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Facts
The assessee, a non-resident Indian, challenged an assessment order related to AY 2016-17. The AO initiated reassessment proceedings u/s 147 and made additions under Section 69 for unexplained investments in two properties. The assessee contested these additions.
Held
The Tribunal held that the assessee had explained the source of investment for both properties with cogent evidence. Regarding the MHADA property, the AO found the source explained. For the Neptune Developers property, the Tribunal applied the proviso to Section 56(2)(vii)(b) and found that the consideration was not less than the stamp duty value on the date of the agreement.
Key Issues
Whether the assessee has adequately explained the source of investment for properties purchased, and if the addition under Section 56(2)(vii)(b) is justified based on the agreement date versus registration date.
Sections Cited
147, 144, 69, 139(1), 148, 56(2)(vii)(b)
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Income Tax Appellate Tribunal, “ I ” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, VP & SHRI GIRISH AGRAWAL, AM
O R D E R Per Saktijit Dey, VP:
The assessee has filed the present appeal challenging the final assessment order passed u/s. 147 r.w.s. 144 of the Income Tax Act, 1961 (‘the Act’ for short), pertaining to the assessment year (A.Y.) 2016-17, in pursuance to the directions of learned Dispute Resolution Panel (‘ld. DRP’ for short).
In ground nos. 1 to 3, the assessee has raised certain legal issues challenging the validity of reopening of assessment u/s. 147 of the Act. However, at the time of hearing, parties agreed to proceed on merits. Hence, at the outset, we deem it appropriate to address the issues arising in ground nos. 4 & 5, which are on merits. If warranted, the legal issues raised in ground nos. 1, 2 and 3 would be taken up at a later stage.
In ground no. 4, the assessee has contested the addition made of Rs.1,06,56,120/- u/s. 69 of the Act. Briefly stated, the facts are, the assessee is a non-resident Indian. The in the Financial Year (‘F.Y.’. for short) 2015-16, relevant to assessment year under dispute, the assessee, though, had made various financial transactions, however, no return of income was filed by the assessee u/s. 139(1) of the Act. Therefore, having reason to believe that income assessable to tax has escaped assessment, the A.O. initiated proceedings u/s. 147 of the Act, by issuing a notice u/s. 148 of the Act, calling upon the assessee to furnish his return of income. However, as alleged by the A.O., in response to notice issued u/s. 148 of the Act, the assessee did not file any return of income. Subsequently, the assessee furnished a reply before the A.O., stating that he being a resident of United States of America (‘USA’), has no source of income in India. It was submitted, he was sending money through NRE savings accounts for maintenance and investments in India. From the information available on record, the A.O. found that the assessee had invested an amount of Rs.75,22,625/- for purchasing immovable property from Maharashtra Housing and Area Development Authority (MHADA). He further found that the assessee had purchased another property from Neptune Developers for a consideration of Rs.1,47,18,514/- and paid stamp duty of Rs.9,97,700/-. However, he observed, the Stamp Duty Authority has valued the said property at Rs.1,92,73,500/- for stamp duty purpose. Based on such information, the A.O. called upon the assessee to explain the source of investments.
Though, the assessee furnished his reply explaining the source of investment, however, the A.O. was not convinced. He treated the investment of Rs.75,22,625/- towards purchase of property from MHADA as well as the amount of Rs.1,56,16,214/- paid to Neptune Developers towards purchase of another property as unexplained investment u/s. 69 of the Act and added back to the income of the assessee while framing the draft assessment order.
Contesting the aforesaid additions, the assessee raised objections before ld. DRP. to explain the source of investment in the aforesaid properties. Based on the additional evidences furnished by the assessee and submissions made, ld. DRP directed the A.O. to verify them and furnish a report. After verifying the evidences furnished by the assessee, the A.O. furnished a remand report before ld. DRP. After going through the remand report of the A.O. and the submissions made by the assessee, ld. DRP observed that the assessee was unable to explain the source of investment of Rs.75,22,625/- towards purchase of property from MHADA. The ld. DRP further observed that out of the total investments made in the property purchased from Neptune Developers, the assessee was unable to explain the source of investment of Rs.31,33,495/- made during the year under consideration. Thus, out of the total addition made by the A.O. u/s. 69 of the Act, ld. DRP sustained the addition to the extent of Rs.1,06,56,120/- and deleted the balance addition.
