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Facts
The assessee purchased an immovable property, and subsequently claimed the sale deed was cancelled, with the consideration returned. The AO made an addition under section 56(2)(x) of the Income Tax Act, considering the difference between the stamp duty value and purchase consideration. The CIT(A) upheld this addition and passed an ex-parte order.
Held
The Tribunal held that the claim of cancellation of the transaction cannot be rejected solely on the ground that the cancellation deed was not registered, if the assessee can substantiate it with corroborative evidence. The matter was remitted back to the AO for fresh examination.
Key Issues
Whether an un-registered cancellation deed can be considered valid for disallowing addition under section 56(2)(x) if supported by other evidence. Whether the CIT(A) erred in passing an ex-parte order without sufficient opportunity.
Sections Cited
56(2)(x), 142(1), 250, 143(3), 144B
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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, VP &
(Assessment Year: 2018-19) Akil Abbas Rassai, DCIT, Circle-22(1), 144, Gulistan, S V Road, Piramal Chambers, Lalbaug, Vs. Khar West, Mumbai-400052. Parel, Mumbai-400012. PAN: AACPR1058F Assessee) : Revenue) Assessee by : Shri Rakesh Joshi, AR : Shri Surendra Mohan, Sr. DR Revenue by Date of Hearing 18.11.2025 : : 02.12.2025 Date of Pronouncement O R D E R
Per Padmavathy S, AM:
This appeal by the by the assessee is against the order of the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC), Delhi [In short 'CIT(A)'] passed under section 250 of the Income Tax Act, 1961 (the Act) dated 29.08.2025 for Assessment Years (AY) 2018-19. The assessee raised the following grounds of appeal:
Akil Abbas Rassai “1. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in passing the ex-parte order, without granting sufficient opportunity of being heard to the appellant.
2. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in making an addition of Rs.82,35,500/-u/s.56(2)(x) of the Income Tax Act, 1961 being difference between purchase consideration and stamp duty value of the property, without considering the facts and circumstances of the case.
3. On the facts and circumstances of the case as well as in law, the Learned CIT(A) as well as the Learned Assessing Officer has erred in disregarding the cancellation deed of purchase of immovable property only on the ground that it is not registered, without considering the fact that mere registration is not the only criteria for regarding cancellation and ignoring the cancellation deed executed by the parties to the contract only on registration ground is miscarriage of justice and law.
4. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in not considering the fact that substantial consideration of Rs.84,98,000/- was received back by the assessee and that the revised return was filed primarily on account of subsequent event in terms of cancellation taking place.”
The assessee is an individual and filed the return of income for AY 2018-19 on 22.09.2018 declaring a total income of Rs. 37,06,990/-. It was subsequently revised on 30.03.2019 declaring total income of Rs. 36,34,300/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The Assessing Officer (AO) notice that the assessee has purchased immovable property for a consideration which is lower than the stamp duty value. The AO accordingly issued a notice u/s. 142(1) calling for the assessee to submit the details pertaining to the impugned transaction and to explain as to why the difference cannot be treated as the income of the assesseee. The assessee submitted that he has purchased immovable property namely Flat No. 101, 1st Floor, in the building "Uphar" for a consideration of Rs. 1,01,00,000/- from Mrs. Zebunissa Rangoonwala and the deed of purchase was registered on 23.03.2018. The Akil Abbas Rassai assessee further submitted that the sale deed has been subsequently cancelled on mutual consent of both the purchaser and the seller and furnished a copy of the cancellation deed dated 29.03.2019. The assessee accordingly submitted that there can be no addition made for the difference between the purchase consideration and the stamp duty value, since the purchase deed is subsequently cancelled. The AO did not accept the legal validity of the cancellation deed since the same is not registered and called on the assessee to furnish further evidence with regard to the cancellation. The AO did not accept the bank statement furnished by the assessee and proceeded to treat the difference between the stamp duty value as on the date of purchase and the purchase consideration as addition u/s. 56(2)(x) of the Act. Aggrieved the assessee filed further appeal before the CIT(A). The CIT(A) issued five notices to the assessee which has not been responded and accordingly the CIT(A) decided the appeal ex-parte based on the material available on record. The CIT(A) confirmed the addition made by the AO by holding that “4.7 I have perused the grounds of appeal
