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Facts
The assessee purchased an immovable property and the AO added the difference between the stamp duty value and the purchase value under section 56(2)(vii)(b) of the Income Tax Act, treating the registration date as the relevant date for valuation. The assessee contended that the allotment date, when a substantial part of the payment was made, should be considered.
Held
The Tribunal held that the date of allotment, supported by substantial part payment, should be considered for stamp duty valuation, not the later registration date. The addition made by the AO and confirmed by the CIT(A) was therefore deleted.
Key Issues
Whether the date of allotment or the date of registration should be considered for stamp duty valuation under Section 56(2)(vii)(b) when substantial payment was made on allotment. Whether the reopening of assessment under Section 147 was valid.
Sections Cited
147, 148, 148A, 56(2)(vii)(b), 56(2)(x), 270A, 115BBE, 142(1), 250, 151A
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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI AMIT SHUKLA, JM & SHRI ARUN KHODPIA, AM
The aforesaid view is supported with the view taken by Hon’ble Bombay High Court in the case of PCIT vs. Vembu Vaidyanathan (supra) wherein Hon’ble Bombay High Court, while interpreting the date of acquisitions had observed as under:
“4. Having heard learned counsel for the parties, we notice that the CBDT in its circular No.471 dated 15th October, 1986 had clarified this position by holding that when an assessee purchases a flat to be constructed by Delhi Development Authority ("D.D.A." for short) for which allotment letter is issued, the date of such allotment would be relevant date for the purpose of capital gain tax as a date of acquisition. It was noted that such allotment is final unless it is cancelled or the allottee withdraw from the scheme and such allotment would be cancelled only under exceptional circumstances. It was noted that the allottee gets title to the property on the issue of allotment letter and the payment of instalments was only a follow-up action and taking the delivery of possession is only a formality.
This aspect was further clarified by the CBDT in its later circular No.672 dated 16th December, 1993. In such circular representations were made to the board that in cases of allotment of flats or houses by co-operative societies or other institutions whose schemes of allotment and consideration are similar to those of D.D.A., similar view should be taken as was done in the board circular dated 15th October, 1986. In the circular dated 16th December, 1993 the board clarified as under:
"2. The Board has considered the matter and has decided that if the terms of the schemes of allotment and construction of flats/houses by the co-operative societies or other institutions are similar to those mentioned in para 2 of Board's Circular No.471, dated 15-10-1986, such cases may also be treated as cases of construction for the purposes of sections 54 and 54F of the Income-tax Act."
It can thus be seen that the entire issue was clarified by the CBDT in its above mentioned two circulars dated 15th October, 1986 and 16th December, 1993. In terms of such clarifications, the date of allotment would be the date on which the purchaser of a residential unit can be stated to have acquired the property. There is nothing on record to suggest that the allotment in construction scheme promised by the builder in the present case was materially different from the terms of allotment and construction by D.D.A.. In that view of the matter, CIT appeals of the Tribunal correctly held that the assessee had acquired the property in question on 31st December, 2004 on which the allotment letter was issued.”
Similar, findings are offered under the various decisions referred (supra) further the aforesaid issues decided by ITAT Mumbai in the case of Meena Arjun Narang vs. ACIT, Mumbai wherein while deciding the identical issue, has held as under:
“10. We have considered the rival submissions and perused the material available on record and the decisions of ITAT, Mumbai relied upon by the assessee. The only issue before us is, whether for the purpose of section 56(2)(x)(b) of the Act, the date of purchase of property for the purpose of stamp duty valuation should be date of 17 Rekha Kishore Shah (Legal Heir of Kishor Dhirajipal Shah) allotment or date of agreement. On this issue, we refer to the decision of ITAT, Mumbai in the case of Pinstripe Properties (P.) Ltd. v. DCIT (supra), wherein it is held by the Tribunal that where the assessee had paid part of consideration of flat, as per the terms of allotment through banking channels prior to execution of sale agreement, proviso to section 56(2)(x) should apply and no addition could be made to assessee’s income on the ground that stamp duty valuation of the said property was higher than properties price. The relevant findings of the Tribunal are extracted as under: “5. Heard both the sides and perused the material on record. During the course of assessment, the assessing officer noticed that assessee had purchased flat no. 204, B- Wing, "Insignia" building situated at Kalina, Santacruz (E), Mumbai for a consideration of Rs. 1,79,94,452/-. However, the value of the said property as per the stamp duty was determined at Rs. 2,73,41,000/-. Therefore, the assessing officer has added difference of Rs. 93,46,548/- in the total income of the assessee after applying the provisions of section 56(2)(x) of the Act. The assessee has submitted the copies of allotment letter of flat no. 1601 & 1701 dated 18.03.2011 wherein it is categorically stated that said flat has been allotted to the assessee and the assessee had paid Rs. 25,00,000/-. The assessee has also referred the allotment letter issued on 26.04.2016 placed in the paper book filed before us. We have perused the said allotment letter wherein it is specifically incorporated that due to change in Development Control Regulation for Greater Mumbai the builder was constrained to alter/amend the building plans. In view of the same assessee has been allotted another flat no. 204 on the 2nd floor in "Insignia" building in place of the flat no. 1601 & 1701 which was earlier allotted in A-Wing in "Insignia" building on 16th floor for a total consideration of Rs. 1,78,91,327/-. It is also mentioned in the allotment letter that acknowledgement of advance payment already made shall be considered and be treated to have