PREMJI NARSHI KARIA,MUMBAI vs. INCOME TAX OFFICER, PIRAMAL CHAMBER,MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “J(SMC)” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI ANIKESH BENERJEE (JUDICIAL MEMBER)

ITA No.2250/MUM/2026 Assessment Year: 2017-18

Premji Narshi Karia, Income Tax Officer, 19(2)(2), 1201, Ratan Laxuria, Jehangir, Daaji Piramal Chambers, Morarjee Street, Grant Road (W), Mumbai – Vs. Mills, Compund, Near 400007, Maharashtra. Bharatmata Cinema, Lalbaug, Parel, Mumbai – 400012, Maharashtra. PAN NO. AAEPK 1693 F APPELLANT RESPONDENT

: Shri Jainam Gala (Virtually Present) Assessee by Department by : Dr. Sumit Jha, (SR. DR) Date of Hearing : 24.06.2026 Date of pronouncement : 30.06.2026 ORDER PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against the order dated 22.01.2026, passed by the Learned Commissioner of Income-Tax Appeals – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for Assessment Year (in short ‘A.Y’) 2017-18. The grounds raised by the assessee are reproduced as under:-

“1. General Ground

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The Ld. CIT(A) has erred in law and on facts in dismissing the appeal and confirming the addition of Rs. 15,00,000/- made by the Ld. Assessing Officer u/s 56(2)(vii)(b) of the Income-tax Act, 1961. 2. Erroneous Interpretation of 'Agreement' under Section 56(2)(vii)(b) The Ld. CIT(A) has gravely erred in holding that the Allotment Letter dated 12.11.2014 does not constitute an 'agreement' for the purposes of the first proviso to Section 56(2)(vii)(b) of the Act, thereby ignoring: 2.1. That the Allotment Letter dated 12.11.2014 contained all terms and conditions of purchase, including unconditional allotment of Unit No. 110, fixed consideration of Rs. 48,00,000/-, payment schedule, and all material obligations of both parties, thereby constituting a binding and enforceable agreement to sell as per The Indian Contract Act, 1872; 2.2. That substantive rights and obligations in the property accrued to the appellant from 12.11.2014 onwards, as evidenced by payments made, possession taken, and conduct of parties treating the allotment as final and binding; 2.3. That the requirement of registration under Section 17 of the Registration Act, 1908 is for the purpose of admissibility in evidence and does not affect the validity of the agreement inter se the parties its enforceability through specific performance; 2.4. That the first proviso to Section 56(2)(vii)(b) uses the term 'agreement' and not 'registered agreement', and Parliament's intention was to protect bona fide purchasers who lock in prices at earlier dates through binding arrangements, regardless of subsequent formal registration; 2.5. That the Hon'ble jurisdictional High Court in multiple decisions has held that allotment letters containing all essential terms constitute agreements to sell for tax purposes, and the ratio laid down in Pradeep Kumar Har Saran Lal v. Assessing Officer 334 ITR 298 (Bom) has been misapplied to the facts of the present case. 3. Compliance with Second Proviso - Non-Cash Payment The Ld. CIT(A) has failed to appreciate that the appellant has duly satisfied the conditions of the second proviso to Section 56(2)(vii)(b) by making payment of Rs. 5,00,000/- through banking channel (Cheque No. 87932 dated 10.11.2014) on or before the date of the Allotment Letter dated 12.11.2014, which payment was made towards the agreed consideration and accepted by the seller, thereby fulfilling all statutory conditions for applicability of the provisos. 4. Rejection of Registered Valuer's Report