, facts of the case and the assessment order passed u/s 143(3) read with section 144B of the I.T. Act. The appellant has not produced any material, document, evidence which he could rely upon to controvert the finding of AO. On perusal of assessment order, it is observed that the appellant had filed his revised return of income for A.Y. 2018-19 on 30.03.2019 declaring total income at Rs.36,34,300/-. This case had been selected for scrutiny under manual selection of cases category through Faceless Assessment Scheme, based on information that the appellant had purchased immovable property and that the consideration paid was lower than the market value i.e. SRO valuation. Subsequently, notices u/s 143(2) and 142(1) were issued to appellant on recorded dates and in response, the appellant claimed that the above sale deed had been cancelled on mutual consent of both purchaser and the seller. During assessment proceedings, the appellant furnished a copy of deed of cancellation dated 29-03- 2019 which was not accepted by the AO as the same is not registered. The appellant did not submit any other evidence/documentary proof to support his claim of cancellation in compliance to show-cause notice. On merit AO's order appears to be reasonable and as per law. The appellant failed to provide any plausible explanation with supporting material, documents/ evidence in support of his claim of cancellation Akil Abbas Rassai of purchase of immovable property during this appellate proceeding too, despite repeated opportunities of being heard were provided. The appellant only furnished copy of bank statement (A/c No.0014104000352710, IDBI Bank) along with Form
35. The appellant did not furnish any explanation/ cancellation deed along with copy of bank statement. From the above conduct of the appellant, it is clear that the appellant is not interested in prosecuting its appeal. In the event, I have no reason to interfere with the findings of the AO. In such circumstance, I dismiss the claim of the appellant.”
The ld. AR submitted that the flat which was purchased by the assessee was very old and was to be redeveloped. The ld. AR further submitted that the seller and assessee have decided to cancel the purchase considering the redevelopment and the seller have returned the entire amount back to the assessee. The ld. AR in this regard drew our attention to the bank statement wherein the amount is received back by the assessee from the seller. The ld. AR also submitted the copy of the cancellation deed wherein it is clearly stated that the possession of the flat was never handed over to the assessee and that by mutual agreement the original purchase deed stands cancelled. The ld. AR accordingly, submitted that the addition u/s. 56(2)(x) cannot be made in the assessee's case since the impugned transaction of purchase of flat is cancelled and the consideration is returned.
The ld. DR on the other hand relied on the order of the lower authorities.
We heard the parties and perused the material on record. The assessee vide deed dated 23.03.2018 purchased a flat for a consideration of Rs. 1,01,00,000/- and the said deed was registered. The AO made an addition u/s. 56(2)(x) since the stamp duty value of the impugned property as on the date of purchase was at Rs. 1,83,35,500/-. The AO while doing so did not accept the claim of the assessee that the purchase deed is subsequently cancelled vide the cancellation deed dated 29.03.2019 for the reason that the same is not registered and does not hold any Akil Abbas Rassai legal validity. The contention of the assessee is that the AO did not consider the fact that the seller Mrs. Zebunissa Rangoonwala has returned the amount of consideration on 03.04.2018 which is evidence through the bank statements furnished before the lower authorities. From the perusal of the orders of the lower authorities, we notice that the reason for making the addition is that the cancellation deed is not registered and that the assessee has not furnished any further details or explanations. We also notice that the CIT(A) has passed an ex- parte order and that the claim of the assessee that he has received the amount back from the seller as reflected in the bank statement of the assessee needs to be factually examined. In our considered view the claim of the assessee that that the original purchase transaction stands cancelled cannot be rejected only for the reason that cancellation deed is not registered if the assessee is able to substantiate the cancellation by other corroborative evidences and in that case no addition can be made u/s.56(2)(x). Accordingly we remit the appeal back to the AO with a direction to examine the facts in assessee's case based documentary evidences that are required to be called for to decide the case in accordance with law. The assessee is directed to furnish necessary evidences to substantiate the fact that the impugned transaction is cancelled whereby the provisions of section 56(2)(x) is not applicable. It is ordered accordingly.
In result, the appeal of the assessee is allowed for statistical purposes.