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Income Tax Appellate Tribunal, DELHI BENCH, ‘A’: NEW DELHI
Before: SHRI VIMAL KUMAR & SHRI BRAJESH KUMAR SINGH
ORDER
PER BRAJESH KUMAR SINGH, AM,
This appeal by the assessee is directed against the order of the Ld. Commissioner of Income Tax(Appeals)-3, Delhi, dated 02.07.2018, arising out of assessment order u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to ‘the Act’) dated 23.12.2016for Assessment Year 2014-15.
Grounds of appeal raised by the assessee are as under:-
1. Ld CIT(A)-3 has erred in law and on facts by confirming the action of AO who did not consider the revised computation of income during assessment proceedings disclosing the calculations of long term capital gain at NIL, the same was in sheer disregard of Jurisdictional High Court decision CIT V. Jai Parabolic Springs Ltd. 306 ITR 42 (Del) and CIT V. Sam Global Securities Ltd.38 Taxmann.com 129 (Del).
2. Ld. CIT(A)-3 has erred in law and on facts by confirming the action of AO who assessed long term capital gain at Rs. 17,13,051/- by denying exemption u/s 54 in sheer disregard of evidences filed before both AO and first appellate authority.
3. Ld. CIT(A)-3 has erred in law and on facts by confirming the action of AO by assessing a sum of Rs. 8666666/- (difference of stamp value and actual sale consideration) as undisclosed income under the head other sources u/s 56((2)(vii) in spite of the evidences that the agreement to sell was executed in 2005 which was admitted/confirmed by Hon'ble Delhi High Court while delivering decision on specific performance of the contract.
Brief facts of the case:- During the year, it is submitted by the assessee that he hadsold an immovable propertybeing D-4, 1st Floor, Vivekanandpuri, Lucknow, for Rs.45,95,177/-in December 2013and earned a Long Term Capital Gains of Rs.17,13,051/- and purchased a new residential house being N-1, Kailash Colony, New Delhi, 2/3rd Undivided share of basement (front portion) and 2/3rd undivided share of ground floor (front portion),for Rs.45,33,334/- vide sale deed dated 23.12.2013 . It was further submitted the said capital gains was utilised for purchase of the aforesaid new property within the time prescribed u/s 54 of the Act to claim deduction u/s 54 of the Act. However, the said transaction was not disclosed by the assessee in his original return of income filed on 16.07.2015 declaring income of Rs.19,43,100/-. It was submitted by the assessee that it was unintentional mistake of not disclosing the sale of the said property during financial year 2013-14 as it did not have any tax implication nor it was detrimental to the interest of the revenue. However, the assessee filed a revised computation disclosing the said transaction on 29.11.2016 in response to the notice u/s 142(1) of the Act during the ongoing assessment proceedings. The assessee submitted that he had sold immovable property being House no.-D-4, 1st Floor, Vivekanandpuri, Lucknow, to Smt. Meena Agarwal and Shri Rajiv Kumar Agarwal for a consideration of Rs.45,95,177/-. The ‘Details Instrument in short’ with respect to the sale of the said property has been placed at page nos.27 to 33 of the paper book in which it is stated that the first payment of sale consideration was received by the assessee by way of Rs.2 lakhs through cheque no.412408 dated 1st May 2013 drawn on State Bank of India Bank, Bazpur, District Udam Singh Nagar Branch and final payment of Rs.7 lakhs was received through cheque no.017194, dated 12.12.2013 drawn on HDFC Bank Hazratganj, Lucknow Branch. As per the assessee, he purchased the property at N-1, Kailash Colony, Delhi, (as per description earlier in this order) vide Sale Deed of Property dated 23.12.2013 for Rs.45,33,334/- from Smt. Krishna Moitra and Smt. Meera Mukherjee both daughters of Shri Shyama Pada Banerjee, who was the owner of the said propertyas per the said deed before his death on 20.03.2005. The said deed is placed at pages 44 to 49 of the paper book. As per the details available on record, the property at N-1 Kailash Colony, New Delhi was owned by Shri Shyama Pada Banerjee who according to the assessee was sold by Shri Shyama Pada Banerjee to the assessee vide agreement to sell/ ‘Receipt’ dated 21.02.2005 for a total consideration of Rs.68,00,000/-(placed at page no.43 of the paper book), in which, it is stated that Shri Shyama Pada Banerjee received a sum of Rs.2,00,000/- and the balance payment of Rs.68 lakhs will be payable by Shri Arun Dwivedi (the assessee) whenever required by Shri Shayama Pada Banerjee and the final payment will be taken over at the time of registration/possession of the above said property and the registration will take place within 90 days from the date of the said receipt. The said ‘Receipt’ placed at page no.43 of the paper book, is reproduced as under:-