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The Ld. CIT(A) has erred in rejecting the valuation report dated 12.11.2014 obtained from Ambike Associates, a government registered valuer, determining the fair market value of the property at Rs. 60,84,000/- as on the date of allotment, and has wrongly insisted upon challenge before stamp authorities, when: 4.1 The appellant voluntarily obtained the valuation Suo-motu to determine correct tax liability and offered the differential of Rs. 12,84,000/- to tax in the return filed u/s 148, demonstrating complete bona fides; 4.2 The stamp duty value at registration in 2017 is irrelevant when the provisos apply and the relevant date for valuation is the agreement date in 2014; 4.3. There is no statutory requirement to challenge stamp duty valuation before stamp authorities when the taxpayer himself is offering a higher value to tax based on professional valuation: 4.4 The registration in 2017 was a mere formality to complete title, and acceptance of stamp duty value at that stage cannot retrospectively vitiate the earlier binding agreement or alter the tax consequences flowing from the agreement date. 5. Cases Relied upon: The Appellant relied upon numerous judicial precedents from coordinate benches of the Hon'ble ITAT supporting the interpretation that allotment letters with all essential terms constitute valid 'agreements' for the purposes of Section 56(2)(vii)(b), including:  Ashutosh Jha (HUF) v. ITO for A.Y. 2014-15 in ITA No. 188/Ran/19 (Kolkata Tribunal);  ITO v. Rajni D. Saini for A.Y. 2014-15 in ITA No. 7120/Mum/2018;  Sajjanraj Mehta v. ITO for A.Y. 2014-15 in ITA No. 56/Mum/2021;  Siraj Ahmed Jamalbhai Bora v. ITO for A.Y. 2014-15 in ITA No. 1886/Mum/2019;  Sonal Ashish Soni v. ITO for A.Y. 2016-17 in ITA No. 2855/Mum/2022;  Sulochana Saijan Modi v. ITO for A.Y. 2018-19 in ITA No. 557/Mum/2023;  Vijay Kumar Bagaria v. ITO for A.Y. 2014-15 in ITA No. 433/Kol/2021;  T. Babu Reddy v. ITO for A.Y. 2012-13 in ITA No. 1028/Hyd/2016;  Poonam Ramesh Sahajwani v. ITO for A.Y. 2014-15 in ITA No. 2252/Mum/2019;  Radha Kishan Kungwani v. ITO (185 ITD 433);  Parth Dashrath Gandhi v. ACIT for A.Y. 2018-19 in ITA No. 1990/Mum/2022;  Rameshchandra Chhabildas Jhaveri v. ITO in ITA No. 3520/MUM/2025;  Manjulaben Himmatlal Jain v. ITO (ITAT Jaipur).  PCIT vs Vembu Vaidyanathan (2020) 429 ITR 371 (Bombay High Court) 6. Violation of Natural Justice and Fair Play

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The Ld. CIT(A) has failed to properly appreciate and adjudicate upon the detailed written submissions, documentary evidence, and legal arguments advanced by the appellant, and has mechanically adopted the reasoning of the Ld. Assessing Officer without independent application of mind to the specific facts and circumstances of the present case. 7. Addition Contrary to Legislative Intent The Ld. CIT(A) has erred in upholding an addition that is contrary to the legislative in tent behind the provisos to Section 56(2)(vii)(b), which were specifically inserted to protect genuine purchases who enter into binding agreements and make non-cash payments at earlier dates from being taxed on subsequent market fluctuations or administrative stamp duty valuations. 8 General Prayers  The appellant prays that the Hon'ble Tribunal may be pleased to:  Allow the appeal and delete the addition of Rs. 15,00,000/-made u/s 56(2)(vii)(b) of the Act;  Alternatively, restrict the addition to Rs. 12,84,000/- as offered by the appellant;  Grant such other and further relief as may be deemed just and proper in the circumstances of the case;  Award costs of the appeal to the appellant.” 2. Briefly stated, facts of the case are that in the case assessment was reopened by way of issuing notice u/s 148 of the Income Tax Act, 1961 [in short, ‘the Act’] dated 30.06.2021. The assessee filed income tax return in response to notice u/s 148 declaring total income of Rs.16,80,020/- which included voluntary declared income of Rs.12,84,000/- against difference in stamp duty value and sale consideration of the property purchased by the assessee.

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assessee submitted that he has entered into agreement for the purchase of the property in the year 2014 and therefore the stamp duty value for the year 2014 should be applied in the case of the assessee. However, the submission of the assessee was not accepted by the AO for the reason that according to the AO the allotment was not in the nature of an agreement and assessee was required to entered into a registered agreement. Accordingly, he rejected the contention of the assessee observing as under:-

