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Facts
The Revenue appealed against the CIT(A)'s order deleting an addition made under Section 56(2)(vii)(b) of the Income Tax Act. The addition was based on the difference between the stamp duty value and the purchase consideration of an immovable property. The assessee claimed the agreement date was in 2010, with advance payment made, while registration occurred in 2016.
Held
The Tribunal held that the date of the allotment letter should be considered for the purpose of the proviso to Section 56(2)(vii)(b), as the assessee had paid an advance and the allotment letter essentially fixed the purchase consideration. Therefore, the addition made by the AO based on the stamp duty value on the date of registration was not tenable.
Key Issues
Whether the date of the allotment letter can be considered as the date of agreement for the purpose of Section 56(2)(vii)(b), and if the proviso to the section is applicable when an advance was paid based on an allotment letter.
Sections Cited
56(2)(vii)(b), 148A, 148
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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI AMIT SHUKLA, JM &
Appellant /Assessee by : Shri Amit Kamble & Shri S.R. Lodhe, AR : Shri Rajesh Pardeshi, Sr. DR Revenue / Respondent by Date of Hearing : 25.02.2025 Date of Pronouncement : 11.03.2025 O R D E R
Per Padmavathy S, AM:
This appeal by the Revenue is against the order of the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC), Delhi [In short "The CIT (A)"] dated 05/11/2024 for Assessment Year (AY) 2017-18. The assessee raised the following grounds of appeal:
1. Whether on the facts and in circumstances of the case and in law, the Ld. CITIA) was justified in deleting the addition made by the AD amounting to Rs 3,86,97,484/- u/s 56(2)(vii)(b) of the Act being difference between stamp duty valve and agreement value during the year under consideration".
2. Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the facts that date mentioned in letter of allotment cannot be considered as date of agreement and therefore the benefit as provided by the legislature in case where there is difference between date of agreement and execution, is not available in the instant case”
The assessee is an individual and filed the original return of income for AY 2017-18 on 26/10/2017. The Assessing Officer (AO) received information from DIT (I&CI) Mumbai that the assessee during the year under consideration, has purchased an immovable property for a consideration of Rs.5,02,31,016 against the stamp duty value of Rs.8,69,28,500. The AO was of the view that to the extent of difference between the purchase consideration and the stamp duty value, the income has escaped the assessment and therefore initiated reassessment proceedings by issue of notice under section 148A of the income tax act (the Act). The AO, after passing an order under clause (d) of section 148A issued a notice under section 148 requiring the assessee to file the return of income. The AO also called on the assessee to file the necessary details and to explain why addition under section 56(2)(vii)(b) should not be made for the difference between the purchase value and the stamp duty value. The assessee, in response submitted that, the purchase consideration was agreed between the assessee and the seller at Rs.5,02,31,016 and the seller has issued the letter of allotment dated 21/09/2010 in this regard. The assessee further submitted that an advance of Rs.17,00,000 was paid at the time of allotment letter by assessee to the seller. The assessee also submitted that there was a considerable delay in the completion of the project on the part of the sellers and therefore the final registration and handing over of the possession was ultimately done on 27/12/2016. Accordingly the assessee submitted that as per proviso to section 56(2)(vii)(b) the market value of the property as on the date of allotment should be applied which is less than the consideration agreed as per allotment letter. Therefore the assessee submitted before the AO that no addition can be made under section 56(2)(vii)(b). The AO did not accept the submissions of the assessee by holding that the letter of allotment cannot be considered as the date of agreement for the purpose of section 56(2)(vii)(b). According the AO made an addition of Rs.3,66,97,484 towards the difference between the purchase consideration and the stamp duty value as on the date of registration of the property. Aggrieved, the assessee preferred further appeal before the CIT Appeal. The CIT appeals deleted the addition made by the AO by holding that “5. I have gone through the reasons recorded for reopening, assessment order, grounds of appeal
and written submissions. The assessment was reopened to assess the income escaped for assessment of Rs.3,66,97,484/- that was the difference between the immovable property purchased by the appellant (Rs.5,02,31,016/-) and the stamp duty value of the property (Rs.8,69,28,500/-). The AO recorded the reasons that as per Sec.56(2)(vii) (b) of the IT Act, this sum of Rs.3,66,97,484/- had escaped from assessment for the AY 2017-18. However, during the course of appeal proceedings, the appellant claimed that agreement was entered on 21.09.2010 for a consideration of Rs.5,02,31,016/-. The appellant also referred two cheques dated 11.09.2010 and 18.09.2010 issued for a sum of Rs. 17,00,000/-. As per the submission, invoking of Sec.56(2) (vii) (b) of the IT Act that was inserted in the Finance Act, 2013 w.e.f. 01.04.2014 is not applicable to him as the agreement was entered much before the introduction of this provision.
6. All these details were forwarded to the AO and he was asked to conduct enquiries in support of his contention that the project has not been commenced in FY 2010-11. Further, the AO was asked to get details of plan approval, details of booking by other customers in that venture, subsequent sale of flats etc. In this connection, a remand report was called for vide notice dated 08.07.2024. As there was no reply received from the AO, reminders dated 31.07.2024, 19.08.2024, 04.09.2024 and 26.09.2024 were issued, wherein the specific details were called for. However, the AO did not submit any remand report.