In terms with the directions of ld. DRP, the A.O. finalized the assessment, confirming the addition of Rs.1,06,56,120/-.
We have considered rival submissions and perused the materials available on record. As discussed earlier in the order, in course of proceedings before ld. DRP, the assessee had furnished various additional evidences to establish source of investment in properties purchased from MHADA and Neptune Developers. After examining the documentary evidences furnished by the assessee, the A.O. has furnished a remand report dated 06.11.2024. With regard to property purchased from MHADA, the comments of the A.O. in the remand report are as under: Comments: Submission made by the assessee is perused and duly considered vis-a-vis documentary evidences viz. copy of bank statement of the assessee evidencing remittance in earlier years, copy of Citibank- NRE bank account statement, SBI NRE Bank account statement of the assessee, copy of bank account statement of SVC bank of his parent in which assessee is also joint holder, copy of bank (A.Y.2016-17) Dilip Marutirao Kalyankar vs. ITO(IT) account statement of Abhyudaya Co-Op Bank, copy of Axis Bank account statement of brother of the assessee, Mr. Umesh Kalyankar, copy demand draft issued in the name of MHADA for purchase of flat etc. As claimed by the assessee, that payments to purchase the MHADA property was financed from Shamrao Vitthal Co-op Bank and Abhyudaya Co-op Bank, the evidences provided by him are analyzed with bank account statements submitted by him. From the evidences made available, it is seen that he had funds to the tune of Rs. 73,85,962 as retained after payment towards Neptune flat. From the bank accounts submitted by the assessee it can be verified that the assessee had funds available and paid an amount of Rs. 73,85,962/- towards purchase of MHADA flat. Hence, an amount of Rs. 73,85,962/- (out of Rs. 75,22,625/- as contended by the assessee) is found to be paid by assessee towards the purchase of MHADA flat from his US salary income remitted to Indian bank accounts (NRE accounts held with Citibank and SBI). The funds were transferred to Abhyudaya and SVC bank and paid to brother Umesh Kalyankar for ultimate payment to MHADA. Entire source of Rs. 75,22,625/- is not verifiable. However, the same may contain interest element, opening balance or savings of the parent's of the assessee.
As could be seen from the aforesaid observations of the A.O., the evidences furnished by the assessee were analyzed with reference to the bank statements and it was found that funds to the tune of Rs.73,85,962/- was available to the assessee after payment made towards purchase of flat from Neptune Developers. The A.O. has further recorded a finding of fact that the source of investment in MHADA flat was out of the salary income earned by the assessee in USA and remitted to his NRE bank account in India. Thus, after due examination of facts brought on record, the A.O. has recorded a finding of fact that the source of investment in MHADA flat stood explained.
