BHARAT KISHIN SAMTANI ,MUMBAI vs. ITO WARD 22(1)(1), MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER:

dated 04.09.2025 for Assessment Year (AY) 2018-19. The assessee has raised

following grounds of appeal:

“1. In the facts and circumstances of the case and in law the learned assessing officer erred in making addition of Rs. 8,00,137/- under sec.56(2)(x) of the Income- tax Act.

assessment year (A.Y.) 2018-19 on 31.07.2018 declaring income of Rs.

6,46,340/-. Case was selected for scrutiny. During the assessment, the Assessing

Officer (AO) noted that he has information from Joint Sub Registrar (MSD),

Andheri -3 that assessee has purchased a Flat at Khar Paschim, Mumbai for sale

consideration of Rs. 2.44 crore on 09.06.2017 and have paid stamp duty of Rs.

14,91,300/-. As per endorsement from the office of Joint Sub Registrar (MSD),

Andheri – 3, the value of property for the purpose of registration of transaction

was determined at Rs. 2.98 crore. The AO was of the view that assessee has

purchased property for inadequate consideration and hence provision of section

56(2)(x) is applicable as there is difference of Rs. 53,34,250/- vis-à-vis the sale

value declared by assessee and the value assessed by Stamp Valuation Authority.

On the basis of such observation, the AO issued show cause notice to the

assessee on 13.01.2021. In response to such show cause notice, the assessee

filed his reply on 03.02.2021 and 05.02.2021. In the reply, the assessee stated

that provision of section 56(2)(x) is not applicable in his case. Section 56(2)(x)

was inserted with effect from 01.04.2017. The assessee further explained the

facts regarding non-applicability of section 56(2)(x) as the assessee has received

new flat pursuant of development agreement for development of existing

property. Such development agreement was as per the State Government policy.

The assessee was having a Flat in Dwarakamai CHS Ltd. Dwarakamai CHS Ltd.

entered into redevelopment of society with Kripa Oneness Private Ltd. In lieu of

existing flat, the assessee along with his mother and father was allotted Flat No.

601.The share of father 50%, mother is 35% and assessee is having 15%. As

per agreement, every member of existing co-operative society was eligible for

allotment of newly constructed area. Further,one of clause of agreement provides

for additional area over and above the area mentioned in the agreement in

respect of existing member of the society. The existing member of society was

also eligible have corpus fund calculated @ Rs. 2,700/- per square feet to per

month. Clause 8 of the agreement also provides sale of additional area to

members @ Rs. 55,000/- upto 160 square feet and beyond 160 square feet @

Rs. 60,000/- per square feet. Each member requiring additional area have to

decide and agree upon with the builder before the developer submit the

sanctioned plan and acquisition of additional are shall form part of individual

agreement to be executed with each member. The builder was also eligible to

recover his cost from sale of free space. The supplement agreement was also

executed. The supplement agreement was executed among the society member

and the developer due to the fact project was unviable to the builder. But due to appreciation of members of society, the developer agreed to develop the

property of new terms and conditions. The copy of supplement agreement was

dated 31.03.2017 was also furnished. As per supplement agreement, the

additional area was to be sold @ Rs. 45,000/- per square feet. However, no rent

for alternative accommodation during period of construction was to be paid to

the members. There was a clause in supplementary agreement for compensation

of Rs. 117/- per square feet. If the developer is unable to construct and obtain

occupation certificate, which was Rs. 150/- per square feet in original agreement.

The assessee explained that he purchased additional area of 544.19 square feet

in 2016 that is before submission of plan by developer to Municipal Corporation

of Greater Mumbai. A certificate of Municipal Corporation of Greater

Bombay(MCGB) dated 02.09.2016 was also furnished. The assessee also

furnished copy of ledger account in the books of Kishin Hariram Samtani and

Deepa Kishin Samtani highlighted for payment for additional area. The assessee

in without prejudiced submission submitted that additional area purchased by

assessee was a result of composite agreement between Dwarakamai Co-op

Housing Society Ltd. along with members of the society and developer Kripa

Oneness Private Ltd. The discounted price at which the assessee purchased

additional area was result of economic benefits the builder received from co-

operative society, wherein the assessee was a member. The old flat was having

area of 630.53 square feet. The builder has given additional area of 25.0 square

meter that is 220.68 square feet as free of cost. The assessee has purchased additional area of 50.623 square meter that is 544.19 square feet and the

assessee’s share is only 7.58 square meter that is 81.628 square feet. The stamp

valuation authority while calculated the market value of entire flat including the

parking charges at Rs. 2.98 crore.

along with his father, Kishin Hariram Samtani and mother, Deepa Kishin Samtani

acquired a flat. The share of father 50%, mother is 35% and assessee is having

15%. There is difference of 53,34,250/- vis-à-vis the stamp duty valuation of Rs.

2,98,22,800/- and the purchase consideration declared is Rs. 2,44,88,550/-. The

assessee made first payment on 08.05.2017. The development agreement and

the supplementary agreement were signed before 01.04.2017. The assessee has

not furnished documentary evidence that market value of the property at Khar

Paschim, Mumbai as on date of transfer was Rs. 2.44 crore and not as per

valuation. The AO issued show cause notice dated 16.02.2021 for proposing

addition of difference of stamp duty valuation and the value declared by

assessee. The assessee again filed his reply reiterating the similar submission.

