PAWAN CHOWDHRI,NEW DELHI V. ITO WARD 52(4), DELHI

ITA 6471/DEL/2025

AI Insights

The case involves an appeal by Pawan Chowdhri against the order of the Commissioner of Income-tax (Appeals), which partly upheld the addition of Rs.1,53,91,559 to the assessee's income, representing the difference between the stamp duty value and the actual payment made for a property purchase. The property, located at Connaught Place, was under a long-term tenancy and had various encumbrances, which the assessee argued affected its fair market value. The Tribunal found merit in re-evaluating the property value as of the purchase date using the Rent Capitalization Method but upheld the addition related to the unsecured loan from the assessee's brother, citing insufficient evidence of the transaction's genuineness.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 848540 (ITAT-NEW DELHI)
• Duration Of Justice: 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Delhi
• Assessment Year: 2016-2017
• Appeal Filed On: 13-10-2025
• Other Referred Cases: CIT vs. Bitwala Industries Ltd., AIR 1973 SC 284
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NITIN KUMAR JAIMAN
• Assessee Lawyers: R. M. MEHTA; ITS LETTER DATED
• Keywords: Set aside; Sale consideration of property below Jantri Value; Fair market value; Onus to prove; Capital Gains; Valuation report
• Section: 143(3); 142(1); 68; 80C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : A : NEW DELHI BEFORE Ms. MADHUMITA ROY, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER ITA No.6471/Del/2025 Assessment Year: 2016-17 Pawan Chowdhri, 17L Connaught Circus, New Delhi – 110 001. PAN: AAEPC9651R Vs ITO, Ward 52(4), Delhi. (Appellant) (Respondent) Assessee by : Shri R.M. Mehta, CA Revenue by : Shri Nitin Kumar Jaiman, Sr. DR Date of Hearing : 03.03.2026 Date of Pronouncement : 25.03.2026 ORDER PER MADHUMITA ROY, JM: The instant appeal filed by the assessee is directed against the order dated 19.08.2025 passed by the Ld. Commissioner of Income-tax (Appeals), NFAC, Delhi [hereinafter referred to as the Ld. CIT(A)] under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) arising out of the Assessment Order dated 31.12.2018 passed by the Income Tax Officer, Ward 54(2), Delhi (hereinafter referred to as ‘the Ld. AO’) under Section 143(3) of the Act for Assessment Year 2016-17. Printed from counselvise.com ITA No.6471/Del/2025 2 2. The assessee, an individual, filed her return of income for the year under consideration on 17.10.2016 declaring the total income of Rs.11,48,150/- which was subsequently revised on 12.02.2018 declaring the revised income of Rs.5,63,300/-. The assessee’s case was subsequently selected for complete scrutiny under CASS and notice under Section 143(2) of the Act dated 09.08.2018 followed by further notice under Section 143(2) of the Act dated 24.09.2018 were issued and duly served. Notices under Section 142(1) of the Act was issued on several occasions directing the assessee to furnish details, compliance thereto was duly made. 3. The brief fact of the case is this that the assessee has purchased a property lying and situated at L-1, Ground Floor, L Block, Connaught Place, New Delhi on 22.01.2016 for a consideration of Rs.1,53,00,000/-. Stamp Duty to the tune of Rs.15,35,000/- was duly paid thereon. The Circle Rate value as per the Revenue of the aforesaid property was Rs.3,06,91,559/-. Considering the lower price paid by the assessee, notice under Section 143(1) of the Act dated 03.12.2018 was issued invoking Section 56(2)(vii)(b)(ii) of the Act. Further, directing the assessee to explain as to why the difference of stamp value and the actual payment made by the assessee of Rs.1,53,91,559/- should not be added in the hands of the assessee, show cause was issued. In fact, the property in question lying at Connaught Circus was under tenancy agreement in the name of M/s English Book Store, a partnership firm of the Printed from counselvise.com ITA No.6471/Del/2025 3 husband of the assessee and sons since the last 65 years and only upon compromise the owner of the property got the price settled with the assessee and having regard to the facts and circumstances of the matter and the situation involved in the matter, the same was not done on fair market value or Circle Rate and further large amounts were also due to L&DO for misuse charges and unauthorized construction of the property and only upon application of rent capitalization method, the fair market value of the said property was arrived at as on the date of sale along with other co-occupant at mutually agreed price of the said property. Such explanation given