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Facts
The assessee purchased a property in 2009, with an allotment letter fixing the sale consideration. The transaction was registered in 2017. The Assessing Officer (AO) made an addition under Section 56(2)(x) based on the difference between the stamp duty value at the time of registration and the consideration agreed upon in 2009.
Held
The Tribunal held that the allotment letter, issued after part payment of consideration in 2009, should be considered as the agreement date. The stamp duty value on the agreement date should be used for computing the full value of consideration, aligning with CBDT Circular 3/2017 and various judicial precedents.
Key Issues
Whether the stamp duty value at the time of registration, or at the time of the allotment letter and part payment, should be considered for the purpose of Section 56(2)(x) when the property was purchased in an earlier year.
Sections Cited
56(2)(x), 143(3), 10
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PER PAWAN SINGH, JUDICIAL MEMBER:
This appeal by the assessee is directed against the order of Learned
Commissioner of Income Tax (Ld. CIT(A)) dated 29.03.2025 for A.Y. 2018-
The assessee has raised the following grounds of appeal:
“1. The Ld. CIT(A) has erred in confirming the impugned assessment order passed by the Ld. AO u/s 143(3) of the Act for the AY 2018-19 determining the total income at INR1,40,34,000/- as against the returned income of INR1,12,82,000/-.
2. The Ld. CIT(A) has erred in confirming the addition u/s 56(2)(x) of the Act of INR 27,52,000/- being 1/3 share of alleged difference in the Stamp Duty Value and Actual Consideration. The Ld. CIT(A) falled to appreciate that the alleged difference between the stamp duty value of INR 3,36,56,000/- on 31-07-2017 (date of registration of the property Shop Number 3 at M L Space, Vile Parle West, Mumbai 400 056) cannot be compared with actual consideration paid by the assessee of Rs. 2,54,00,000/- which was agreed vide letter of allotment dated 25-09-2009
The Ld. CIT(A) has erred in passing the order without giving effective opportunity of being heard and observing the principles of natural justice.
The Ld. CIT(A) further erred in passing the order in haste and in arbitrary manner without considering the facts and circumstances of the case. 4. The Appellant prays leave to add, alter, vary, omit, substitute or amend the above grounds of appeal either before or at the time hearing of the said appeal.”
Rival submissions of both the parties have been heard and record perused.
The ld. AR (Learned Authorized Representative) of the assessee submits that case of assessee was reopened on the basis of tax evasion petition. During the year under consideration the assessee purchased Shop No. 3 in the building M L Space, 4th floor, Sunderville, Plot no. 19, S V Road, Santacruz (W), Mumbai -400054. The assessee purchased such property along with two other co-owners i.e. Kalpesh Jhaveri and Nilesh Jhaveri, both are sons of assessee. The assessee has shown total sale consideration of Rs. 2.54 Crore (Cr). The transaction of sale (purchase) was registered with Sub Register concerned on 31.07.2017. The Stamp Valuation Aauthority valued the property on the basis of ready reckoner rate (circle rate) at Rs. 3.36 Cr. In fact, the assessee and his co-owner purchased the said property from M L Reality in 2009. At the time of purchase of property, all three co-owners paid Rs. 5,00,000/- each by way of cheque. Consequent upon payment of Rs.
15,00,000/-, an allotment letter was issued by the builder. In the allotment letter all terms and conditions are mentioned including fixing the consideration value of said property at Rs. 2.54 Cr. Such allotment term is in fact is sort of an agreement between the parties. Copy of allotment letter is filed at page 37 of paper book. The assessee and his co-owner purchased the said property on more than the prevailing value of ready reckoner rate at relevant time. During the assessment, before AO the assessee explained all such fact that allotment letter was issued to the assessee fixing the sale consideration and part there of was made in the year 2009. Therefore, the rate applicable in the year 2009 has to be considered as full value of consideration and the assessee’s eligible for benefit of first and second proviso to section 56(2)(x). The CBDT also issued circular no. 3/2017 wherein in para 29.2 in said circular it has been clarified that if the date of agreement fixing the amount of consideration for 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 into consideration for the purpose of computing full value of consideration provided part of the consideration has been paid by way of account pay cheque, bank draft or by use of electronic clearance system, on or before the date of agreement. All such condition were satisfied in case of assessee. The AO (Assessing Officer) disregarded all such submission made addition of 1/3rd amount of difference vis-à-vis the sale consideration declared by assessee and the value of asset determined by stamp valuation authority. The ld. AR while carrying us through first and second proviso to section 56(2)(x) and would submit that the lower authorities clearly disregarded such provisions. The ld. AR further submits that in case of other co-owner mainly Nilesh Jhaveri, son of assessee no addition was made in the assessment order passed under section 143(3) dated 19.03.2024 after examining the similar issue in detail. Copy of assessment order in case of Nilesh Rameshchandra Jhaveri is placed on record at page 59 to 58 of the paper book. Once similar transaction has been accepted in case Rameshchandra Chhabildas Jhaveri of co-owner in a detailed scrutiny assessment, the assessee cannot be treated indifferently as has been held in a series of decisions Rajeshkumar Shantilal Patel v. ITO (127 taxmann.com 342), Pankaj Inder Wadhwa v. ITO for A.Y. 2019-20 in CIT v. Kumararani Smt. Meenakshi Achi (292 ITR 624) (Mad), Jaswant Rai v. CWT (107 ITR 477) (P&H), Ms. Viramati H. Dalal v. ITO [58 taxmann.com 331 (Mum-Trib)], Pradeep Bansal v. ACIT [155 taxmann.com 663 (Del-Trib), Sangram J. Patel v. DCIT [ITA No. 377/Ahd/2018 (Ahd-Trib)], Babubhai Shantilal Solanki v. ITO [ITA No. 1893/Ahd/2019 (Ahd-Trib)], Shri Vipul Krishna Ashtekar and Ors. v. DCIT [ITA No. 1062/PN/2013 (Pune-Trib)], Jaswant Rai v. CIT [107 ITR 477 (Punjab and Haryana HC)], CIT v. Kumararani Smt. Meenakshi Achi [292 ITR 624 (Mad)], Rajeshkumar Shantilal Patel v. ITO [127 taxmann.com 342 (Surat-Trib)] 3. The Ld. AR further submits that in a series of following decision, allotment letter issued by builder/developer has been accepted/treated agreement fixing the amount of consideration for the purpose of section 56C/ 56(2). To support such view the ld AR of the assessee relied on the following decisions; Ashutosh Jha (HUF) v. ITO for A.Y. 2014-15 in (Kol- Trib), 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, Spenta Enterprises v. ACIT for A.Y. 2014-15 in ITA No. 2133/Mum/2019, 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, Rameshchandra Chhabildas Jhaveri T. Babu Reddy v. ITO for A.Y. 2012-13 in 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
The ld AR of the assessee submits that in the series of decision on similar set of fact wherein assessee has paid part consideration in pursuance of agreement/allotment letter, the benefit of first and second proviso to section 50C or 56(2)(x)(b) has been allowed in support of the submission the ld. AR relied upon the following decision.
i. Order of Mumbai Bench of the Hon'ble Tribunal in the case of Poonam Ramesh Sahajwani v. ITO for A.Y. 2014-15 in TA No. 2252/Mum/2019 ii. Order of Hyderabad Bench of the Hon'ble Tribunal in the case of Sri T. Babu Reddy v. ITO for A.Y. 2012-13 in iii. Order of Jaipur Bench of the Hon'ble Tribunal in the case 1 of Radha Kishan Kungwani v. ITO (185 ITD 433) iv. Order of Mumbai Bench of the Hon'ble Tribunal in the 3 case of Parth Dashrath Gandhi v. ACIT for A.Y. 2018-19 in ΙΤΑ Νο. 1990/Mum/2022 v. Order of Mumbai Bench of the Hon'ble Tribunal in the case of Sujauddian Kasimsab v. ITO for A.Y. 2015-16 in
On the other hand the ld. DR (Learner Senior Departmental Representative) for the revenue supported the order of AO and CIT(A). The ld. DR submits that there is no written agreement is filed by the assessee and allotment letter cannot be treated as agreement.
In short rejoined a submission, the ld. AR of the assessee submits that law does not require agreement in writing. Moreover, all the term and condition of purchase has been mentioned in the allotment letter. Even otherwise as per section 10 of contract Act, oral contract is valid and enforceable under the law.
We have considered the rival submission of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied by ld. AR of the assessee. We find that during the relevant financial year the assessee purchased immovable property i.e. Shop No. 3 in the building M.L. Space, 4th floor, Sunderville, Plot no. 19, S V Road, Santacruz (W), Mumbai -400054. The assessee purchased said property along with his two sons. The assessee and his co-owner has shown sale consideration of Rs. 2.54 Cr, however, the stamp valuation authority valued the said asset for the purpose of registration for transaction at 3.36Cr. Thus there was a difference of Rs. 82.56 Lakhs. The AO brought 1/3rd of difference viz a viz the sale consideration declared by the assessee and the value determined by stamp valuation authority to tax under section 56(2)(x). We find that before AO the assessee, in response to show cause notice specifically stated that he along with his two sons purchased the said property in the year 2009. The builder/developer issued allotment letter dated 25.09.2009. Before issuing allotment letter the assessee and his co-owners (his sons) paid Rs. 5000/- each that is total of Rs. 15.00 lacs on 21.09.2009.
The part of sale consideration is duly mentioned in allotment letter. However, the registration of shop/office was registered in July 2017.
We find that assessee also relied on CBDT circular no. 3/2017 wherein it was directed that when agreement to sale fixing the amount of consideration for transfer of immovable property and the date of registration are not same, the stamp duty value on the date of agreement may be taken for the purpose of computing full value of consideration, provided the part of sale consideration has been paid by way of check or electronic clearance through banking channels. We find that despite bringing all such fact and evidence in the notice of AO, the AO made addition of 1/3rd of difference vis-à-vis sale value and value determined by stamp valuation authority. The ld. CIT(A) disregarded the submission of assessee in a single sentence that in his opinion the finding of AO are right. We find that in a series of decision by coordinate bench of Tribunal mentioned above it has been consistently held that first proviso to sub clause (B) of section 56(2)(x) clearly mandate that when sale consideration was mutually agreed and part consideration thereof was paid by banking channels, the stamp duty value at the time of fixing the sale consideration has to be considered. Similar language is used in para 29.2 of CBDT Circular no. 3/2017.
We find that the impugned property is of 112 sq.m. the ready reckoner rate in 2009 was Rs. 109000/-per square meter. Thus the value of impugned property as per ready reckoner rate in 2009 was of Rs.1.22 Crore, whereas the assessee has purchased the property for a consideration of Rs. 2.54Cr which is more than the ready reckoner rate. Thus, the AO was not justified in 7 denying benefit of first and second proviso to section 56(2)(x). Thus, the assessee succeeded on primary submission of ld. AR of the assessee.
We also find that similar issue was examined in case of co-owner, the assessment order dated 19.03.2014 in case of Nilesh Rameshchandra Jhaveri and similar transaction was accepted after detailed discussion. So the assessee cannot be treated differently. Thus, in view of aforesaid factual and legal decision, the grounds of appeal raised by assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in open court on 10.09.2025.