the details, purchased deed executed on 27.11.2018 and issued show-cause notice invoking the provisions of section 56(2)(x)(b) of the Act and the assessee filed the reply. Whereas the AO was not satisfied with the submissions and made addition of differential amount of Rs.23,23,000/- as income from other sources. Similarly, the assessee has filed the explanations on the sources of purchase of property but the AO was not convinced with the details and clarifications and made addition u/sec69A of the Act of Rs. 10,00,000/- and assessed the total income at Rs. 42,03,220/- and passed the order u/sec147 r.w.s144B of the Act dated 6.03.2024.
3. Aggrieved by the order, the assessee has filed an appeal before the CIT(A). Whereas the CIT(A) has considered grounds of appeal, statements of facts and findings of the AO but has confirmed the action of the Assessing officer and dismissed the assessee’s appeal. Aggrieved by the order of the CIT(A), the assessee has filed the appeal before the Hon’ble Tribunal.
4. At the time of hearing, the Ld. AR submitted that CIT(A) has erred in confirming the action of the Assessing Officer, overlooking the provisions of the Act and submissions in the proceedings. Further the CIT(A) erred in relying on the findings of the assessing officer ignoring the explanations that the DVO’s valuation report was not available at the time of assessment proceedings and received subsequently and which play a vital role in adopting the value invoking the provisions of section 56(2)(vii)(b) of the Act. Similarly, Ld.AR submitted that assessee has evidences/ documents substantiating the sources of acquisition of the property and prayed for an oppurtunity before the lower authorities and the Ld.AR substantiated the submissions with factual paper book. Per Contra, the Ld.DR relied on the order of the CIT(A).
5. Heard the rival submissions and perused the material on record. The disputed issues envisaged by the Ld.AR that the Ld.CIT(A) has erred in sustaining the addition u/sec. 56(2)(x)(b) of the Act in respect of the purchase of the property. The Ld.AR emphasized that the assessee has purchased distress sale the property and the assessee has received valuation report after the assessment proceedings and the Ld.AR has demonstrated the valuation report filed in the paper book at page No. 46-55, whereas the valuation report is dated 31.03.2024. On perusal of the facts, it is found that assessment order was passed on 06.03.2024 and the DVO’s valuation report is dated 31.03.2024. Therefore, it is a clear case that, this DVO report was not available with the AO at the time of assessment proceedings. Therefore, considering the overall facts and circumstances, restore this issue along with evidences to the file of the Assessing officer to adjudicate afresh. On the second disputed issue of sources of purchase of property, the Ld.AR referred to the audited financial statements and availability of own funds placed at page 4 to 29 of the paper book. Therefore, considering the facts, circumstances and principles of natural justice, shall provide with one more opportunity of hearing to the assessee to substantiate the case with evidences and information. Accordingly, set aside the order of the CIT(A) and remit the two disputed issues to the file of the jurisdictional assessing officer to adjudicate afresh and the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information. And the grounds of appeal of the assessee are allowed for statistical purposes.
6. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 12th Oct., 2026.
