Sec. 263 Revision Justified as AO Failed to Invoke Sec. 69 With Sec. 56(2)(x) on Undervalued Property | ITAT

Case Details: Kamaluddin Popatlal Surani vs PCIT - [2025] 170 taxmann.com 88 (Surat-Trib.)

Judiciary and Counsel Details

• Pawan Singh, Judicial Member & Bijayananda Pruseth, Accountant member
• Rajesh Upadhyaya, AR for the Appellant.
• Ravi Kant Gupta, CIT-DR for the Respondent.

Facts of the Case

The assessee purchased immovable properties, but the value as per the Stamp Valuation Authority (SVA) was higher than the purchase value. The Assessing Officer (AO) added the entire amount of value determined by SVA under section 56(2)(x) due to the difference between the actual sale consideration and the Stamp Duty Value. The Principal Commissioner (PCIT) observed that the AO should have added only the differential amount under section 56(2)(x) and the actual purchase consideration as an unexplained investment under section 69A. Accordingly, the PCIT invoked section 263, contending that AO’s order was erroneous and prejudicial to the revenue’s interests.

The assessee submitted that it had filed an appeal before CIT(A), which was pending to date. Since CIT(A) had concurrent jurisdiction, the issue could not be examined by PCIT within the meaning of section 263. Aggrieved by the order, the assessee filed an appeal before the Surat Tribunal.

ITAT Held

The Tribunal held that in the reassessment order under section 144, the AO called for various details from the assessee and added the entire amount being the value as per SVA due to non-compliance of the assessee in the reassessment proceedings. In the revision proceedings, the PCIT bifurcated the said sum into two parts and observed that the difference between the value as per the registered deed and that as per SVA should have been added under section 56(2)(x) and the amount as per the sale deed should have been added under section 69. This was so because the assessee failed to explain the nature and source of investment with necessary supporting evidence.

The action of the PCIT was in accordance with clear statutory provisions of the Act. Clause (x) of section 56(2) provides that receipt of the sum of money or property by any person without consideration or for inadequate consideration in excess of Rs. 50,000 shall be chargeable to tax in the hands of the recipient under the head ‘Income from other sources’. Hence, the AO should have taxed the difference and not the entire stamp duty value (SVA) under section 56(2)(x).

Moreover, AO should have added the amount under section 69 because the assessee did not offer an explanation about the nature and source of the investment, which was not recorded in his books of account. An incorrect application of law will satisfy the requirement of the order being erroneous. Hence, the PCIT rightly involved provisions of section 263.

List of Cases Reviewed

• Malabar Industries Co. v. CIT, 243 ITR 83 (SC) (para 11) followed.

List of Cases Referred to

• Smt. Renuka Philip v. ITO [2019] 101 taxmann.com 119/[2018] 409 ITR 567 (Madras) (para 9)
• Malabar Industrial Co. Ltd. v. CIT [2000] 109 Taxman 66/243 ITR 83 (SC) (para 11).