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“8. The submissions of the assessee, the assessment order dated 18.05.2023, and the material available on record have been carefully considered in the light of the statutory provisions and relevant judicial precedents. 9. relevant to A.Y. 2017-18, deems any immovable property acquired by an individual Section 56(2)(vii)(b) of the Income-tax Act, 1961, as applicable to the period for consideration less than its stamp duty value (by more than 50,000) to yield income from other sources to the extent of such excess. The first proviso permits adoption of stamp duty value as on the date of an earlier "agreement" fixing consideration where the agreement and registration dates differ, but only subject to the second proviso mandating that the whole or part of the consideration has been paid by non-cash mode on or before such agreement date. These provisos represent a limited exception to the general rule of taking stamp value on registration date, intended to protect bona fide purchasers who lock in prices early through formal agreements and payments, while preventing abuse through backdated or sham arrangements. 10. The assessee purchased Unit No. 110 for declared consideration of 48,00,000, with registration of the sale deed occurring on 23.03.2017 when the stamp duty value was determined at 75,84,000 by the competent authority, a figure accepted without challenge under the Maharashtra Stamp Act or any appellate forum thereunder. While the assessee has placed on record an allotment letter dated 12.11.2014 and evidence of 5,00,000 paid by cheque on 10.11.2014, no evidence exists that this letter was registered as an agreement to sell under section 17 of the Registration Act, 1908, or that it was invoked contemporaneously before the stamp authority to claim a lower valuation at registration. A private valuation report obtained post-facto from Ambike Associates, valuing the property at 60,84,000 "as on" 12.11.2014, has also not been adjudicated or accepted under any stamp law provision. 11. The assessee voluntarily offered 12,84,000 to tax (60,84,000 minus 48,00,000) in his return filed u/s 148, implicitly conceding undervaluation but seeking to cap the fair value at his valuer's figure rather than the statutorily finalized stamp value of 75,84,000. The Assessing Officer rightly observed that neither proviso applies, as there is no "agreement" in the statutory sense prior to registration, no proof of its enforceability under registration law, and no contemporaneous alignment of the claimed 2014 value with stamp authorities, rendering the full differential of 27,84,000 taxable, with 15,00,000 added over the assessee's offer. 12. The Hon'ble Bombay High Court in Pradeep Kumar Har Saran Lal v. Assessing Officer 334 ITR 298 (Bom) has clarified that the benefit of provisos to section 56(2)(vii) (b) is available only where there exists a registered agreement to sell prior to registration, and a mere booking or allotment without registration does not qualify, as the provision contemplates a formal document capable of specific performance. It was held that The proviso contemplates an agreement for sale which is registered. The words used are agreement fixing the amount of

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consideration for the transfer of immovable property. Such agreement must be registered under section 17 of the Registration Act. A mere letter of allotment or booking does not constitute an agreement within the meaning of the proviso. 13. Similarly, the ITAT Mumbai in ITO v Sujauddin Kasimsab Sayyed (ITA No. 512/Mum/2019, dated 25.11.2019) held that where no registered agreement exists and stamp value at registration is accepted without dispute, the proviso cannot be invoked merely on the basis of an unregistered allotment letter or private valuation, and the full stamp duty value governs.In absence of any registered agreement to sell prior to the date of registration of sale deed, the first proviso to section 56(2)(vii)(b) has no application. The assessee cannot substitute stamp duty value by his own valuer's report without challenging the same under the Stamp Act. 14. These binding precedents squarely apply, as the assessee's allotment letter remains unregistered, uninvoked before stamp authorities, and unadjudicated, distinguishing it from cases where provisos succeeded due to formal registered agreements or effective contemporaneous challenges. 15. On a holistic review, the assessee's claim fails for want of strict compliance with both provisos: the allotment letter does not constitute a statutorily recognizable "agreement" absent registration and governmental acceptance, and the private valuation lacks the imprimatur of stamp law adjudication. The stamp duty value of 75,84,000 attained finality upon unchallenged acceptance at registration on 23.03.2017, and section 56(2)(vii) (b) mandates taxation of the full excess over consideration, i.e., 27,84,000, subject only to the assessee's voluntary offer of 12,84,000 which stands accepted. The Assessing Officer's addition of the balance 15,00,000 is factually precise, legally sound, and fully substantiated, warranting confirmation in toto. 16. The ground relating to initiation of penalty u/s 274 r.w.s. 270A is premature, as such proceedings are distinct and the assessment order merely records prima facie satisfaction. No view is expressed thereon, preserving all parties' rights. The addition of 15,00,000 u/s 56(2)(vii) (b) stands confirmed, with total income at 31,80,020.” 5. We have heard the rival submissions, perused the orders of the authorities below and carefully examined the material placed on record. The short controversy requiring adjudication is whether, for the purpose of determining the applicability of section 56(2)(vii)(b) of the Act, the stamp duty value as on the date of the allotment letter issued in the year 2014 is liable to be adopted or whether the stamp

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duty value prevailing on the date of execution and registration of the conveyance deed in the previous year relevant to the assessment year under consideration is required to be taken into account.

5.1 The facts are not in dispute that the impugned property was allotted to the assessee by an allotment letter dated 12.11.2014, pursuant to which part of the consideration was admittedly paid through banking channels. The registered conveyance deed, however, came to be executed subsequently during the relevant previous year. The assessee has consistently maintained that the allotment letter constituted an agreement fixing the consideration for transfer of the immovable property and, therefore, in view of the first and second provisos to section 56(2)(vii)(b), the stamp duty value as on the date of allotment alone is required to be considered. It is also the assessee's case that he has voluntarily offered to tax the difference between the agreed consideration and the stamp duty value prevailing on the date of allotment in the return filed in response to the notice issued under section 148 of the Act.