Insofar as the investment in property purchased from Neptune Developers, the comments of the A.O. in the remand report are as under:
(ii) New evidence submitted in respect of addition proposed to be made of Rs. 1,56,16,214/-under the head Income from Other sources: The assessee purchased a flat from Neptune Developers for an amount of Rs. 1,46,18,514/- The assessee has paid consideration for the flat through SVC Bank Limited. The assessee has contended that the money was first sent to his brothers (Mr. Vijay and Umesh Kalyankar) upto the year 2010 from Citibank NRE Bank account. Thereafter the money was consolidated by father of the assessee in SVC Bank. Hence, the sums sent to brothers were brought back to SVC Account in December 2010. Further, the money for payment to Neptune Builders was transferred to SVC Bank from Abhyudaya Co-operative (by withdrawing FDs) or from SBI-NRE Account on need basis. The summary of receipts and payments provided by assessee is reproduced below:
(A.Y.2016-17) Dilip Marutirao Kalyankar vs. ITO(IT) Comments: Submission made by the assessee is perused and duly considered vis-a-vis documentary evidences viz. copy of bank statement of the assessee evidencing remittance in earlier years, copy of Citibank- NRE bank account statement, SBI NRE Bank account statement of the assessee, copy of bank account statement of SVC bank of his parent in which assessee is also joint holder, copy of bank account statement of Abhyudaya Co-Op Bank and booking receipt of Neptune flat. Following documents submitted by the assessee have been: a) Remittance by assessee to his brother from Citibank NRE Account is verified from Citibank NRE Statement. The name of the brother is reflected in Citibank account. b) Remittance from brother to SVC is verified from SVC Bank statement. The remittance from Citibank NRE to brother of the assessee is evident from the statement of Citibank NRE statement in the year of 2009. The amounts transferred to his brother of Rs. 29,70,000 is reflected in the Citibank NRE statement Hence, the contention of the assessee that the transfer of Rs. 29,50,000/- to joint account of assessee with parents in SVC bank from brothers seems reasonable and can be accepted even in the absence of any name reflected in SVC Bank. c) Transfer from Citibank NRE Account to SVC is evidenced through the Citibank NRE statement and the amounts are matched d) Transfer from Abhyudaya bank to SVC bank are evidenced through SVC Bank as well as Abyudaya Bank statement and amounts are matched for all transfers. e) Further, the contention of the assessee that fixed deposit are prematurely withdrawn is verified from the statement of Abhyudaya bank. As mentioned above (in observation for MHADA flats), it can be verified that payment of Rs. 1,22,29,073/- is utilized towards payment to Neptune Builders from older remittances. g) Further, an amount of Rs. 20,00,000/- is received from SBI-NRE Account during AY 2016-17. Hence, a trail of Rs. 1,42,29,073/- is established through perusal of trail through copy of Citibank- NRE bank account statement, SBI NRE Bank account statement of the assessee, copy of bank account statement of SVC bank and copy of bank account statement of Abhyudaya Co-Op Bank. Hence, the same is acceptable. h) The total purchase value of the flat is Rs. 1,46,18,514/- as per the draft assessment order. Out of the same, an amount of Rs. 1,42,29,073/- is traced through bank statements as Citibank / SBI NRE Bank Account à Brother's/Parents' Assessee's Joint Account à SVC Account à Neptune Builders. i) It is worth to mention here that total amount remitted during AY 2016-17 (being the year under consideration) is only Rs. 25,11,843/-. A sum of Rs. 20,00,000 received specifically for such remittance is also evidenced by SVC bank statement in the same year and SBI-NRE statement provided by the assessee.
As could be seen from the aforesaid observations of the A.O., after thorough examination of the evidences, the A.O. has recorded a finding of fact that the flat with Neptune Developers was booked in November, 2010 and, thereafter, the assessee had made payments periodically and in the impugned assessment year, the assessee has actually paid an amount of Rs.25,11,843/- to Neptune Developers. He has further observed that investment. Thus, the aforesaid observations of the A.O. in the remand report leave no room for doubt that the assessee has explained the source of investment in respect of both the immovable properties through cogent evidences. In this context, it may further be stated that the flat from MHADA, which is a Government Agency, was purchased through a lottery scheme in the year 2013 for a consideration of Rs.75,22,625/-. When the source of investment has been explained through documentary evidences and the A.O. has also examined them and has not found anything adverse, in our considered opinion, ld. DRP was not justified in sustaining a part of the addition made in the draft assessment order. In view of the aforesaid, we are inclined to delete the addition of Rs.1,06,56,120/-. This ground is allowed.
In ground no. 5, the assessee has contested the addition of Rs.46,54,986/- u/s. 56(2)(vii)(b) of the Act, on account of difference between the declared sale consideration and the value determined by Stamp Valuation Authority. As discussed elsewhere in the order, the assessee purchased a flat from Neptune Developers for a declared sale consideration of Rs.1,46,18,514/- and paid stamp duty of Rs.9,97,000/-. Whereas, the Stamp Valuation Authority determined the value of the property at Rs.1,92,73,500/- for stamp duty purpose. Invoking the provision of section 56(2)(vii)(b) of the Act, the A.O. treated the value determined by the Stamp Valuation Authority as deemed sale consideration paid by the assessee to the developer and, accordingly, added back the differential amount of Rs.46,54,986/- to the income of the assessee while framing the draft assessment order. Though, the assessee contested the aforesaid addition before ld. DRP by pleading that the assessee had entered into an agreement with the developer for purchase of the property in November, 2010, hence, the value of the property as on November, 2010 sustained the addition.
