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Facts
The assessee filed its return of income for AY 2018-19, declaring a total income. The AO made an addition under section 56(2)(x) on account of the difference between the agreement value and stamp duty valuation of a property. The assessee contended that the reduction in agreement value was due to GST implementation and the difference was within the safe harbor limit.
Held
The Tribunal held that the addition made by the AO under section 56(2)(x) of the Act cannot be upheld. The Tribunal found that the reduction in agreement value was a bona fide adjustment to accommodate purchasers regarding the GST benefit. The difference in price was within the limits prescribed by the Act for such variations.
Key Issues
Whether the addition made by the AO under section 56(2)(x) on account of the difference between agreement value and stamp duty valuation of a property is justified, considering the circumstances of GST implementation and safe harbor provisions.
Sections Cited
143(2), 142(1), 56(2)(x), 80TTA, 154, 43CA, 50C
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Income Tax Appellate Tribunal, “J(SMC
Before: SMT. BEENA PILLAI & SHRI OMKARESHWAR CHIDARA
Per: Smt. Beena Pillai, J.M.: Present appeal filed by the assessee arises out of order dated 29/01/2024 by NFAC is daily for assessment year 2018-19 on following grounds of appeal: “Following grounds of appeal are without prejudice to each other:
I.T.A. No.4433/Mum/2024 A.Y. 2018-19 2
1. The Appellant states that the notice issued u/s. 143(2) of the Act is bad in law, illegal and void-ab-initio. The consequential assessment order passed is bad-in-law, illegal and void-ab-initio.
2. The Appellant states that the assessment order passed by AO is in gross violation of principles of natural justice.
3. The learned CIT(A) has erred in passing the appeal order in gross violation of principles of natural justice. 2. The learned CIT(A) has erred in confirming the addition of Rs. 3,89,843/-made by the AO u/s. 56(2)(x) of the Act 69C on account of difference between agreement value and stamp duty value. 5. The Appellant craves leave to add, amend and/or alter the ground or grounds of appeal either before or at the time of hearing of the appeal.” Brief facts of the case are as under:
2. The assessee is an individual and filed its return of income on 13/07/2018 declaring total income of ₹22,55,740 for assessment year under consideration. Case was selected for scrutiny and statutory notice under section 143 (2) 142 (1) was issued to the assessee. In response to statutory notices, assessee filed requisite details as called for.
2.1. The Ld.AR noted that assessee had booked under construction property during assessment year 2016-17. As there was increase in the GST rates. The Ld.AR noted that the builder reduced agreement value from Rs.2,63,67,000/- as per the revised sale price of ₹2,55,25,375/-. However the Ld.AO was of the opinion that the registration of the property was done at the lower cost. He accordingly made addition of the differential amount in the hands of the assessee under section 56 (2) (x) of the Act. A.Y. 2018-19 3 Aggrieved by the order of the Ld.AO assessee preferred appeal before the Ld.CIT(A).
The Ld.CIT(A) upheld addition made by the Ld.AO by observing as under: “6. In Ground No. 1, claim has been made that the excess of stamp duty valuation over sale consideration was only 1.5% whereas provisions of section 56(2)(x) allowed 5% of sale consideration to be ignored. However, the contention is not correct because for the AY under consideration (2018-19), only Rs. 50,000/- was to be ignored. The amount of difference between stamp duty valuation and sale(purchase) consideration is Rs. 389848/-, which is higher than Rs. 50,000/-. As a result, the said difference was taxable as income from other sources u/s. 56(2)(x). Therefore, assessee's contention is not as per the law applicable for the AY under consideration. Hence, the contention is rejected and ground is dismissed. 6.1 Regarding ground No.2, it is seen that no evidence has been furnished till date to establish that the property was booked in October, 2015 for consideration of Rs. 26367000/-. As per the facts available on record, everything related to the property happened only in the year under consideration. Since nothing has been brought on record to avail the benefit under proviso 1 & 2 below the clause (x) of section 56(2), the claim that the builder reduced the sale consideration from Rs. 26367000/- to Rs. 25525375/- in order to provide relief from additional burden of GST@ 12% introduced from 01.07.2017, is of no consequence. As a matter of fact, not a single document has been furnished to demonstrate that assessee had booked the property prior to 01.07.2017. In these circumstances, the reason that builder reduced the sale price due to implementation of GST w.e.f 01.07.2017 is factually incorrect. Therefore, the contention raised in this ground is rejected. The provisions of section 56(2)(x) do not provide for discretion to any authority except in the circumstances provided in first and second proviso. Therefore, AO was correct in making addition of Rs. 389848/-. Accordingly, the addition is confirmed and the ground is dismissed. 6.2 For ground no. 3, AO is directed to verify whether claim u/s. 80TTA has been made in the ITR as well as to verify eligibility of assessee for the claim and then to take action as per law. In view of this direction to AO, this ground is treated as partly allowed” A.Y. 2018-19 4 Aggrieved by the order of the Ld.CIT(A), assessee is in appeal before this Tribunal.
