ITAT Mumbai Sets Aside Section 56(2)(vii)(b) Addition: Co-Ownership and DVO Reference Must Be Duly Examined
Case Background
Sophia Mushtaq Panirwala Vs ACIT (ITAT Mumbai)
Assessment Year: 2020-21 | Order Date: 17 March 2026
The Mumbai Bench of the Income Tax Appellate Tribunal recently adjudicated a significant matter involving an addition made under Section 56(2)(vii)(b) of the Income Tax Act, 1961 on account of the difference between the declared purchase consideration and the stamp duty valuation of an immovable commercial property. The Tribunal found serious procedural and substantive infirmities in the approach adopted by the lower authorities and consequently remanded the matter for fresh consideration.
Facts of the Case
The assessee filed her return of income on 09.01.2021 declaring a total income of Rs. 7,15,380/-. During the relevant financial year, she jointly purchased a commercial immovable property along with her son, with each co-owner holding an equal 50% share. The total purchase consideration paid was Rs. 2,86,75,000/-. The sale deed was executed and registered on 12.12.2019 before the Joint Sub-Registrar, Mumbai City-III. As per the registered sale deed, the market value of the property for stamp duty purposes was recorded at Rs. 5,15,16,000/-.
The Assessing Officer's Additions
The Assessing Officer (AO) identified a difference of Rs. 2,28,41,000/- between the actual purchase consideration and the stamp duty valuation. Instead of restricting the addition to the assessee's proportionate 50% share, the AO proceeded to add the entire difference in the hands of the assessee under Section 56(2)(vii)(b)(ii) of the Income Tax Act, 1961, treating it as income under the head "Income from Other Sources."
Additionally, the AO invoked Section 69 read with Section 115BBE of the Act, treating the investment in the property as unexplained, on the basis that the assessee had allegedly failed to furnish adequate explanation and supporting documents during the course of assessment proceedings.
Grounds of Appeal Before ITAT
The assessee raised the following grounds before the Tribunal:
Whether the Ld CIT-A, NFAC was justified by passing the order without affording reasonable opportunity of being heard and personal hearing despite the admitted facts that there are so many glitches on portal resulting details/submissions couldn't be uploaded.
Whether the Ld CIT-A (NFAC) was justified by upholding the Assessment order on the issue of invoking section 56(2) on the difference of Rs.2,28,41,000/- due to stamp valuation and declared consideration without considering the nature of property its location as the property which may have to be transferred to, MCGM, MUMBAI being situated in set back land.
Whether the Ld CIT-A (NFAC) was justified by upholding the Assessment order on the issue of unexplained investment in property of Rs. 2,86,75,000/-, despite the fact that all are very much explainable, by invoking section 69 read with section 115BBE without affording reasonable opportunity as the Appellant tried to upload but due to technical glitches could not be uploaded.