We have considered rival submissions and perused the materials available on record. Notably, assessee’s claim that the agreement to purchase the property was actually entered into with the developer in November, 2010 was also verified by the A.O. in course of remand proceeding. After verifying the evidences furnished by the assessee, the A.O. has commented as under:
III. ADDITION UNDER SECTION 56(2) (vii)(b): The applicant had stated that the AO has made an addition of Rs.46,54,986/-under section 56(2)(vii)(b) of the Act on account of difference in the value of purchase consideration (Rs.1,46,18,514/-) and stamp duty value (Rs. 1,92,73,500/-) of the flat as per the registered agreement. The AO has considered the value of consideration and stamp duty as on the date of registration of the agreement, being 29.01.2016. However, the applicant wished to highlight that as per proviso to section 56(2)(vii)(b) of the Act, if the date of the 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 the agreement may be taken for the purposes of section 56(2)(vii) (b) of the Act. The provisions of the Act also prescribe that adopting the stamp duty value as on date of agreement fixing consideration is permissible only if the consideration of a part thereof is paid by any mode other than cash on or before the date of the agreement for the transfer of immovable property. The relevant extract is reproduced below: "Provided that where the date of the 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 the agreement may be taken for the purposes of this sub-clause: Provided further that the said proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property.” Thus, it was evident that the applicant fulfils both the conditions as mentioned in proviso to section 56(2)(vii) (b) of the Act. As mentioned in the above submission, the applicant had paid booking amount of Rs. 51,000/- on 17.11.2010 vide cheque no. 400967. Additionally, the booking form deciding the flat number and its allotment was decided and payments were made accordingly. A copy of the booking form is enclosed at page 95 of the paper book submitted has been perused. Accordingly, the stamp duty value as on November 2010 may be adopted and compared against the stamp duty value of the flat. The applicant is submitting valuation report obtained from registered valuer, Mr. Parish Rao Panse (Goverment Valuer), obtained for ascertaining the stamp duty value of the immovable property as on November 2010. As per such report, the stamp duty value of the property was Rs. 62,95,864/- in FY 2010-11. Hence, it is clear that the consideration is not less than the stamp duty value.
As could be seen from the afore-said observations of the A.O. in the remand report, on 17.11.2010, the assessee had paid the booking amount of Rs.51,000/- through cheque to the developer. Thereafter, upto financial year 2014-15, the assessee had paid major part F.Y. 2015-16, corresponding to the assessment year under dispute, the assessee had paid only an amount of Rs.25,11,843/- to the developer. The A.O., on enquiry, has further reported that the stamp duty valuation of the property in F.Y. 2010-11 was Rs.62,95,864/- . Thus, the aforesaid facts clearly reveal that the declared sale consideration of Rs.1,46,18,515/- on the date of booking of the property was much more than the stamp duty value of the property as on that date. Therefore, the assessee is bound to get benefit of the proviso to section 56(2)(vii)(b) of the Act, which provides that where 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 valuation on the date of agreement has to be taken as the sale consideration.
In view of the aforesaid, the addition made u/s. 57(2)(vii)(b) of the Act cannot be sustained. Accordingly, we direct the A.O. to delete it. In view of our decision on merits, as above, the legal issues raised in ground nos. 1, 2 and 3 have become academic insofar as the present appeal is concerned. Accordingly, they do not require adjudication, hence, kept open.
In the result, the appeal is allowed as indicated above.
Order pronounced in the open court on 25.08.2025 Sd/- Sd/- (Girish Agrawal) (Saktijit Dey) Accountant Member Vice President Mumbai; Dated : 25.08.2025 Roshani, Sr. PS (A.Y.2016-17) Dilip Marutirao Kalyankar vs. ITO(IT) Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER,