ITAT Mumbai on Jointly Owned Flat and Stamp Duty Valuation: Reference to DVO Mandatory Under Section 56(2)(x)

Background of the Dispute

In Shyamsunder Bansidhar Reengusia Vs ITO (ITAT Mumbai) (ITA No.5585/MUM/2025, order dated 31/08/2026, A.Y. 2018-19), the Mumbai Bench of the Income Tax Appellate Tribunal examined two core questions:

  1. Whether, when an assessee specifically disputes the stamp duty valuation adopted for invoking Section 56(2)(x)(b), the Assessing Officer is obliged to refer the matter to the Departmental Valuation Officer (DVO) by applying the mechanism of Section 50C(2); and
  2. Whether, in the case of a jointly owned property, the entire differential amount between agreement value and stamp duty value can be taxed in the hands of only one co-owner.

The appeal arose from an order dated 09.07.2025 passed by the CIT(A)/National Faceless Appeal Centre, Delhi upholding an addition under Section 56(2)(x)(b) based on stamp duty valuation, and also from the manner in which the entire difference was attributed entirely to the assessee, ignoring the spouse’s co-ownership.

Facts in Brief

  • The assessee and his wife, Manju Devi Reengusia, jointly purchased a residential flat in Chembur, Mumbai.
  • Date of purchase: 14.08.2017
  • Agreement consideration: Rs. 60,00,002
  • Stamp duty valuation (SDV) as per registering authority: Rs. 94,81,500
  • Difference between SDV and agreement value: Rs. 34,81,500

The property was acquired in specific and identifiable shares, as reflected both in the payment trail and TDS deduction:

Ownership and Payment Details

As recorded in the proceedings, the ownership and payment structure was as under:

  • Manju Devi Reengusia

    • Date of payment: 16.08.2017
    • Total payment: Rs. 35,00,000
    • Amount paid (inclusive for ratio purposes): Rs. 35,35,354
    • Ownership ratio: 58.92%
    • TDS deducted: Rs. 35,354

  • Shyamsunder Reengusia (assessee)

    • Token money: Rs. 2,00,001 (on 10.08.2017)
    • Further payment: Rs. 22,40,001 (on 16.08.2017)
    • Total amount paid (inclusive for ratio purposes): Rs. 24,64,648
    • Ownership ratio: 41.08%
    • TDS deducted: Rs. 24,646

  • Total consideration: Rs. 60,00,002 (100%)

The assessment was reopened under Section 147 on the basis of information that the assessee had purchased an immovable property at consideration lower than the SDV, and notice under Section 148 was issued. The reassessment order was completed under Section 147 read with Section 144B.

The Assessing Officer invoked Section 56(2)(x)(b) and treated the entire differential of Rs. 34,81,500 (i.e., Rs. 94,81,500 – Rs. 60,00,002) as “Income from other sources” in the assessee’s hands.

Assessee’s Explanation Before the AO

The assessee raised the following significant points during the reassessment:

  • The builder had not obtained an Occupation Certificate (OC) for the project.
  • Several basic amenities and infrastructure in the surrounding area were lacking at the time of purchase and, as stated, even subsequently.
  • Because of the absence of OC and incomplete amenities, the real fair market value of the flat was stated to be lower than the SDV fixed by the stamp duty authority.
  • The assessee contended that the SDV is generally determined presuming that all statutory approvals and amenities exist, which was not the case here.
  • The assessee requested that the property be valued by a Government-approved valuer/DVO under Section 50C(2) read with Section 56(2)(x)(b).

The AO rejected these submissions on the basis that:

  • Stamp duty valuation is determined by the District Level Empowered Committee after considering various parameters.
  • The assessee had accepted the SDV for stamp duty purposes and paid stamp duty accordingly.
  • No appeal had been filed before the State Government appellate authority against the SDV.

The AO therefore treated the entire difference of Rs. 34,81,500 as taxable in the assessee’s hands under Section 56(2)(x)(b) without making any DVO reference and without restricting the addition to the 41.08% share.

Proceedings Before CIT(A)

Aggrieved by the reassessment order, the assessee approached the CIT(A) with, inter alia, the following grounds:

  1. Challenge to addition based solely on stamp duty value
    The assessee asserted that:

    • The property suffered from disadvantages such as lack of OC and non-availability of basic facilities.
    • These factors justified a consideration lower than the SDV.
    • The SDV should not have been treated as conclusive evidence of fair market value.