3.1. Thereafter, as noted in the sale deed dated 23.12.2013, Shri Shayama Pada Banerjee died on 20.03.2005 leaving behind his last Will and testament, dated 08.02.2021, duly registered as Document No. 1040, in Additional Book No. III, Volume No. 917, on Pages 14 to 18, on 09.02.2001, in the office of the Sub-Registrar, New Delhi, whereby and whereunder he devised and bequeathed the aforesaid portions of the said property unto 1) Mrs. Meera Mukherjee, wife of Mr. D.K. Mukherjee, 2) Mrs. Krishna Moitra, wife of Mr. Samir Moitra and 3) Mr. R. N. Banerji son of Mr.Shyama Pada Banerji, absolutely and forever.The said ‘Agreement to Sell’ vide ‘Receipt’ placed on page 43 of the paper book went into litigation as Shri R.N. Banerjee, S/o Shri Syama Pada Banerjee alleged that the ‘Agreement to Sell/Receipt dated 21.02.2005’ was a forged and a fabricated document in this caseandthe defendants No.2 (Smt. Meera Mukherjee) and 3 (Smt. Krishna Moitra) havecolluded with the plaintiff to pressurize the defendant No.1 (Shri R.N. Banerjee) to execute a Sale Deed in favour of the plaintiff (the assessee, Shri Arun Dwivedi). The same was noted as per the facts stated in case no.CS(0S) No.193 of 2008 before the Hon’ble Delhi High Court in order dated 01.05.2013 in para no.4, as under:-
4. Counsel for the defendant No. 1 opposes the present application and states that the Agreement to Sell/Receipt dated 21.02.2005 is aforged and a fabricated document and the defendants No.2 and 3 havecolluded with the plaintiff to pressurize the defendant No.1 to execute a Sale Deed in favour of the plaintiff. It is further stated that since thedefendant No. 1 has challenged the validity of the aforesaid Agreement to Sell dated 21.02.2005, defendants No.2 and 3 cannot be permittedto act upon it by receiving any amount from the plaintiff towards saleconsideration, based on the Agreement to Sell dated 21.2.2005.
3.2. As per the facts noted by Hon’ble Court in the aforesaid order, the aforesaid application was filed by defendants no.2 and 3 sisters of defendant no.1, praying inter alia that a decree of specific performance may be passed in favour of the plaintiff in terms of prayer clause (a) of the plaint, in respect of premises no.N-1, Kailash Colony, New Delhi, in terms of ‘Agreement to Sell’ dated 21.02.2005, executed by the deceased father of the defendants.
3.3. Further, the Hon’ble Delhi High Court in para-5 of its order stated that taking into view the fact that irrespective of the dispute regarding the sale agreement dated 21.02.2025 between Shri R.N. Banerjee S/o- Late Shyama Pada Banerjee and the assessee the fact remains that the deceased father ofthe parties, late Shri Shyama Pada Banerjee had executed a registered will dated 08.02.2001 that was duly probated by the learned ADJ on 31.03.2009, in Probate Petition No.155/2005 and in terms of the aforesaid will, each of the defendants are entitled to 1/3 undividedshare in the suit premises. Considering the above fact, the Hon’ble Delhi High Court allowed the sale of the property by Defendant No.2 and 3 in the said suit being Smt. Krishna Moitra and Smt. Meera Mukherjee of the respective one third undivided share in the suit premises in favour of the assessee upon his paying to each of the aforesaid defendants a sum of Rs.21 lakhs totalling Rs.42 lakhs towards their share of sale consideration. The Hon’ble Court in para-8 of the said order also held that while passing the present order that the Court had not expressed any opinion on the merits of the case and/or the legality/validity of the ‘Agreement to Sell dated 21.02.2005’ relied upon (plaintiff) and disputed by the defendant-1 Shri Raghunath Banerjee, son of late Shri Shyama Pada Banerjiee. The relevant para-8 of the said order is reproduced as under:-
8. Needless to state that while passing the present order, the Court has not expressed any opinion on the merits of the case and/or the legality/validity of the Agreement to Sell dated 21.02.2005, relied upon by the plaintiff and disputed by the defendant No.1.
Further, there was an another transaction made by the assessee during the year in respect of sale of shares of Sankalp Advisory Services Private Limited, on which, it earned Long Term Capital Gain of Rs.51,52,564/- and further earned a Short Term Capital Loss of Rs.54,39,625/- on sale of shares of Radford Global Limited which was not declared in his return of income filed by him on 16.07.2015. The Assessing Officer did not allow the loss of Short Term Capital of Rs.54,39,625/- as the Assessing Officer noted that the assessee knew that such transactions related to penny stock and therefore the assessee did not disclose in his return of income and taxed the Long Term Capital Gain ofRs.51,52,564/-, which was not contested by the assessee before the ld. CIT(A).
The Assessing Officer regarding the sale and purchase of residential immovable property by the assessee being House No.-D-4, 1st Floor, Vivekanandpuri, Lucknow and N-1, Kailash Colony, Delhi, respectively computed the Long Term Capital Gains of Rs.17,13,015/- after allowing indexed cost of acquisition of Rs.28,82,162/-from the sale consideration of Rs.45,95,177/-but did not allow the claim of deduction u/s 54 of the Act on the ground that the said claim was not made either in the original return of income or by way of a revised return of income. The relevant discussion by the Assessing Officer in para no.5 of the assessment order is reproduced as under:-
I have gone through the submission of the assessee and take note of the facts that the same was not declared in its return of income dated 16.07.2015. Further as per the provision of section 139(5) of the Act the assessee had the time to revise its return upto 31.03.2016 which it has not done.Had the case of the assessee not come under scrutiny by the CASS parameter the same would not have been declared by the assessee and would have gone untaxed? Hence the contention of the assessee that it is declaring its capital gain from sale of residential property and further claiming it exempt as per the provision of section 54 of the Act for having purchase another residential property within one year of the sale on account of unintentional mistake is not accepted and rejected outright.The assessee is using the assessment proceedings to legalize the claim of exemption of capital gain which it had intentionally chosen not to declare within the time limit as per the provisions of the Act.This fact of the assessee intentionally not declaring its transaction is also brought out from the fact that the assessee had undisclosed income from other sources as discussed in para 6 below. Hence the declaration of the assessee on the long term capital gain for sale of the residential property D-4, Vivekanand Puri, Lucknow is being assessed as the income of the assessee. Its claim for exemption w/s 54 of the Act on such long term capital gain is rejected as stated above. The long term capital gain is computed as below: Sale consideration Rs.45,95,177/- LessIndexed cost of acquisition Rs.28,82,162/- Assessed long term capital gain Rs.17,13,015/- This above assessed long term capital gain for Rs.17,13,015/- is added to the income of the assessee has not declared in its return. In view of the facts and circumstances of the case, I am satisfied that the assessee company has furnished inaccurate particulars of its income, therefore, penalty proceedings u/s 271(1)(c) of the Act is initiated separately for failure to disclose the true particulars of income as mentioned above.”
Aggrieved with the said order, the assessee preferred an appeal before the Ld. CIT(A). However, the Ld. CIT(A) confirmed the action of the AO in computing the Long Term Capital Gain of Rs.17,13,1035/- on sale House no.-D-4, 1st Floor, Vivekanandpuri, Lucknow and denying the deduction u/s 54(1) or 54(2) as claimed by the assessee. The relevant discussion by the Ld. CIT(A) in para 2.3 to 2.5 is reproduced as under:-
“2.3 I have carefully considered the submission of appellant, assessment order, the remand report and the rejoinder of the appellant. The appellant submitted copy of Hon'ble High Court Order in its own case regarding property purchase at N-1, Kailash Colony, New Delhi vide order No. C.S. (O.S.) No. 195/2008 dated 01.05.2013 which directed the vendor in accordance with the decree of specific performance in respect of the premises No. N-1, Kailash Colony, New Delhi in terms of the agreement to sell dt. 21.02.2005 executed by the deceased father of the vendor. Sec. 2(47)(v) of the Income Tax Act states that transfer in relation to capital asset includes "any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882(4 of 1882)." In this case the agreement to sell is dated 21.02.2005, which has been upheld by Hon'ble High Court of Delhi vide its judgement dated 01.05.2013. Accordingly the date of purchase of the property at N-1, Kailash Colony, New Delhi is 21.02.2005. 2.4. In the course of assessment proceedings the AR of assessee has submitted that the assessee sold an immovable property for Rs.45,95,177/- at D-4, Vivekanand Puri, Lucknow but it had not declared the capital gain arising from this transaction in its return of income 16.07.2015.It was submitted during the course of assessment proceedingsthat the assessee had made an unintentional mistake of not disclosing sale of property during FY 2013-14.The AO rejected outright the contention of theassessee that the complete transaction for sale and purchase of the property neither had any tax implication nor was detrimental to the interest of revenue.This submission was filed only during the course of assessment proceedings after issue of notice u/s 142(1). In the assessment order the AO not only detected the failure of the assessee to declare this transaction of capital gain arising from sale of residential property, but also detected undisclosed capital gain on sale of shares of Sankalp Advisory Services Pvt. Ltd., which was related to transactions of the penny stock Radford Global Ltd. which was ascertained by the DIT(Inv.), Kolkata to be a scrip which was used by accommodation entry operator to manipulate prices of penny stock for generating capital gain/loss for beneficiaries.The undisclosed long term capital gain of Rs.51,52,564 / - hasnot been contested by appellant before the first appellate authority, i.e. it has accepted the addition of Rs. 51,52,564/- on account of long term capital gain related to penny stock. In this context the preponderance of probability of one appellant inadvertently failing to declare its long term capital gain on sale of residential immovable property and long term capital gain on sale of shares appears to indicate that it was an intentional failure of omission on the part of the assessee to declare fully and truly its income from sale of residential property at D-4, Vivekanand Puri, Lucknow which is the subject matter of this appeal besides the long term capital gain of Rs. 51,52,564/- arising from sale of shares. 2.5 The provisions of section 54 would be attracted in this case only if the capital gain arisingfrom the transfer of long term capital asset at D-4,Vivekanand Puri, Lucknow was invested within the conditions specified in section 54(1) or 54(2) as the case may be.In view of the fact that the propertyat D-4, Vivekanand, Puri, Lucknow was sold in FY 2013-14, by no stretch of imagination can the long term capital gain arising from such sale be adjusted against acquisition of property at N- 1, Kailash Colony, New Delhi which was purchased on 21.02.2005, as claimed by the appellant.Hence, I uphold theassessed long term capital gain of Rs. 17,13,015/- and this ground of appeal is dismissed.”