7. Upon verification of the details submitted by the appellant, it is noticed that the appellant has filed necessary evidences regarding the advance payment in FY 2010-11 and that could not be controverted by the AO otherwise. As the appellant has already paid the advance in the FY 2010-11, section 56(2)(vii)(b) of the IT Act cannot be invoked as per the market rate prevailing in FY 2016-17 at the time of registration. In view of the above, section 56(2)(vii) (b) of the IT Act is not applicable and the grounds taken are allowed.”
The ld.AR submitted that the agreement to purchase the property was entered and the allotment letter was given to the assessee on 21/09/2010 (page 123 of PB). The ld.AR further submitted that the assessee has paid advance to the tune of Rs.17,00,000 at the time of agreement and that due to delay in project the property to be registered only on 27/12/2016. The ld.AR drew our attention to the stamp duty value as on the date of allotment (page 233 of PB) to substantiate that the purchase consideration agreed by the assessee as on the date of allotment is much more that the stamp duty value during that time. The ld.AR accordingly submitted that the proviso to section 56(2)(vii)(b) is clearly applicable in assessee's case and accordingly no addition could be made. The ld.AR also relied on the decision of the coordinate bench in the case of ITO vs. Narendrakumar Jain (ITA no.3422/Mum/2024 dated 22/08/2024) to submit that the date of agreement fixing the purchase consideration should be considered for the purpose of section 56(2)(vii)(b).
The ld. DR on the other hand, relied on the order of the AO.
We heard the parties and perused the material on record. The issue arising for our consideration is whether the date of agreement fixing the purchase consideration is the date to be considered for the purpose of section 56(2)(vii)(b) and whether the allotment letter could be considered as the agreement. In this regard, we notice that the seller has issued a letter of allotment dated 21/09/2010 to the assessee in which the purchase consideration is fixed at Rs.5,02,31,016. The relevant extract of the allotment letter is given below:
It is the contention of the ld AR that the letter of allotment fixing the purchase price should be considered as agreement for the purpose of section 56(2)(vii)(b) and that the proviso to the said section is applicable to assessee's case. Therefore before proceeding further we will look at the relevant the provisions of section 56(2)(vii)(b) as extracted below –
Income from other sources. (1) **** (2) In particular, and without prejudice to the generality of the provisions of sub- section (1), the following incomes, shall be chargeable to income-tax under the head "Income from other sources", namely :— (i) to (vi) **** (vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009 but before the 1st day of April, 2017,— (a) **** (b) any immovable property,— (i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; (ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration: 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;
From the perusal of above provisions, it is clear that where the date of agreement fixing the amount of consideration for transfer of immovable property is different from the date of registration then for the purpose of section 56(2)(vii)(b), the stamp duty value on the date of agreement shall be considered.
One more condition for the applicability of the above proviso is that the assessee should have paid atleast the part of the consideration by any mode other than cash. In assessee's case the allotment letter wherein the purchase consideration is agreed on 21/09/2010 and that the assessee has paid advance by account payee check at the time of allotment. Therefore in our considered view, there is merit in the submission that the Proviso to section 56(2)(vii)(b) is applicable to assessee's case. Now coming to the issue of whether the letter of allotment can be considered as an agreement for the purpose of proviso to section 56(2)(vii)(b), we notice that in a recent decision in the case of Narendrakumar Jain (Supra) the coordinate bench on an identical issue has held that “10. Thus, when on the date of agreement amount of consideration is fixed for the transfer of immovable property and the date of registration is not the same, then the Stamp duty Value on the date of agreement is to be taken. The section further provides that the value as on date of agreement can be taken only when the amount of consideration in the agreement has been paid by way of account payee cheque or by the electronic clearing system through a bank account on or before the date of agreement transfer of such immovable property. Thus, the aforesaid provisos carve out exception by taking the stamp duty value as on the date of agreement when the payments have been made through banking channels. The Ld. AO has stated that allotment letter is not a registered agreement, therefore, the value of the property has to be taken as on the date of sale registration. First of all, when builder gives an allotment letter with terms and conditions and all the rights and the value of purchase is agreed upon and assessee has acted upon by accepting the terms and conditions and starts making the agreed payment, then it is clearly covered under aforesaid proviso to section 56(2)(x) of the Act. The assessee has agreed to purchase in the year 2012 in terms of allotment letter and also made the payments before the sale was registered. Therefore, the value as on date of allotment has to be treated as stamp duty value for the purpose of aforesaid provision of section 56(2)(x) of the Act and since at that time payment made was more than the stamp duty value therefore, no addition can be made. Thus, the aforesaid finding of the Hon'ble CIT (A), which is in consonance with the provisions of the Act and the judgment of Hon'ble Bombay High Court, is upheld. Accordingly, the revenue appeal is dismissed.”
Considering that the facts in assessee's case and respectfully following the ratio of the above decision we hold that the date of letter of allotment should be considered for the purpose of proviso to section 56(2)(vii)(b). Therefore the addition made by the AO by considering the stamp duty value on the date of registration is not tenable and liable to be deleted. Accordingly we see no reason to interfere with the decision of the CIT appeals in deleting the addition made by the AO.
In result, the appeal of the Revenue is dismissed.