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Facts
The assessee challenged an order that added Rs. 78.69 lakhs under section 56(2)(x) of the Income Tax Act for AY 2018-19. The addition was based on the difference between the stamp duty value and the actual consideration for four shops purchased by the assessee's grand parents in 1995 and later transferred to the assessee.
Held
The Tribunal held that the first and second provisos to Section 56(2)(x) of the Act are applicable. The date of the allotment letter, along with part payment made then, should be considered as the agreement date for determining stamp duty value, not the registration date.
Key Issues
Whether the stamp duty value on the date of registration or the date of the allotment letter should be considered for the purpose of Section 56(2)(x) when the property was booked and part consideration was paid much earlier than the registration date.
Sections Cited
56(2)(x), 50C, 155, 43CA, 56(2)(vii)(b)
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Income Tax Appellate Tribunal, MUMBAI “A” BENCH : MUMBAI
Before: SHRI B.R. BASKARAN & SHRI NARENDER KUMAR CHOUDHRY
ORDER PER B.R. BASKARAN, A.M : The assessee has filed this appeal challenging the order dt.13-11-2024 passed by the Ld. Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [„Ld.CIT(A)‟] and it relates to AY. 2018-19. The only issue urged in this appeal is related to the addition of Rs.78.69 lakhs made by the AO u/s56(2)(x) of the Income Tax Act, 1961 („the Act‟).
The facts relating to the case are stated in brief. The AO took up the return of income filed by the assessee for scrutiny in order to verify the investment made by the assessee in the immoveable properties. It was noticed that the assessee and his brothers have purchased four shops in a building, named, „Krishna Tower‟ for a consideration of Rs.18,22,800/-. It was noticed that the value determined by the stamp authorities for the above said four shops was Rs. 2,54,30,000/-. Hence, there was a difference of Rs.2,36,07,200/- between stamp duty value and actual consideration of the four shops.
2.1. When questioned about the same, the assessee submitted that the property was initially booked by his grand parents in the year 1995 by making an initial payment of Rs.7.00 lakhs to the builder. Thereafter another sum of two lakhs was paid in the year 1997. However, the registration of the properties did not take place because of some dispute with the builder. After the death of the grand parents, the property was transferred to the name of the three grand sons including the assessee. Finally after resolving the dispute, the sale deed was executed on 30-01- 2018 and at that point of time, the stamp duty value was different. Accordingly, it was submitted that no addition u/s 56(2)(x) should be made.
2.2. The AO did not agree with the contentions of the assessee. He took the view that the difference between stamp duty value and actual sale consideration is assessable to tax u/s. 56(2)(x) of the Act. Since the assessee herein was having 1/3rd share in the properties, the AO assessed 1/3rd of the difference amount, which worked out to Rs.78,69,067/- as income of the assessee u/s. 56(2)(x) of the Act. The Ld.CIT(A) also confirmed the same. Hence, the assessee has filed this appeal.
We heard the parties and perused the record. The undisputed fact would remain that the property was purchased by the grand parents of the assessee in the year 1995. The assessee has furnished copy of allotment letter in pgs. 2 to 4 of the Paper Book. We also notice from the copy of receipt given by the builder, which is placed at page No.5 of paper book, for having received Rs. 7 lakhs by way of cheque No. 135269, dt. 05-05-1995 drawn on Bank of India. Thus, we notice that the impugned property was booked in the year 1995 by paying part consideration by way of cheque. Accordingly, as per the facts of the present case, we are of the view that the first &second proviso to section 56(2)(x) of the Act shall apply. For the sake of convenience, we extract below the provisions of sec.56(2)(x) of the Act and we have highlighted the first and second said provisos.
“56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources", if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. (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)…… (ii)…… …….. (x) where any person receives, in any previous year, from any person or persons on or after the 1st day of April, 2017,— (a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum; (b) any immovable property,— (A) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; (B) for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely:— (i) the amount of fifty thousand rupees; and (ii) the amount equal to ten per cent of the consideration: Provided that where the date of 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 agreement may be taken for the purposes of this sub-clause :
Provided further that the provisions of the first proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, on or before the date of agreement for transfer of such immovable property: Provided also that where the stamp duty value of immovable property is disputed by the assessee on grounds mentioned in sub- section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of this sub-clause as they apply for valuation of capital asset under those sections: Provided also that in case of property being referred to in the second proviso to sub-section (1) of section 43CA, the provisions of sub-item (ii) of item (B) shall have effect as if for the words "ten per cent", the words "twenty per cent" had been substituted; 3.1. As per the above said provisos, the consideration determined between the parties on the date of entering into the agreement and the Stamp duty value as on that date should be considered for the purposes of sec.56(2)(x), if the date of agreement and the date of registration are different. In the instant case, the facts would show that the impugned properties were booked by the grandparents of the assessee in the year 1995, which is evidenced by the allotment letter issued by the builder. There is also no dispute with regard to the fact that a part consideration of Rs.7.00 lakhs was paid on that date. Hence, in our view, the first and second provisos of sec.56(2)(x) shall apply to the facts of the present case.
