SHARAD SEVANTILAL SHAH ,MUMBAI vs. INCOME TAX OFFICER WARD 23(3)(6), MUMBAI

ITA 4154/MUM/2025Status: DisposedITAT Mumbai14 August 2025AY 2016-179 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition under section 56(2)(vii)(b) towards the difference between stamp duty valuation and the actual consideration could not be sustained. The legislative intent of section 56(2)(vii)(b) is to curb unaccounted cash transactions where property is registered below stamp duty value. While the property was registered at Rs. 3.15 crores and the stamp duty value was Rs. 4.12 crores, the Tribunal noted that the Stamp Duty Authorities of Maharashtra amended the calculation method for stamp duty valuation of old buildings via a circular dated 04.11.2015. This change, particularly in not depreciating the land's per square meter value, substantially increased the stamp duty valuation by approximately 30%. The Tribunal found merit in the assessee's submission that the increase in valuation was solely due to the change in calculation method, as evidenced by valuation reports and the unchanged ready reckoner value per square meter between May and December 2015. The Tribunal also considered the Form 26QB filings and seller affidavits as substantiating the agreed sale consideration. Therefore, the addition was directed to be deleted. The Tribunal explicitly stated that this decision is based on the unique facts and circumstances and cannot be applied as a precedent.

What were the facts?

The assessee, Sharad Sevantilal Shah, filed an appeal against the order of the CIT(A) for AY 2016-17. The assessee purchased a property for Rs. 3,15,00,000, but the stamp duty value on the date of registration (31.12.2015) was Rs. 4,12,00,000. The Assessing Officer (AO) initially treated the difference as unexplained investment under section 69B. The CIT(A) directed the AO to tax this difference under section 56(2)(vii)(b) due to the lack of a written agreement, despite the assessee claiming an oral agreement in May 2015 and providing evidence of advance payments with TDS and a bank loan application. The assessee contended that the increase in stamp duty valuation was due to a change in calculation method, not market appreciation.

What were the issues?

1. Whether the Commissioner (Appeals) erred in suggesting an addition of Rs. 97,40,000/- (difference between stamp duty value and agreement value) under section 56(2)(vii)(b) of the Income Tax Act, 1961, when the assessee claims an oral agreement for sale consideration was fixed in May 2015? Assessee's Contentions: - An oral agreement fixing the sale consideration at Rs. 3,15,00,000/- was made on 27.05.2015, with payments made on 27.05.2015 and 14.08.2015. - Form 26QB acknowledgements generated on payment of TDS (Rs. 54,000/- and Rs. 1,61,000/-) recorded the total value of consideration as Rs. 3,15,00,000/-, proving the date and amount of agreement. - A bank loan application to HDFC Bank on 26.06.2015 also disclosed the total purchase price as Rs. 3,15,00,000/-, sanctioned on 08.08.2015. - The first proviso to section 56(2)(vii)(b) requires the date of the agreement fixing the consideration, not necessarily a written or registered agreement. - The increase in stamp duty valuation was due to a change in calculation method by the Stamp Duty Authorities of Maharashtra (Circular dated 04.11.2015), not market appreciation. Revenue's Contentions: - For the proviso to section 56(2)(vii)(b) to apply, there must be an agreement entered into between the assessee and seller, which is not available. - Long-term acquaintance with the seller cannot substitute for documentary evidence of a mutually agreed sale consideration. - Documents submitted by the assessee are self-serving and do not evidence mutual agreement on sale consideration.

Which sections of the Income-tax Act were involved?

Section 56(2)(vii)(b),Section 69B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “G” BENCH, MUMBAI

Before: JUSTICE (RETD.) C V BHADANG&

For Appellant: Shri B. V. Jhaveri, AR
For Respondent: Shri Swapnil Choudhary, Sr. DR
Hearing: 14.08.2025Pronounced: 02.09.2025

Per Padmavathy S, AM: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi [In short 'CIT(A)'] passed under section 250 of the Income Tax Act, 1961 (the Act) dated 20.05.2025 for Assessment Year (AY) 2016-17. The assessee has raised the following grounds of appeal:

“1. The Commissioner (Appeals) erred in suggesting the Assessing Officer to make an addition of Rs.97,40,000/- being the difference between the stamp duty value and the agreement value u/s.56(2)(vii)(b)(ii) of the I.T. Act, 1961. 2. The Commis

The order continues below.

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