The AO was of the view that provision of section 56(2)(x) is applicable and the

addition of Rs. 8,00,137/- being 15% of difference of valuation vis-à-vis stamp

duty valuation and sale consideration declared by assessee was added to the

income of assessee.

before ld. CIT(A). Before ld. CIT(A), the assessee made similar submission as made before AO in reiterating for provision of section 56(2)(x) is not applicable

on the transaction of assessee. As transaction relates to only purchase of

additional area forming part of alternative accommodation jointly purchased by

assessee and his parent. The ld. CIT(A) held that submission of assessee is

misplaced. The material fact under the provision of section 56(2)(x) is whether

the immovable property was acquired for inadequate consideration compared to

stamp duty valuation irrespective of fact whether such property is termed as a

flat or an additional area merged into a existing flat. The assessee has not

furnished if any payment is made prior to 01.04.2017. The assessee has paid first

consideration only on 08.05.2017. The assessee failed to satisfy the condition of

second proviso attached with the section 56(2)(x). On the basis of such finding

the ld CIT(A) confirmed the action of AO. Further, aggrieved the assessee has

filed present appeal before Tribunal.

the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for

the Revenue. The ld. AR of the assessee submits that assessee along with his

parent was allotted a flat in redevelopment scheme of society. His father

(KishinHariramSamtani) was having a flat in Dwarakamai Co-op Housing Society

Ltd. In lieu of surrender of flat in development scheme, the assessee his father

and his mother got alternative flat. The old flat was having 630.53 square feet

carpet area. In lieu of such flat, the assessee along with his father was entitled a

flat 851.21 square feet carpet area. In addition to 851.21 square feet, the assessee along with his parent acquired 220.68 square feet carpet area as free

of cost and they also purchased additional area of 544.19 square feet. Thus,

total ad-measuring area of new flat became 1395.40 square feet carpet area in

duplex flat. The additional are was purchased @ Rs. 45,000/- per square feet as

per supplementary agreement. The assessee and his parents paid part payment

of said additional area in February, 2016 by way of cheque of Rs. 23,00,000/-.

The other sale consideration was paid by way of cheque of Rs. 10,000/- on

06.02.2016. Another payment was made from account of other family member

on 10.02.2016 and 11.02.2016. Copy of agreement with builder also

acknowledged the payment of Rs. 23,00,000/- vide cheque no. 300488 on

04.02.2016. Copy of agreement with builder / developer is filed. Thus, the

assessee has paid part of sale consideration of additional area by way of cheque

in the month of February, 2016. The ld. AR also furnished regular reckoner list

applicable in 2016-17 wherein the rate in the Khar Mumbai was 302600 per

square meter for residential building. The assessee purchased the additional area

at more than the prevailing ready reckoner rate of the area. Thus, the assessee

is also eligible for eligible for benefit of first and second proviso to section

56(2)(x).

concerned, the regress of section 56(2)(x) is not applicable on such transaction

as has been held by co-ordinate bench of Mumbai Tribunal in Anil DattaramPitale

vs ITO (2025)173 taxmann.com 51 (Mumbai-Trib) held that when the assessee got a new flat in lieu of old flat surrendered by him to society for redevelopment,

it was not a case of receipt of immovable property for inadequate consideration

that would form within the purview of section 56(2)(x).

CIT(A). The ld. Sr. DR for the revenue submits that ld. CIT(A) has clearly

recorded the fact that material fact for invoking provision of section 56(2)(x) is

whether immovable property was acquired for inadequate consideration as

compared to stamp duty value determined by stamp valuation authority.

through the orders of lower authorities carefully. We have also gone through

various documentary evidence filed on record. The basis of making addition has

been recorded by us in earlier paras of this order, which is not repeated here for

the sake of brevity. On appreciation of facts, we find that assessee with his

parents was allotted duplex flat having area of 1395 square feet, out of which

851.21 square feet, was given in lieu of original flat in the existing society. The

assessee along with his parent purchased additional area of 544.19 square feet.

deeming fiction of section 56(2)(x) is not applicable of such transaction as per

the decision of Mumbai Tribunal in Anil Dattaram Pitale vs ITO (2025)173

taxmann.com 51 (Mumbai-Trib) wherein it was held that when the assessee got

a new flat in lieu of old flat surrendered by him to society for redevelopment, it

was not a case of receipt of immovable property for inadequate consideration that would form within the purview of section 56(2)(x). We find that for

remaining area of 544.19 square feet, the assessee claimed that he is owner of

15% of the flat, and that part payment in respect of additional area purchased,

was already paid in February 2016. To support his contention, the assessee

furnished copy of bank statement showing part payment on 04.02.2016, by way

of cheque, which was cleared on 11.02.2016. Thus, the assessee is eligible for

benefits of first and second proviso of section 56(2)(x). the assessee also

claimed that the additional area purchased by assessee over and above the

ready reckoner rate applicable in the area. Hence, the matter is restored to the

jurisdictional AO for limited purpose to verify facts about payment of part

consideration in February 2016 and if the additional area is purchased at par with

ready reckoner rate and to pass order in accordance with law qua the share of

assessee in the impugned flat.

Order was pronounced in the open Court on 08/06/2026.

/- S/- /- Sd/- Sd/- MAKARAND VASANT MAHADEOKAR PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 08/06/2026 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file.

By Order

Assistant Registrar / DDO ITAT, Mumbai