7. Aggrieved with the said order, the assessee is in appeal before us.
The ld. AR submitted that denial by the Assessing Officer of the deduction u/s 54 of the Act in respect of Long Term Capital Gain arising out of the property House no.-D-4, 1st Floor, Vivekanandpuri, Lucknow, on the ground that the said claim was not made by the assessee in the original return of income and further that the assessee who had also time to revise its return of income upto 31.03.2016, which was not done and therefore the claim of the assessee that the non-declaration of the said transaction in its return of income was on account of unintentional mistake was not accepted and rejected outright. The ld. Counsel for the assessee relied upon the Circular No.14(XL-35) dated 11.04.1995 along with the decisions of the Hon’ble High Court in CIT vs Sam Glogal Securities Ltd. [2013] 38 taxmann.com 129 (Del.) and in CIT vs Jai Parabolic Springs Ltd. 306 ITR 42 (Del.) to support his claim that a new claim which was otherwise available to the assessee could be filed during the assessment proceedings even though not filed in the original return of income or in the revised return of income. The ld. AR submitted that as per the details submitted by way of sale deed dated 23.12.2013 for purchase of particular portion at property at N-1, Kailash Colony, Delhi, (as described earlier in para 3 of this order) the assessee had inter alia paid a sum of Rs.22.30 lakhs to Mrs. Meera Mukherjee and Mrs. Krishna Moitra, both daughters of late Shyama Pada Banerjee, (who became one third owner of the particular portion in the said property by virtue of the Will dated 08.02.2001 of late Shri Shayama Pada Banerjee as discussed above) one year before the date of sale/transfer of the Lucknow property in December, 2013. The details of the said payment of Rs.22.30 lakhs as appearing on page no.9 of the sale agreement dated 23.12.2013 (placed at page no.52 of the paper book) is reproduced as under:-
xxxxxxxxxxxxxxx g) Rs.3,00,000/- through RTGS, dated 28.02.2013; h) Rs. 1,00,000/- vide Cheque No.663209, dated 19.07.2013; i) Rs. 1,00,000/- vide Cheque No.663229, dated 28.08.2013; j) Rs.6,40,000/ - vide Cheque No.674405, dated 17.12.2013; xxxxxxxxxxxxxx o) Rs. 10,90,000/- vide Cheque No.674404, dated 23.12.2013; 8.1. According to the ld. Counsel for the assessee, the property being House no.-D-4, 1st Floor, Vivekanandpuri, Lucknow was sold in December, 2013 and the final cheque no.017194 dated 12.12.2013 drawn on HDFC Bank Hazratganj Lucknow Branch was received by the assessee.. The ld. AR referring to the above details as submitted on page no.52 of the paper book stated that the above payment of Rs.22.30 lakhs was paid after 12.12.2012 within one year before the date of transfer i.e. on 23.12.2013, the sale deed of the N-1, Kailash Colony, New Delhi property.
We have heard both the parties and perused the materials available on record. In this case, the Assessing Officer has not disputed the sale of Lucknow property claimed to have been sold in December, 2013 for a sale consideration of Rs.45,95,177/-. Further, the Assessing Officer has also not disputed the fact regarding the payment of Rs.22.30 lakhs within one year from the date of purchase in respect of Delhi property. The only objection of the Assessing Officer is that the assessee had not disclosed the above transaction in its original return of income and also did not file any revised return in respect of the above transaction. In this regard, the provisions of sections 54 during the relevant assessment year are reproduced as under:-
Profit on sale of property used for residence. 2354. 24[(1)] 25[26[Subject to the provisions of sub-section (2), where, in the case of an assessee27 being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset 28[***], being buildings or 29lands appurtenant thereto, and being a residential house29, the income of which is chargeable under the head "Income from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of 30[one year before or two years after the date on which the transfer took place purchased31], or has within a period of three years after that date 31a[constructed, a residential house], then], instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,— (i) if the amount of the capital gain 32[is greater than the cost of 33[the residential house] so purchased or constructed (hereafter in this section referred to as the new asset)], the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain. 34[***] 35[(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme36 which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset : Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,— (i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid. Explanation.—37[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.] 9.1. The above section does not mandate that for claiming deduction u/s 54 of the Act filing of the claim in the return is a mandatory condition. Further, without going into the controversy as to whether the above transaction regarding Long Term Capital Gain in respect of Lucknow property and the investment in Delhi property for claiming deduction u/s 54 of the Act was intentional or unintentional, the fact remains that as per the provisions of section 45 of the Act ,the capital gains arising on the sale of Lucknow property shall inter alia be effected in the previous year save as otherwise provided in sections 54 of the Act. Sub-section (1) of section 45 of the Act during the relevant period is reproduced as under:-
Capital gains. 8945. 90[(1)] Any profits or gains arising from the transfer91 of a capital asset91 effected91 in the previous year shall, save as otherwise provided in sections 92[***] 93[54, 54B, 94[***] 95[96[54D, 9 7[54E, 98[54EA, 54EB,] 54F 99[, 54G and 54H]]]]], be chargeable to income-tax under the head "Capital gains", and shall be deemed to be the income of the previous year in which the transfer took place.
