NALINKANT BHIKHALAL PATHAK,BHAVNAGAR V. THE ITO, WARD-1(8), BHAVNAGAR

ITA 1711/AHD/2025

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This case involves an appeal by Nalinkant Bhikhalal Pathak against the order of the Commissioner of Income Tax (Appeals), which upheld an addition to the assessee's income under section 56(2)(x) of the Income Tax Act, 1961, due to a discrepancy between the purchase value of a property and its assessed value by the Stamp Duty Authority. The property in question was purchased for Rs. 20,00,000, while the registration value was assessed at Rs. 1,21,41,000. The District Valuation Officer later assessed the fair market value at Rs. 44,75,000, leading to a reduced addition of Rs. 24,75,000 to the assessee's income. The Tribunal found that the costs incurred on stamp duty, registration charges, and other taxes were not considered in the DVO's valuation and should be included in the purchase price for tax purposes.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 784629 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2018-2019
• Appeal Filed On: 05-09-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revised return; Fair market value; Valuation report; Initiation of penalty proceedings; Value adopted by valuation officer
• Section: 143(3); 234B

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH Before: DR. BRR Kumar, Vice President And Shri T. R. Senthil Kumar, Judicial Member Nalinkant Bhikhalal Pathak Plot No. 678, “Jyotika” Sector 9, Iscon 11 Sidsar Road, Bhavnagar-364060 Gujarat PAN: ACVPP2337E (Appellant) Vs Income Tax Officer Ward-1(8), Bhavnagar (Respondent) Assessee Represented: Shri Narendra Singh K Vaghela, A.R. Revenue Represented: Shri Rohit Aasudani, Sr. D.R. Date of hearing : 10-11-2025 Date of pronouncement : 13-11-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the appellate order dated 18.07.2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2018-19. ITA No. 1711/Ahd/2025 Assessment Year 2018-19 Printed from counselvise.com I.T.A No. 1711/Ahd/2025 A.Y. 2018-19 Page No Nalinkat Bhikhalal Pathak vs. ITO 2 2. Brief facts of the case is that the appellant is an individual filed his Return of Income for the Asst. Year 2018-19 on 29-09-2018 admitting total income of Rs.3,69,940/- and a revised return on 12-10-2018 admitting total income of Rs.3,65,380/-. The return was taken for scrutiny assessment for the reason that the purchase value of the immovable property along with the income disclosed is substantially less than the value as per the Stamp Duty Authority. Since the property purchased by the assessee was Rs.20,00,000/- and the registration value by the Sub-Registrar, Bhavnagar was Rs.1,21,41,000/- so the difference is the added income of the assessee u/s. 56(2)(x) of the Act. 3. Aggrieved against the assessment order, assessee filed an appeal before Ld. CIT(A) during which the property was referred to District Valuation Officer (DVO) to determine the Fair Market Value of the property as on 10-07-2017. The DVO vide his order dated 07-07- 2021 determined the Fair Market Value of the property at Rs. 44,75,000/-. Thus the ld. CIT(A) restricted the addition to Rs.24,75,000/- u/s. 56(2)(x) of the Act. 4. Aggrieved against the appellate order, the assessee is in appeal before us raising the following Grounds of Appeal: 1. That the learned CITIA) erred in law and on facts in upholding an addition of 224,75,000 u/s 56(2)(x) by not accounting for the full consideration paid by the appellant, including 25,95,000 stamp duty, 220,000 registration fee and 22,37,844 pending land tax, which are integral parts of the purchase price. Printed from counselvise.com I.T.A No. 1711/Ahd/2025 A.Y. 2018-19 Page No Nalinkat Bhikhalal Pathak vs. ITO 3 2. That the learned CIT(A) failed to consider the written submission dated 02.06.2025, including material documents such as. Copy of registered sale deed, Land tax receipt, DVO valuation report, Site condition and its photographs. 