by the assessee were not found acceptable and, therefore, the difference amount of Rs.1,53,91,559/- was added in the hands of the assessee which was in turn partly allowed by the First Appellate Authority. Hence, the instant appeal before us. 4. We have heard the rival submissions and perused the material available on record. The Ld. Counsel appearing for the assessee, Shri R.M. Mehta submitted before us that during the course of assessment proceedings, the assessee discharged her onus by getting the property valued from the government approved registered valuer, the valuation report whereof has already been annexed to the paper book filed before us. The AO rejected the valuation report so filed by the assessee who neither referred the matter to the Valuation Officer of the Department. It was further vehemently argued Printed from counselvise.com ITA No.6471/Del/2025 4 by the Ld. Counsel appearing for the assessee on this issue that the valuation of the said property was done as on 18.12.2018 amounting to Rs.1,73,84,400/- which is on the higher side totally ignoring the fact that the said property was under tenancy agreement with English Book Store for the last 65 years. The said tenant was paying a monthly rental of Rs.1175/- at the time of purchase of the said property till disposal. This particular objection was raised by the assessee by its letter dated 2nd April, 2025 before the First Appellate Authority too. Furthermore, the Eviction Suit filed by the assessee against the owner of the property stood dismissed by the Hon’ble High Court in favour of the assessee as well as others and, therefore, the application of rent capitalization method to arrive at the fair market value of the said property as on the date of sale along with the co-occupant, particularly, keeping in mind that the landlord having been lost the Eviction Suit, ought to have been considered by the authorities below in the case of the assessee. 5. On the other hand, the Ld. DR relied upon the orders passed by the authorities below. 6. Upon hearing the respective parties and upon perusal of the record available before us including the orders passed by the authorities below, it is found that the assessee admittedly occupied the property since long as a Printed from counselvise.com ITA No.6471/Del/2025 5 tenant. The circle rate of the property was Rs.3,06,91,559/-. The valuation was ultimately made by the DVO upon reference made by the Ld. CIT(A) through the AO at Rs.1,73,84,400/- as on 18.12.2018 as against valuation of Rs.1,53,00,000/- declared by the assessee as on 22.01.2016, the date of purchase. The same was communicated by its Report dated 05.05.2025. It is the case of the assessee that the valuation determined as on 18.12.2018 by the Ld. AO to the tune of Rs.1,73,84,400/- cannot be considered since the declared value was Rs.1,53,00,000/- on 22.01.2016, the date of purchase of the property. In that view of the matter, the valuation is required to be determined as on 22.01.2016 particularly when the issue involved is the lower value paid by the assessee than that of the market value; the valuation was calculated by Sapient, a Government registered approved valuer, report whereof was annexed to the paper book filed before the authorities below and no copy of the same has been filed before us. The property was purchased jointly by the wife along with the husband where the husband was running a partnership firm with the son Shri Sidharth Chaudhary in the name and style M/s English Stores. It is their case that both the husband and wife has taken loan from the bank and claiming deduction under Section 24(b) of the Act in respect of their share of interest paid and deduction under Section 80C of the Act in respect of loan repayment by them. It is further the case made out by the assessee that the property was under tenancy for over 60 Printed from counselvise.com ITA No.6471/Del/2025 6 years at the time of purchase and having regard to the encumbered property the value offered by them was much lower than of the circle rate. Further, that the Ld. AO is obligated to refer the matter to the DVO to obtain an independent and expert opinion on the fair market value of the property as on the date of sale in terms of the provision of Section 50C(2) of the Act. As the AO did not undertake such procedural requirement and mechanically applied the circle rate for valuation without considering the appellant’s valuation report or referring the matter to the DVO, the order passed by the AO, therefore, bad in law and liable to be set aside. The Ld.CIT(A)’s order was also under challenge before us since it has directed