3.2. We may also gainfully refer to the decision rendered by the Co-ordinate Bench in the case of Parth Dashrath Gandhi vs ACIT (ITA No.1990/Mum/2022 dated 31-01-2023), wherein the Tribunal considered the question as to whether the allotment letter can be taken as Agreement to sell. It was held by the Tribunal as under: - 6. We heard the parties and perused the record. We notice that the AO has considered the stamp duty value as on the date of registration of the agreement to sell for the purpose of determining the applicability of sec.56(2)(x) of the Act. However, the facts that the assessee had been allotted both the properties by way of allotment letters and further, the assessee has also paid instalments as per that letter are not disputed. Hence, the question that arises is whether the allotment letter can be considered as "agreement to sale" within the meaning of the provisos to sec. 56(2)(x) of the Act, which states that the stamp duty valuation as on the sale of sale agreement should be taken into consideration for the purpose of sec.56(2)(x), provided that amount of consideration or part thereof had been paid as per the mod prescribed on or before the date of agreement for transfer of such immovable property.
Before us, the Ld A.R placed reliance on the decision rendered by the coordinate bench in the case of Mr. Sajjanraj Mehta vs. ITO (ITA No.56/Mum/2021 dated 05-09-2022), wherein it was held that the date of allotment letter can be taken as date of agreement of sale for the purposes of sec.56(2)(x) of the Act. On the contrary, the Ld D.R placed his reliance on the decision rendered by another co-ordinate bench, which was relied upon by AO & CIT(A), viz., Sujauddian Kasimsab (supra).
With regard to the decision rendered in the case of Sujauddian Kasimsab (supra), the Ld A.R submitted that the said decision has been rendered on the basis of facts prevailing in that case. The assessee, in the above said case, had paid Rs.3.00 lakhs before the date of agreement, but the same was described as "earnest money deposit" in the Agreement, meaning thereby, the assessee did not fulfill the condition prescribed in sec.56(2)(x) of the Act. The Ld A.R further submitted that the Tribunal did not consider the effect of second proviso to sec.56(2)(x) of the Act in the above said case. We agree with the submissions of Ld A.R with regard to the distinguishing features pointed out in the decision rendered by the co-ordinate bench in the case of Sujauddian Kasimsab (supra). Hence, we are of the view that the above said decision could not lend support to the case of the revenue.
On the contrary, we are of the view that the decision rendered by another co- ordinate bench in the case of Mr Sajjanraj Mehta (supra) is applicable to the facts of the present case. The decision rendered in the case of Mr Sajjanraj Mehta by the co-ordinate bench is extracted below, for the sake of convenience:- "10. We have gone through the order of the A.O, Ld. CIT(A) and various submissions of assessee dated 06-10-2021. Vide pg no-23 to 27 of paperbook we have observed the payment made by the assessee to the developer on 17-10- 2011 amounting to Rs 14 lacs vide cheque no 906740, Bank of Maharashtra to enter into an agreement cum acknowledgement of payment made and other terms and conditions about the property. This agreement between assessee and developer clearly confirms the amount of consideration along with other terms and conditions relating to levy of stamp duty, service tax and other charges to be paid by the assessee.
The finding of the A.O vide pg no-4, para-2.6 wherein he observed that assessee has deposited Rs 14 lacs with the developer to year mark the said premises for Rs 70 lacs. Even if for the time being it is assumed that this agreement is merely a letter of intent, still amount mentioned in this so called letter of intent can't be changed by either of the party .At the max the parties involved may opt for exit from the transaction but amount of consideration can't be changed. This transaction of the assessee has to be analysed in commercial parlance, without finalisation of consideration nobody will deposit 20% of the final consideration. The vitality of the agreement further found force from the behaviour of the assessee as confirmed by the A.O also that assessee paid further Rs 34.5 lacs till financial year 2012- 13. Assessee also paid Rs 1,00,285/- as VAT, Rs 1,35,187/- as service tax, Rs 5,02,000/- as stamp duty and Rs 30,000/- as registration charges.
The chronology of the events confirms that the finding of the A.O treating the agreement of the assessee as letter of intent is not correct. In this matter treating the said agreement as letter of intent shows an over thinking and hyper technical interpretation at the end of the A.O. Pinki Chetan Shah assessee's case clearly falls in the proviso to Section 56(2)(vii)(b).
In the above said case, the co-ordinate bench has held that the allotment letter can be taken as agreement for sale. We also notice that the above said decision has been followed by another Co-ordinate Bench in the case of Pinki Chetan Shah vs. Addl CIT (ITA No.3629/Mum/2023 dated 27-02-2024).
3.3. In view of the foregoing discussions, we are of the view that the AO was not right in taking into consideration of the stamp duty value of SRO as on the date of registration of the sale deed. The Ld.CIT(A) was also not justified in confirming the addition so made by the AO.
3.4. As per the above cited decisions, the AO is required to compare the sale consideration of the properties with the Stamp duty value of SRO as on the date of allotment letter. Since the relevant facts are not available on record, we feel it appropriate to restore this issue to the file of the AO for comparing the sale consideration with the stamp duty value of SRO as on the date of allotment letter and to take appropriate action in accordance with section 56(2)(x) of the Act, after affording adequate opportunity of being heard to the assessee. Accordingly, we set aside the order passed by the Ld.CIT(A) and restore this issue to the file of the AO, who will examine this issue afresh as per the discussions made supra.
In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.