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Income Tax Appellate Tribunal, ‘SMC‘ BENCH
Before: SHRI M.BALAGANESHDr. Nanasaheb Deshmukh
आदेश / O R D E R PER M. BALAGANESH (A.M):
This appeal in A.Y.2014-15 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-54, Mumbai in appeal No.CIT(A)-30/IT-155/ITO-19(2)(5)2014-15 dated 24/08/2018 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) by the ld. Income Tax Officer-19(2)(5), Mumbai (hereinafter referred to as ld. AO).
At the outset, there is a delay in filing of appeal by 840 days by the assessee in the instant case. The ld. DR vehemently objected to the condonation of the said appeal. I have gone through the condonation petition filed by the assessee wherein it has been stated that the Accountant of the assessee had left the job and since he was the person who was conversant with the income tax matters and assessee as an individual was fully dependent on him, it had escaped completely the attention of the assessee. In any case, I find that this is a recalled matter by this Tribunal wherein, this Tribunal in MA No.116/Mum/2022 vide order dated 12/07/2022 had recalled the exparte order passed by this Tribunal on 14/02/2022. Since the delay has already been condoned by this tribunal while adjudicating the main appeal , which has been subsequently recalled, I am inclined to condone the delay and admit the appeal of the assessee for adjudication.
The only issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in confirming the addition made by the ld. AO in the sum of Rs.38,31,000/- being the difference between the sale consideration and the value determined by the stamp duty authority for the purpose of stamp duty as per Section 56(2)(vii)(b) of the Act.
3.1. I have heard rival submissions and perused the materials available on record. The assessee is an individual and had filed the return of income for A.Y.2014-15 on 20/10/2018 declaring total income of Rs.88,440/-. In the scrutiny assessment proceedings, Shri Nilesh Shah, General Manager-Accounts and Finance from NEO Infracon Limited appeared as authorised representative on behalf of the assessee. The assessee purchased two flats during the year under consideration wherein the total agreement value was agreed at Rs.1,50,00,000/-. The corresponding stamp duty value determined by the stamp authorities for the purpose of levy of stamp duty was fixed at 1,88,31,000/-. Accordingly, the ld. AO show-caused the assessee as to why the difference in consideration of Rs.38,31,000/- being not brought to tax in terms of Section 56(2)(vii)(b) of the Act being the year under consideration. The details of property purchased by the assessee are as under:-
Details of Date of Agreement Stamp duty Difference property Purchase value value Flat No.802, 01.03.2014 82,00,000 1,02,71,500 20,71,500 on 8th Floor Neo Galaxy Flat No.802, 01.03.2014 68,00,000 85,60,500 17,60,500 on 8th Floor Neo Galaxy Total 1,50,00,000 1,88,31,000 38,31,000 3.2. The ld. AO observed that assessee did not make any submission to this effect and accordingly, proceeded to treat the difference of Rs.38,31,000/- as income of the assessee while completing the assessment.
3.3. I find from the statement of facts mentioned before the ld. CIT(A) that assessee had registered agreement for purchase of flats in F.Y.2013-14 relevant to A.Y.2014-15. Assessee had entered into Memorandum of Understanding (MOU) on 31/12/2019 with seller at the time of re-development of society for purchase of flats. As per the MOU, once possession of new flats were handed over to the seller by the builder, agreement for registration of said flats in the name of the assessee would be entered into between assessee and seller. It was vehemently submitted by the ld. AR that MOU fixed the amount of consideration for transfer of immovable property at Rs 1,50,00,000/- and the date of MOU and date of registration were falling in different years, the stamp duty value as on the date of entering into MOU is required to be taken into consideration and not the value on the date of registration of property. In the instant case, I find that the Revenue had disbelieved the existence of MOU and proceeded to treat difference in consideration of Rs.38,31,000/- to be the income of the assessee pursuant to deeming fiction provided in Section 56(2)(vii)(b) of the Act as it stood at the time of registration of the flat.
3.4. I find from para 5.1. of the order of the ld. CIT(A) that assessee had furnished the copy of MOU dated 31/12/2009 before him in the form of additional evidence which was duly admitted by him and even the same was forwarded to the ld.AO for his comments and report. The ld. AO had reported that the MOU does not have any legal value and does not give any reason why the value was less than stamp duty valuation. Based on this, the ld. CIT(A) upheld the addition of the ld. AO. At the outset what is to be seen here is whether the provisions of Section 56(2)(vii)(b) of the Act contained a clause for making any addition to make it applicable in the year of entering the MOU i.e A.Y. 2010-11. In this regard, we find that this is a case of inadequate consideration and the provisions of Section 56(2)(vii)(b) of the Act for inadequate consideration has been inserted in the statute only from 01/04/2014 and hence, the same cannot be made applicable to A.Y.2010-11. When at the time of entering MOU in A.Y.2010-11, the stamp duty value prescribed by the stamp authorities need not be looked into at all, the assessee cannot be expected to give any explanation as to why the consideration agreed between the parties is less than the value fixed by the stamp authorities. Hence, the applicability of provisions of Section 56(2)(vii)(b) of the Act cannot be made in the instant case. In any case, it is not the case of the Revenue that the assessee had paid over and above the agreed consideration to the seller. No evidence has been brought on record by the Revenue with regard to any consequential action taken in the hands of the seller for taxing the differential amount of Rs.38,31,000/- either u/s.50C or u/s.43CA of the Act. In view of the aforesaid observations, I direct the ld. AO to delete the addition made in the sum of Rs.38,31,000/- Accordingly, the grounds raised by the assessee are allowed.
In the result appeal of the assessee is allowed.
Order pronounced on 31/10/2022 by way of proper mentioning in the notice board.