9.2. The computation of capital gains as filed by the assessee regarding sale consideration of Rs.45,95,177/- of the Lucknow property and the indexation cost of Rs.28,82,162/- claimed by the assessee resulting capital gain of Rs.17,13,015/- has not been disputed by the AO. Regarding the finding of the Ld. CIT(A) that the property at Lucknow was sold in financial year 2013-14 and it could not be adjusted against the execution of the property at New Delhi, which was purchased on 21.02.2005, is not acceptable in view of the fact that the receipt dated 21.02.2005 as placed on page no.43 of the paper book was only an ‘Agreement to Sell’, which went into the litigation as discussed above and the property was finally purchased by the assessee vide sale deed dated 23.12.2013 placed at page 44 to 59 of the paper book. As per the submissions of the assessee, the assessee states that in year 2005, the possession of property being N-1 Kailash Colony, New Delhi was neither allowed to be retained by the assessee and rather the possession was taken on the date of registration of the sale deed i.e. 23.12.2013, which is mentioned at point no.2 at page no.53 of the paper book being the sale deed dated 23.12.2013 in respect of the Delhi property. The relevant submission of the assessee in para no.2 of its written submission and para 2 of the sale deed dated 23.12.2013 in respect of Delhi property regarding handing over the possession are as under:-
Relevant extract of the written submission “Therefore, in 2005, possession of property was neither allowed nor retained by appellant. Rather, the possession was taken on the day of registration of the sale deed i.e. 23.12.2013. (Point No. 2 at page no. 53 of PB). Thus it was not a transfer within the definition of Section2(47)(v) of Income Tax Act, 1961. Para-2 of the Sale deed dated 23.12.2013 “That the symbolic possession of the said share of the said portions of the said property has been delivered by the VENDORS to the VENDEE, who shall have all the rights to get the physical possession of the undivided 2/ 3rd share of the said property.” 9.3. In view of the above facts, it is held that the denial of deduction u/s 54 by the AO for the reasons as stated above and the finding of the ld. CIT(A) that the Delhi property was acquired as purchased on 21.02.2005 is not correct. As noted above that in the respect of the Long Term Capital Gains of Rs.17,13,015/- in respect of sale of propertybeing D-4, 1st Floor, Vivekanandpuri, Lucknow, a sum of Rs.22,30,000/- was paid by the assessee for the purchase of the new property beingN-1, Kailash Colony, Delhi as per the requirement u/s 54 of the Act. Therefore, as per the provision of section 45(1) and section 54(1)(ii) of the Act, the assessee will be entitled for deduction of Rs.17,13,015/- u/s 54 as claimed by him since the amount of Long Term Capital Gain of Rs.17,13,015/- is less than the purchase cost of Rs.22,30,000/- paid by the assessee for the new property being N-1, Kailash Colony, Delhi, which was paid one year prior to the purchase of the propertybeing D-4, 1st Floor, Vivekanandpuri, Lucknow, as required under the said provisions. Accordingly, we hold that the assessee is entitled for deduction of Long Term Capital Gain of Rs.17,13,015/- u/s 54 of the Act and therefore the addition of Rs.17,13,015/- made by the AO and confirmed by the Ld. CIT(A) is deleted. Accordingly, grounds no.1 and 2 of the appeal is allowed.
The Assessing Officer further noted that the assessee had purchased a property at N-1 Kailash Colony, New Delhi on 23.12.2013 at a value of Rs.45,33,334/- and also submitted the registered sale document dated 23.12.2013. From the said deed, it was noted by the AO that though the sale deed was for Rs.45,33,334/-, the circle rate valuation of the property was for Rs.1,32,00,000/-. The Assessing Officer noted that consideration of Rs.45,33,334/- for this property received was less than the stamp duty value of the property by an amount of Rs.86,66,666/-(Rs.1,32,00,000/- - Rs.45,33,334/-) and relying upon the provisions of section 56(2)(vii)(b) of the Act, the Assessing Officer made an addition of Rs.86,66,666/-. The relevant discussion by the Assessing Officer in para no.6 of his order is reproduced as under:-
The assessee has stated to have purchase a property N-1, Kailash Colony, New Delhi on 21.12.2013 at a value of Rs.45,33,334/-. It has also submitted the registered purchase document. From the purchase deed it is seen that though the sale deed is for Rs.45,33,334/- the circle rate valuation of the property is for Rs.1,32,00,000/-. Hence the consideration for Rs. 86,66.666/-. Reference is drawn to the provisions of section 56(2)(vii)(b) which is being reproduced here for ready reference: (vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,— (a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum; (b) any immovable property,— (i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; (ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration: Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of this sub-clause: Provided further that the said proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property; From the above provisions it is seen when an individual receives any immovable property for a consideration which is less than the stamp duty value of the property by an amount exceeding Rs.50,000/-, the value of the stamp duty of such property which exceeds the consideration is to be taken as income from other sources. Hence on the above facts the amount of Rs.86,66.666/- is being taken as the undisclosed income from income from other sources u/s 56(2)(vii). In view of the facts and circumstances of the case, I am satisfied that the assessee company has furnished inaccurate particulars of its income, therefore, penalty proceedings u/s 271(1)(c) of the Act is initiated separately for failure to disclose the true particulars of income as mentioned above.