3. That the deeming fiction under Section 56(2)(x) was incorrectly invoked despite: Transaction being between unrelated parties, Proper documentation and registration, 4. It is further humbly submitted that the said industrial property is located very close to the Gulf of Khambhat and is severely affected by ingress of saline sea water. The land in question is frequently inundated during high tides, rendering it unsuitable for any industrial or commercial development. The ground conditions are extremely poor-the soil is saline, and the groundwater level is only 5 to 6 feet below ground. making it unfit for drinking or general usage. There is a complete lack of basic infrastructure facilities. including: No proper approach road to the site, No drainage system. No electricity connection, No access to potable water. Due to these harsh environmental and infrastructural conditions, the land is not viable for productive use, and its marketability is substantially impaired. These critical ground realities have not been considered in the DVO's valuation, nor does the stamp valuation authority account for these extreme adverse conditions. 4. Penalty not leviable: The issue is one of interpretation of valuation. There is no concealment or misreporting. Hence, penalty u/s 270A cannot survive Penalty cannot survive as the case falls under exceptions of Section 270A(6): 270A(6)(a): Bona fide explanation offered; all facts disclosed (registered deed, stamp duty, land tax, DVO report). 270A(6)(b): Addition is based on estimate/valuation. concealment. not Section 270A(9) lists cases of misreporting (false entries. suppression of facts etc.). None apply here. 5. That interest charged under Sections 234B unjustified as the addition is based on a deemed valuation not known to the assessee at the time of filing return. Printed from counselvise.com I.T.A No. 1711/Ahd/2025 A.Y. 2018-19 Page No Nalinkat Bhikhalal Pathak vs. ITO 4 6. That initiation of penalty proceedings under Section 270A is arbitrary as there was no misreporting, concealment, or deliberate under-statement of income by the appellant. 5. Ld. Counsel submitted that the assessee paid Stamp Duty of Rs.6,05,000/- towards Stamp Duty and pending Land Tax of Rs. 2,37,844/- in all totaling to Rs.8,52,844/-. The DVO in his report categorically held that he has not considered Stamp Duty, Additional Stamp Duty, Registration Charges, Legal Charges and Other Charges/Taxes paid while estimating the Fair Market Value of the property and cost of brokerage paid. Thus Ld. Counsel submitted that the cost of Registration Charges and Land Tax paid charges included which are integral part of the purchase price and modified the addition made by the Ld. CIT(A) u/s. 56(2)(x) of the Act. 5. Per contra, the Ld. D.R. appearing for the Revenue supported the order passed by the lower authorities. 6. We have given our thoughtful consideration and perused the materials available on record including the valuation report submitted by Assistant Valuation Officer-II dated 07-07-2021. It is categorically mentioned in the report, that the cost incurred on Stamp Duty, Additional Stamp Duty, Registration Charges, Legal Charges and Other Charges/Taxes paid were not included for the purpose of estimating the fair market value. No doubt the above stamp duty charges and taxes were paid by the assessee are all integral part of the purchase of the property which is also to be considered for the purpose of Section 56(2)(x) of the Act. The above Printed from counselvise.com I.T.A No. 1711/Ahd/2025 A.Y. 2018-19 Page No Nalinkat Bhikhalal Pathak vs. ITO 5 expenses were claimed by the assessee before Ld. CIT(A) which is not considered by him. Therefore we hereby set-aside the order passed by the Ld. CIT(A) to the file of Jurisdictional Assessing Officer to consider the above registration charges and land tax expenses and rework the income chargeable u/s. 56(2)(x) of the Act by giving proper opportunity of hearing to the assessee. Needless to say that the assessee should make use of this opportunity and produce all necessary details before the JAO to pass fresh order. 7. In the result, the appeal filed by the assesse is allowed for statistical purpose. Order pronounced in the open court on 13-11-2025 Sd/- Sd/- (DR. BRR KUMAR) (T.R. SENTHIL KUMAR) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad : Dated 13/11/2025 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद Printed from counselvise.com "