ITAT Restricts Section 56(2)(x) Addition to Rs 13.23 Lakh After DVO Values Property at Rs 1.74 Crore:

The assessee is Niraj Agarwal who was engaged in the business of trading stainless-steel products and filed his return of income for AY 2024-25 declaring total income of Rs 6,96,690. Along with two other co-owners, the assessee purchased two parcels of land for an aggregate consideration of Rs 1,35,12,847, whereas the stamp valuation of the properties was Rs 4,15,38,746.

The AO treating the difference of Rs 2,79,75,899 as deemed income under Section 56(2)(x) of the Income Tax Act, made an addition of Rs 93,25,300, being one-third share attributable to the assessee. The AO made the addition without referring the valuation dispute to the DVO. The NFAC upheld the addition.

Before the Tribunal, it was brought to the Tribunal's notice that the property had subsequently been referred to the DVO in the case of another co-owner. The DVO valued the property at Rs 1,74,84,000, as against the declared consideration of Rs 1,35,12,847.

The Tribunal observed that the stamp value determined by the stamp valuation authority could not simply be substituted as the sale consideration without referring the matter to the DVO. Accordingly, the Tribunal held that the addition sustained by the CIT(A) could not be maintained in its original form.

Taking the DVO valuation into consideration, the Tribunal directed the AO to consider only the difference between Rs 1,74,84,000 and the declared consideration of Rs 1,35,12,847.  Consequently, the Tribunal set aside the order of the CIT(A) and directed the AO to delete the balance addition of Rs 80,01,582. The appeal filed by Niraj Agarwal was accordingly partly allowed.