KIRANKUMAR JAMNALAL SANGHAVI,SURAT vs. ITO, WARD 2(3)(2), SURAT

Brief facts of the case are, the assessee is an individual filed his return of income for the Assessment Year 2018-19 on 21.12.2018 declaring total income of Rs. 6,62,974/-. The Assessing Officer noted that the assessee along with his wife purchased an immovable property by registred Sale Deed executed on 05.07.2017, whereas actual consideration of the immovable property was Rs. 12,00,000/- as per Agreement of Sale executed on 21.12.2009 and the payments made through cheque on 10.12.2009 and 21.12.2009 by the assessee and his wife respectively. Whereas the stamp duty valuation on the date of registration date namely 05.07.2017 was Rs. 25,96,607/-. Therefore, the Assessing Officer issued a show cause notice and invoked the provisions of section 56(2)(x) of the Act to bring difference in the amount for taxation. The assessee replied that the provisions of section 56(2)(x) of the Act will not be applicable, however, the 2nd proviso wherein the sale consideration was paid through account payee cheques, therefore, no addition can be made in the hands of the assessee. Further, the assessee was in possession of the immovable property from 2009 and also paying electricity charges, property tax, water tax to prove that possession of the property was transferred in 2009 itself and mere registration of the Sale Deed in July, 2017. Further as per section 53A Transfer of Property Act, the real transactions taken place in 2009 itself. The above explanation was not accepted by the AO and the difference amount as per section 50(C) of Rs. 13,96,607/- is added u/s 56(2)(x) of the Act and demand tax thereon.

Aggrieved against the assessment order, assessee filed an appeal before ld. CIT(A) who has also confirmed the additions by dismissing the appeal.

Aggrieved against the appellate order, assessee is in appeal before us, raising following Grounds of Appeal:-

We have heard rival submissions and perused the materials available on record and given careful consideration, including the paper book filed by the assessee, wherein Agreement of Sale dated 21.12.2009 showing payment of Rs. 6,00,000/- each by the assessee and his wife by cheque payments (page no. 42 & 43 of paper book) and also bank statements wherein cheque payments are reflected in the Pass Books. 5.1 In the above circumstances, the applicability of first and second proviso to section 56(2)(x) in the present case, the provisions are reproduced for ready reference: “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: 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 prescribed, on or before the date of agreement for transfer of such immovable property.”

It is undisputed fact that the date of Sale Agreement was 21.12.2009 and whereas date of registrations Sale Deed was 05.07.2017. Thus the first proviso to section 56(2)(x) of the Act clearly applicable in this case. Furthermore, the entire sale consideration of Rs. 12,00,000/- were paid through account payee cheques by the assessee and his wife which fulfill the second proviso of section 56(2)(x) of the Act. Therefore, there cannot be any addition on account of section 56(2)(x) of the Act. Further, the assessee also proved that the transfer of property as per section 53A of the Transfer of Property Act had taken place in 2009 itself, by producing electricity bills,

In the result, the appeal filed by the assessee is allowed.