11. Aggrieved with the said order, the assessee filed an appeal before the ld. CIT(A). The assessee made the following submissions before the Ld. CIT(A):-
“3. Grounds of appeal-
2 challenges addition of Rs.86,66,666/- u/s 56(2)(vii)(b) 3.1 Submissions of appellant ton Ground of appeal
2 are as under: For Fact:
2. A. The assessing officer erred on facts in making an addition of Rs.86,66,666.00/-being the difference between the circle value of the property and registered value of the property i.e. 1,32,00,000-45,33,334 U/s 56(2)(vii)(b) of the Income Tax Act 1961.
1. By ignoring the facts that the above mentioned property i.e. N-I kailash Colony had been the assessee by the Honorable High Court Of Delhi vide order No. C.S.(O.S) No:195/200 Dated 01/05/2013. (Above Mentioned facts are mentioned in the Purchase document given to your good self on the last hearing).
2. By ignoring the fact that the sale consideration of the above mentioned property was decided in the year 2005 vide an agreement Dated 21/02/2005 for Rs 68,00,000. (Copy of the above said agreement had already been given to your good self on the last hearing).
3. By ignoring the fact that that defendants No.2 & 3 (Vendors) voluntarily approached the Honorable High Court of Delhi and filed a petition, praying inter-alia that a decree of specific performance may be passed in favour of the plaintiff (assesse), in respect of the premises No. N-1 Kailash Colony, New Delhi, in terms of the agreement to sell Dated 21-02-2005 executed by the deceased father of the defendants. The Honorable High Court of Delhi vide order No. C.S.(O.S) No: 195/2008 Dated 01/05/2013 permitted the Vendors to execute sale deeds in respect of their respective 1/ 3d undivided share in the said property (total 2/3rd undivided share) in favor of the Vendee and whereas the VENDORS in compliance of the above referred judgment and decree have agreed to irrevocably sell, convey, transfer, and assign to the VENDEE and the VENDEE has agreed to purchase the 2/3 undivided share for a total consideration of Rs. 45,33,334. (Above facts are mentioned in the judgment given to your good self on the last hearing).
4. By ignoring the proviso of the Section 56(2)(vii)(b). That proviso reads as follows. Provided that where the date of the agreement fixing the amount of consideration for the transfer of Immovable Property and Date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purpose of this sub-clause: Provided further that the said proviso shall apply only in a case where the amount of consideration referred to therein, or part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property. The above mentioned conditions are fully met in our case. The date of agreement (i.e. 21-2-2005) and date of transfer (i.e. 23- 12-2013) are different. The assesse had made the payment of Rs 2,00,000 through cheque no: 845466 dated 21/02/2005 drawn on union bank of India kailash colony on the date of agreement to the deceased father of the defendant. The above mentioned fact of payment had been mentioned in the agreement as well as on page no:6, last para, of the verdict passed by the Honorable High Court of Delhi. The stamp duty value on the date of agreement comes out to be Rs.39,87,384.00, and the consideration for the property under sale is Rs. 45,33,334 (Calculation is attached herewith). As the stamp duly value is less than the the amount of consideration, the above mentioned Section i.e. 56(2)(vii)(b) holds no merit thus applicability and addition under this section in the present case is Void and should be deleted.