5.2 The Assessing Officer rejected the aforesaid contention solely on the premise that the allotment letter did not constitute an "agreement" within the meaning of the proviso and that, in the absence of a registered agreement executed in the year 2014, the benefit of the provisos was unavailable.

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5.3 We are unable to subscribe to the aforesaid approach adopted by the Assessing Officer. The issue is no longer res integra. A series of decisions rendered by the Coordinate Benches of this Tribunal, including Parth Dashrath Gandhi v. Addl. CIT (ITA No. Sajjanraj Mehta v. ITO 1990/Mum/2022), (ITA No. 56/Mum/2021), Sulochana Saijan Modi v. ITO (ITA No. 557/Mum/2023), Siraj Ahmed Jamalbhai Bora v. ITO, Ashutosh Jha (HUF) v. ITO, and other decisions cited before us, have consistently held that an allotment letter, which unequivocally identifies the property, fixes the consideration and creates enforceable rights and obligations between the parties, constitutes an agreement for the purposes of the provisos to section 56(2)(vii)(b)/section 56(2)(x), provided the condition relating to payment of consideration or part thereof through the prescribed banking mode on or before the date of such agreement is duly satisfied.

5.4 The legislative intent underlying the provisos is to protect genuine purchasers who have crystallised the consideration under a binding arrangement and have discharged a part of the consideration through verifiable banking channels, from being subjected to tax merely on account of subsequent escalation in the stamp duty valuation prior to execution of the conveyance deed. A hyper-technical construction of the expression "agreement", divorced from the commercial realities of real estate transactions

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involving allotment by builders and developers, would defeat the very object sought to be achieved by the Legislature.

5.5 At the same time, the benefit of the provisos is conditional and cannot be extended in the absence of factual verification regarding compliance with the statutory requirements. Though the assessee has placed reliance upon the allotment letter, the payment made through banking channels and the valuation report indicating the fair market value as on the date of allotment, the authorities below have not undertaken any examination of these documents in the light of the settled legal position. Consequently, the factual foundation necessary for determining the applicability of the provisos has remained unverified.

5.6 In these circumstances, while we accept, as a matter of law, that an allotment letter satisfying the essential attributes of an agreement may constitute an "agreement" within the meaning of the provisos to section 56(2)(vii)(b), the factual conditions prescribed therein require verification by the Assessing Officer. The Assessing Officer shall, therefore, examine whether the allotment letter fixed the consideration for transfer of the property, whether part of the consideration had been paid through banking channels on or before the date of allotment, and thereafter determine the stamp duty value as on the date of the allotment. If, upon such verification, the statutory conditions are found to have been satisfied, the stamp

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duty value prevailing on the date of allotment shall be adopted for the purposes of section 56(2)(vii)(b), and the addition, if any, shall be recomputed accordingly.

5.7 We also find that the reliance placed by the learned CIT(A) upon the decision of the Hon'ble Supreme Court in CIT v. Balbir Singh Maini (supra) is misplaced. The said decision arose in the context of section 2(47)(v) of the Act read with section 53A of the Transfer of Property Act, 1882, and dealt with the concept of "transfer" in relation to an unregistered Joint Development Agreement. The controversy before us is materially different, namely, the interpretation of the expression "agreement" occurring in the provisos to section 56(2)(vii)(b). The ratio of the said decision, therefore, has no application to the facts of the present case.

5.8 In view of the foregoing discussion, the impugned order of the learned CIT(A) is set aside and the issue is restored to the file of the Assessing Officer for the limited purpose of verifying the assessee's claim in the light of the principles enunciated hereinabove and the decisions of the Coordinate Benches referred to above. The Assessing Officer shall afford the assessee an adequate opportunity of being heard, examine the allotment letter, the evidence of payment through banking channels, the stamp duty valuation as on the date of allotment and all other relevant material, and thereafter pass a fresh order in accordance with law by way of a

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reasoned and speaking order. The grounds raised by the assessee are treated as allowed for statistical purposes.

Order pronounced in the open Court on 30/06/2026.

Sd/- Sd/- (ANIKESH BENERJEE) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 30/06/2026 M. Ranganath Vittal, Sr. P.S. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.

BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai

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Date Initials Yes Original dictation pad is enclosed at the end of file 1. Draft dictated on: 24.06.2026 Sr. PS/PS 2. Draft placed before author: .06.2026 Sr. PS/PS 3. Draft proposed & placed before the JM/AM second member: 4. Draft discussed/approved by Second JM/AM Member: 5. Approved Draft comes to the Sr. Sr. PS/PS PS/PS: 6. Order pronounced on: Sr. PS/PS 7. File sent to the Bench Clerk: 8. Date on which file goes to the Head Sr. PS/PS Clerk: 9. Date on which file goes to AR 10. Date of Dispatch of order