been issued in respect of flat no. 204 in place of the earlier allotment. The assessee has also referred the copy of agreement for sale dated 11.09.2017 placed in the paper book. He also referred copy of bank statemet showing that part of the sale consideration has been paid through banking channel on 08.02.2011. After perusal of the copies of material placed on record, it is evident that assessee has brought before the lower authority that due to change in Development Control Regulation for Greater Mumbai, 1991, the builder was constrained to alter/amend the building plans and in view of the same the builder allotted another flat on a lower 18 Rekha Kishore Shah (Legal Heir of Kishor Dhirajipal Shah) floor. We find that this fact was not disproved by the assessing officer neither by making any enquiry from the builder nor brought any material on record to controvert the claim of the assessee. The allotment letter issued to the assessee dated 26.04.2016 substantiate that booking of old flat no. 1601 and 1701 was replaced by flat no. 204 because of the circumstances of change in Development Control Regulation as discussed (supra) in this order. We have also perused the provision of section 56(2)(x) of the Act applicable from A.Y. 2017-18, the relevant extract of the provision of section 56(2)(x) is reproduced as under:
"Section 56(2)(x)
Where any person receives, in any previous year from any person or persons on or after the 1st day of April, 2017
(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
(A) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property, (4) for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the Following amounts, namely
(i) the amount of fifty thousand rupees, and (ii) the amount equal to ten per cent of the consideration:
Provided that where the date of 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 agreement may be taken for the purposes of this sub- clause:
Rekha Kishore Shah (Legal Heir of Kishor Dhirajipal Shah) Provided further that the provisions of the first proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed28, on or before the date of agreement for transfer of such immovable property:"
The First Proviso to section 56(2)(x) of the Act as above provides that where the date of 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 agreement may be taken. However, the Second Proviso provides that the provisions of first proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account on or before the date of agreement for transfer of such immovable property. In the case of the assessee it has already made part payment of Rs. 25,00,000/- vide RTGS dated 08.02.2011 through banking channel as discussed (supra) in this order. Apart of this even it is settled issue as per the various decisions of ITAT, Mumbai that Stamp Duty Valuation as on date of allotment letter should be considered for purposes of section 56(2)(vii)(b) of the Act. We consider that the respective allotment letters issued to the assessee should be considered as "Agreement to sell" for the purpose of section 56(2)(x) of the Act. Since the assessee has paid the parts of consideration as per the terms and conditions of allotment through banking channels prior to the execution of sale agreement therefore, we consider that proviso to section 56(2)(x) should apply to the facts of the present case. Therefore, as per the proviso to section 56(2)(x) as discussed the date of agreement in the case of the assessee will be taken to 18.03.2011 and not 26.04.2016 since it is clearly demonstrated from the relevant supporting material that allotment of the new flat has been made to the assessee in continuation of the replacing of the earlier allotment which was changed because of the unavoidable circumstances of change in the Development Control Regulation. Therefore, we consider that decision of Id. CIT(A) in sustaining the addition made by the assessing officer is not justified. Accordingly, the ground of appeal of the assessee is allowed.
11. In terms of aforesaid observations of the Tribunal in the aforesaid case which is further supported by the other decisions of the Tribunal referred to (supra), we find substance in the contentions raised by the ld. AR on behalf of the assessee, we therefore respectfully following the aforesaid deisons, in absence of any contrary fact or decision brough on records to dis-regard the same, are of the considered view that the date for the purpose of stamp duty valuation in the present matter, as the part payments were already made by the assessee through proper banking channel, prior to execution of sale agreement as per the terms of allotment letter, therefore under the provisions of section 56(2)(x)(b) as observed herein above would be the date of allotment i.e. 11.12.2010 and the date of registration of agreement (03.11.2017). Accordingly, we direct the AO to delete the addition in present matter and re-compute the capital gain in the assessee’s case based on aforesaid directions.”
11. In backdrop of aforesaid decisions, facts and circumstances of the present matter and our aforesaid observations, we are of the considered view that in present matter the allotment letter was issued on 20.04.2011 and also major part of payment were made by the assessee in April and May 2011. It is therefore the date of allotment (20.04.2011), would be considered as date of acquisition or date of agreement for the purpose of stamp duty valuation under the provisions of section 56(2)(vii)(b) of the Act. We thus disagree with the findings of Ld. AO as well as Ld. CIT(A) in considering the stamp duty value as on the date of registration in 2017. Accordingly, we find substance in the contentions raised by the assessee and thus direct the Ld. AO to delete the addition in present matter after verifying the factual aspects furnished by the assessee. 21
12. Since, we have directed to delete the addition made u/s. 56(2)(vii)(b) of the Act, the additional grounds raised by the assessee challenging the validity of the issuance of notice u/s. 148 and order issued u/s. 148A(d) are thus remain academic only, so are not adjudicated.
13. Regarding, the second additional ground challenging the applicability of provisions of section 115BBE, since the substantive addition has been deleted this ground being consequential in nature become infructuous. Therefore, the same is treated as dismissed.
In the result, the appeal of assessee stands allowed in terms of our aforesaid observations.
Order pronounced in the open court on 30-12-2025.