5. By neither issuing the show cause notice on 'Why the Addition of Rs.86,66,666 should not be made U/s 56(2)(vii)(bj of the Income Tax Act 196l' nor giving the opportunity of being heard on the matter of the addition. PRAYER, In the light of the above mentioned facts, order of the Honorable High court of Delhi and the proviso discussed above, the addition made should be deleted. The appellant craves the leave to add, substitute, modify, delete or amend all or any ground of appeal either before or at the time of hearing.” (emphasis supplied)
11.1. The ld. CIT(A) did not accept the above explanation of the assessee and confirmed the addition of Rs.86,66,666/- u/s 56(2)(vii)(b), in view of reasoning given in para no.3.4 which is reproduced as under:-
3.4. I have considered the submission of appellant, the assessment order, the remand report and the rejoinder of appellant. In the course of assessment proceedings the assessee has submitted the date of purchase of property at N-1, Kailash Colony, New Delhi to be 21.12.2013 at a value of Rs. 45,33,334/- as per the registered purchase document. The circle rate value of this property is Rs. 1,32,00,000/- as on 21.12.2013. However this sale was possible only in pursuance of the order of Hon'ble Delhi High Court vide order No. C.S. (O.S.) No. 195/2008 dated 01.05.2013 which upheld the agreement to sell dated 21.02.2005 between appellant and the father of the vendors for a value of Rs. 68 lakh. On the date of agreement dt. 21.02.2005 the assessee had made payment of Rs. 2 lakh through cheque No. 845466 dt. 21.02.2005 drawn on Union Bank of India, Kailash Colony Branch, New Delhi. The assessee is contradicting itself by stating before the AO that the date of purchase of property at N-1, Kailash Colony, New Delhi in 21.12.2013, while, placing reliance on the order of Delhi High Court in its own case with regard to the sale of property that uphold the transfer date on purchase of this property on 21.02.2005 i.e. date of agreement of assessee with the deceased father of the vendor. The consideration of the present transaction of Rs. 45,33,334/ - is as per the sale deed dt.21.12.2013 filed during appeal proceedings. This is 2/ 3rd of Rs. 68 lakh which was agreed between the appellant and father of the vendor vide agreement dated 21.02.2005. The circle rate valuation of this property is Rs. 1,32,00,000/- as on 21.12.2013. Since the consideration for this property is less than the stamp duty value, AO held that the second proviso to section 56(2) (vii)(b) was attracted. In this case the appellant purchased immovable property for a consideration of Rs. 45,33,334/- which is less than the stamp duty value of Rs. 1,32,00,000/- by an amount exceeding Rs. 50,000/-. Hence in accordance with provision of section 56(2)(vii)(b) the value of stamp duty of property which exceeds the consideration i.e. Rs. 86,66,666/ was correctly disallowed by the AO and added back to the total income of the appellant. Hence, this ground of appeal is dismissed.
12. Aggrieved with the order of the ld. CIT(A), the assessee is in appeal before us.
The ld. AR relied upon the submissions made before the Ld. CIT(A) and stated that in view of the proviso 1 and 2 of section 56(2)(vii)(b) of the Act, this addition was wrongly made by the AO and confirmed by the Ld. CIT(A). Explaining the proviso, the ld. AR submitted that in this case, the date of agreement for sale of the property at N-1 Kailash Colony, New Delhi i.e. 21.02.2005 and date of transfer i.e. 23.12.2013 are different. It was further submitted that the assessee had made the payment of Rs.2,00,000/- through cheque no.845466 dated 21.02.2005 drawn on Union Bank of India, Kailash Colony, Delhi on the date of agreement dated 21.02.2005 to late Shri Shyama Pada Banerjee, the owner of the said property. It was further submitted that the stamp duty value on date of agreement comes out to Rs.39,87,384/- and the consideration for the property under sale is Rs.45,33,334/- and as the stamp duly value was less than the amount of consideration, the above addition was not as per law in the case of the assessee. The ld. AR further drew attention to the first proviso to section 56(2)(vii)(b) of the Act, wherein, it is stated that once the date of agreement fixing the amount of consideration for transfer of immovable property and date of registration are not same, the stamp duty value on the date of agreement may be taken for the purpose of sub- clause i.e. 56(2)(vii)(b) of the Act. Further drawing attention to the second proviso to section 56(2)(vii)(b) of the Act, he submitted that first proviso to section 56(2)(vii)(b) shall apply only in a case where the amount of consideration referred to thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such property. It was submitted by the ld. AR that both the two conditions are satisfied in the case of the assessee and therefore the addition of Rs.86,66,666/- should be deleted.
The ld. Sr. DR relied upon the orders of the authorities below.
We have heard both the parties and considered the materials available on record. On perusal of the facts stated by the Ld. AR and not contested by the ld. Sr. DR, the first and second proviso to section 56(2)(vii)(b) of the Act squarely applies in the case of the assessee in as much as the date of agreement i.e. 21.02.2005 though under challenge by Shri R.N. Banerjee as discussed above for the sale of the N-1, Kailash Colony, New Delhi, property and its date of registration i.e. 23.12.2013 are different and further as per second proviso as stated in the sale deed dated 23.12.2013 an amountRs.2,00,000/- through cheque no.845466 dated 21.02.2005 drawn on Union Bank of India, Kailash Colony, Delhi, was paid by the assessee to Late Shri Shyama Pada Banerjee, who was the absolute owner of the said property as per the facts stated in the receipt placed at page 43 of the paper book. Further, the stamp duty of the property being N-1, Kailash Colony, New Delhi, claimed by the assessee at Rs.39,87,348/-, which is less than purchase consideration of Rs.45,33,334/- paid by the assessee has not been disputed by the lower authorities and therefore the provisions of section 56(2)(vii)(b) of the Act will not be applicable in this case.This view is also supported by the decision of the Pune Tribunal in the case of Sanjay Dattatraya Dapodikar vs ITO, in [2019] 107 taxmann.com 2019 (Pune Trib.), wherein, on similar facts, the Tribunal decided the claim in favour of the assessee. The Headnote of the said order and para no.7 are reproduced as under:-