The Ld.AR submitted that there is a delay of 40 days in filing the present appeal before this tribunal. He submitted that the reason for the delay is because against the assessment order dated 19/04/2021 filed rectification petition before the Ld.AO on 05/12/2024. He submitted that as the assessee awaited for the order passed under section 154 of the act, causing delay of 40 days. It is a submission of the assessee that the no malafide intention on behalf of the assessee in filing the appeal before this tribunal belatedly.
4.1. The Ld.DR though opposed the condemnation of delay in filing the present appeal before this tribunal, could not controvert the cause that led to such delay.
We have perused the submissions advanced by both sides in the light of records placed before us.
In our view, the assessee has made out a reasonable cause for the delay that is caused in filing the present appeals before this Tribunal. Nothing to establish any contrary intention has been filed by the revenue before this Tribunal. In our opinion there is a sufficient cause for condoning the delay as observed by Hon’ble Supreme Court in case of Collector Land Acquisition Vs. Mst. Katiji & Ors., reported in (1987) 167 ITR 471 in support of his contentions. A.Y. 2018-19 5 5.1. We place reliance on following observations by Hon’ble Supreme Court in case of Collector Land Acquisition Vs. Mst. Katiji & Ors., reported in (1987) 167 ITR 471 wherein, Hon’ble Court observed as under:-
“The Legislature has conferred the power to condone delay by enacting section 51 of the Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on de merits". The expression “sufficient cause” employed by the Legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice that being the life-purpose of the existence of the institution of courts. It is common knowledge that this court has been making a justifiably liberal approach in matters instituted in this court. But the message does not appear to have percolated down to all the other courts in the hierarchy.
And such a liberal approach is adopted on principle as it is realized that :
Ordinarily, a litigant does not stand to benefit by lodging an appeal late.
Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. ......................................................1.Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.” 6. Considering the submissions by both sides and respectfully following the observation by Hon’ble Supreme Court, we find it fit to condone the delay caused in filing the present appeals as it is not attributable to the assessee.
A.Y. 2018-19 6 Accordingly, we condone the delay of 40 days in filing the present appeal before this Tribunal.
On merits, the Ld.AR submitted that the only issue raised by the assessee is on account of the addition made under section 56 (2) (x) of the act being the difference between the agreement value and the stamp value.
7.1. The Ld.AR submitted that, the said property was on 30/10/2015 for a total sale consideration of Rs.2,63,67,000/-. The currently wide notification dated 01/07/2017 goods and service tax was made applicable on the unbilled amount on sale of flats under construction at 12% as compared to 5.5% that was applicable previously. Subsequently a press release was issued by the Ministry of Finance department of revenue on 15/06/2017 wherein the builders were expected to pass on the benefit of lower tax burden under GST regime to the buyers of the property by way of reduced prices/instalments. Reliance was placed on said press release pleased page 3-4 of the paper book.
7.2. The Ld.AR the submitted that the registration of the property therefore took place at a price of ₹2,55,25,375 in lieu of which the builder had issued a letter dated 12/08/2017. The Ld.AR placed reliance on the E issued by the developer at page 5-6 of the paper book. The Ld.AR further submitted that in any event the difference in the price at which the agreement was registered is only to the extent of 1.5% and for the year under consideration section 56(2)(x) allows the difference up to 5%. A.Y. 2018-19 7 7.3. Ld.AR submitted that all these details were furnished before the 1st appellate authority however the same has been ignored by passing the impugned order. The Ld.AR the submitted that the addition made under section 56(2)(x) of the act is bad in law.
7.4. On the contrary, the Ld.DR relied on orders passed by authorities below.
We have perused the submissions advanced by both sides in the light of records placed before us.
Admittedly, the safe harbour applicable for year under consideration is 3%. There is no doubt that the difference between originally agreed price vis-à-vis the actual price in to the facts of the present case, as per the registered agreement for sale dated 18/11/2017 is 1.5%. The CBDT vide circular number 8/2018 explained the intention of rationalisation in section 43 CA, section 50C and section 56 of the act, explaining bona fide variation and the undue hardships faced by assessee’s.
8.1. In the present facts of the case though we need not look into the reason behind the bona fides variation, it is apparent that the builder was called upon wide press release to accommodate the purchasers in respect of transferring the benefit of the GST by including the same in the total value of consideration. As a result of which the value that was all generally agreed had to include the GST was payable by the purchasers. Such an adjustment cannot anyway fall within the ambit of section 56 (2) (x) of the act. A.Y. 2018-19 8 8.2. In our considered opinion, the provisions under section 56 (2) (x) of the act was introduced to curb the practice of receiving any property without consideration or for inadequate consideration by resorting to the registered valuation as per the stamp authorities. We do not find any such intention in the present facts of the case in order to invoke the provisions of section 56 (2) (x) of the act and therefore the addition made by the authorities below cannot be upheld.
Accordingly the grounds raised by the assessee stands allowed.
In the result appeal filed by the assessee stands allowed. Order pronounced in the open court on 04/02/2025