the Ld. AO to adopt the value determined by the DVO at Rs.1,73,84,400/- for the purpose of computation of capital gains and to give effect. We have not been able to find out any iota of evidence as to how consideration for purchase of the property was assessed at Rs.1,53,00,000/- by the assessee applying the rent capitalization method; the break-up of such method in terms of the provision of law has not been able to be demonstrated before us by the Ld. Counsel appearing for the assessee which is also required to be looked into by the Ld. AO. However, the other aspect of the matter that the valuation adopted by the AO as on 18.12.2018 by the DVO under Section 55A instead of valuation of the property made as on 22.01.2016, i.e., the date of purchase of the property by the assessee is found to have some basis. In fact the said Printed from counselvise.com ITA No.6471/Del/2025 7 argument made by the Ld. Counsel for the assessee is acceptable. Thus, considering the entire aspect of the matter, the Ld. AO is directed to look into the matter as to whether the application of Rent Capitalisation Method has been done by the assessee and further to direct the DVO to determine the nature of the property as on 22.01.2016, i.e., the date of purchase of the property and to compute the Capital Gain thereafter. The entire process is directed to be completed within a period of eight months from the date of passing of this order. This ground of appeal is, thus, allowed for statistical purposes. 7. The second issue involved in this appeal is the addition made to the tune of Rs.2 crore under Section 68 of the Act in respect of unsecured loans taken by the assessee from her brother. While purchasing the property at Connaught Place, the assessee took loan of Rs.2 crores from her brother Shri Rakesh Anand, the loan confirmation and the bank statement whereof were also placed before the authorities below. It is the case of the assessee that source of source of Shri Rakesh Anand, the assessee’s brother was also provided, i.e., ITR of Shri Tek Chand Anand, HUF; Shri Rakesh Anand in turn in his confirmation has also given the details of the source of loan given to the assessee from Tek Chand Anad, HUF from sale of shares lying with Kotak Securities demat account and, therefore, the assessee duly discharged her onus to prove the creditworthiness, correctness and genuineness of the Printed from counselvise.com ITA No.6471/Del/2025 8 transaction of unsecured loan of Rs.2 crores. According to her, once the identity, genuineness and creditworthiness are established through such documents, the onus shifts to the Revenue to dispute them. On the other hand, the Ld. AO applied the legal test and found the explanation rendered by the assessee is not tenable having regard to the nature of the transaction submitting a related party loan of such magnitude to high end security noting that “mere submission of a confirmation letter from a relative without independent third party verification or corroborated evidence does not prove the genuineness of the transaction.” Further, that while examining the ITR of Shri Rakesh Anand, the AO concluded that that neither revealed sufficient liquidity to credibly extend a loan of Rs.2 crores to the assessee nor Shri Rakesh Anand is maintaining any balance sheet or assessment documentation to demonstrate his ability to advance such a sum which is contrary to the judgement of the Hon’ble Supreme Court in the case of CIT vs. Bitwala Industries Ltd., AIR 1973 SC 284. In fact the burden must be discharged with unequivocal supporting material rather than the mere assertion. It was also in question how the HUF forwarded the funds to Shri Rakesh Anand and in turn to the appellant in absence of any documentary trail which further questions the genuineness of the transaction. The third party confirmation or statements corroborating the loan as well as the affidavits from the lender or the bank letters and the documents submitted Printed from counselvise.com ITA No.6471/Del/2025 9 appear self serving and since the evidences remained inadequate to eliminate the reasonable doubt as narrated hereinabove based on factual appraisal of the matter and considering the legal principle the addition made by the Ld. AO and further confirmed by the Ld.CIT(A) is found to be just and proper so as not to warrant any interference. Hence, the addition is confirmed. 8. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 25.03.2026. Sd/- Sd/- (AMITABH SHUKLA) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 25.03.2026. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi Printed from counselvise.com "