Section 56 of the Income-tax Act, 1961 - Income from other sources - Chargeable as (Gifts) - Assessment year 2015-16 - Assessee entered into an agreement with a vendor for purchase of a plot of land in year 2008 at an agreed consideration of Rs. 21 lakhs - At that time stamp value of said plot of land was Rs. 23.75 lakhs - But sale deed was registered in year 2015 - Stamp value as on date of registration of sale deed was Rs. 57.08 lakhs - Assessing Officer invoked provisions of section 56(2)(vii)(b) and held that difference between stamp value of property as on date of registration of sale deed and date of actual purchase consideration was liable to be considered as income under said section - He, accordingly, made addition of Rs. 26.08 lakhs - Whether, in view of facts,since assessee had paid a part ofconsideration by cheque prior to date of agreement, instant case would be covered by first and second provisos to section 56(2)(vii)(b) - Held, yes - Whether, therefore, stamp value of said plot of land as on date of agreement should be applied for section 56(2)(vii)(b) purpose and not stamp value as on date of registration of sale deed - Held, yes - Whether, thus, addition made was to be deleted - Held, yes [Para 7] [In favour of assessee] 7. In my considered opinion, the contention of the ld. AR deserves to be accepted. First proviso to section 56(2)(vii)(b) of the Act categorically provides that where the date of agreement fixing the amount of consideration for the transfer of immovableproperty and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purpose of this provision. Admittedly, the irrevocable PoA was registered in the year 2008 fixing the price of the property at Rs.21.00 lac, even though the actual transfer took place in the year 2015. Prescription of the second proviso is admittedly fulfilled in the instant case in as much as the assessee paid a sum of Rs.1.00 lakh as part payment prior to the date of the Agreement in the year 2008 through banking channel. In view of the foregoing discussion, it is held that the mandate of the main part of section 56(2)(vii)(b) does not apply to the facts of the instant case as it is covered by the first and second provisos in as much as the assessee entered into an agreement fixing the amount of consideration for the purchase of immovable property in the year 2008 but the actual registration took place in 2015 and further the assessee paid a part of the consideration by cheque in the year 2008 before the date of the Agreement. In such circumstances, it is the stamp value on the date of Agreement in the year 2008, which should be applied for the purpose of the sub-clause and not the stamp value as in the year 2015. Stamp value of the property as on the date of agreementin 2008 was Rs.23,75,000/- as has been recorded in para no.4.2 of the assessment order. As such stamp value is obviously less than the actual consideration at Rs.31.00 lakh, I hold that the mandate of the main part of section 56(2)(vii)(b) is not attracted so as to warrant any addition on this score. I, therefore, order to delete the addition of Rs.26.07 lakh. 15.1. Facts being similar in this case, respectfully relying upon the above decision, the addition of Rs.86,66,666/- is not sustainable and the same is deleted. However, before deleting the above addition of Rs. 86,66,666/-, we make following two observations. Firstly, ground no.3
3. Ld. CIT(A)-3 has erred in law and on facts by confirming the action of AO by assessing a sum of Rs. 8666666/- (difference of stamp value and actual sale consideration) as undisclosed income under the head other sources u/s 56((2)(vii) in spite of the evidences that the agreement to sell was executed in 2005 which was admitted/confirmed by Hon'ble Delhi High Court while delivering decision on specific performance of the contract. 15.2. It is stated in the above ground that the agreement to sell the Delhi property in 2005 was admitted/confirmed by the Hon’ble Delhi High Court while delivering decision on specific performance of the contract. We do not agree with the above submission of the assessee made in ground no.3. As discussed above, the Hon’ble Delhi High Court in its order dated 01.05.2013 in CS(OS) No.195/2008 Arun Dwivedi vs Raghunath Banerjee & Ors. in para no.8 had stated that while passing the present order that the Court had not expressed any opinion on the merits of the case and/or the legality/validity of the ‘Agreement to Sell dated 21.02.2005’ relied upon the by the assessee (plaintiff) and disputed by the defendant-1 Shri Raghunath Banerjee, son of late Shri Shyama Pada Banerjiee. The relevant para-8 of the said order is reproduced as under:-
“8. Needless to state that while passing the present order, the Court has not expressed any opinion on the merits of the case and/or the legality/validity of the Agreement to Sell dated 21.02.2005, relied upon by the plaintiff and disputed by the defendant No.1.” 15.3. Therefore, the above contention of the assessee in ground no.3 that the agreement to sell the Delhi property in 2005 was admitted/confirmed Hon’ble Delhi High Court while delivering decision on specific performance of the contract is not correct. Further, the relief of Rs.86,66,666/- granted as above on the basis of available facts will be subject to the outcome of the decision of the Hon’ble Court, wherein, as noted by the Hon’ble Delhi High Court in the case no.CS(0S) No.193 of 2008, the merits of the case and/or the legality/validity of the Agreement to Sell dated 21.02.2005, relied upon by the plaintiff (assessee) and disputed by the defendant No.1(Shri R.N. Banerjee, S/o- Late Shri Shayam Pada Banerjee) is pending. The Assessing Officer will be at liberty to take necessary action as per law upon the receipt of the outcome of the Hon’ble Court on the legality/validity of the Agreement dated 21.02.2005Ground no.3 of the appeal is allowed with the above observations.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 12th June, 2025.