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Facts
The assessee purchased an immovable property in 2006 for Rs. 7,50,000/-. The property was registered in 2018 at a stamp duty value of Rs. 39,45,128/-. The Assessing Officer (AO) invoked Section 56(2)(x) and Section 50C of the Act, making an addition of Rs. 39,45,128/-.
Held
The Tribunal held that the transfer of property occurred in 2006 as per the agreement, and the registration in 2018 was merely a formality. The conditions for invoking Section 56(2)(x) were not met as the consideration was paid in 2006, and Section 50C could not be invoked based on the later registration value.
Key Issues
Whether the addition made under Section 56(2)(x) is justified when the property transfer and payment occurred prior to the registration date, and whether Section 50C can be applied based on the stamp duty value at the time of registration.
Sections Cited
143(1), 143(2), 142(1), 50C, 56(2)(x), 274, 270A, 234B
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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC” MUMBAI
Before: SMT. BEENA PILLAI
Present appeals filed by the assessee is against order dated 27/12/2023 passed by NFA Delhi for assessment year 2018-19 on following grounds of appeal:
The assessment order dated 07.04.2021 is bad in law and without jurisdiction as the same has been passed under section which were no longer applicable.
2. The Ld. CIT(A) has erred in confirming the addition made by the Ld. AO of Rs. 39,45,128/- u/s 56(2)(x) of the Act.
3. The order passed by the Ld. CIT(A) and the Ld. AO are without considering the detailed submissions filed and the documentary evidences relied upon and therefore, both the orders are bad in law and liable to be set aside.
4. The Ld. AO erred in initiating penalty proceeding u/s 274 r.w.s 270A of the Act, vide letter dated 07.04.2021.
5. The Ld. AO, has erred in the levying interest under section 234B of the Act.
Brief facts of the case are as under:
The assessee is an individual and proprietor of M/s. Naveen Enterprises. He filed his return of income on 30/08/2080 declaring total income of ₹5,44,170/- for the year under consideration. The return was processed under section 143 (1) of the act and was selected for scrutiny. The Ld.AR accordingly issued notice under section 143 (2) and 142 (1) of the act calling upon assessee to furnish various details.
2.1 The Ld. AO observed that, assessee during the year under consideration purchased immovable property for consideration of ₹7,50,000/-. Subsequently, the said property was registered with the sub-registrar of Mumbai on 23/03/2018 at a value of ₹ 39,45,128/- being the stamp duty value as on that date. As the stamp duty value for the property as on the date of registration per was more than the agreement value, the Ld. AO invoked provisions of section 50 C read with section 56 (2) (x) of the act.
2.2 After considering the submissions of the assessee the Ld. AO rejected the same and made addition in the hands of the assessee under section 56 (2) (x) of the act, amounting to ₹ 39,45,128/-. Aggrieved by the order of the Ld. AO assessee preferred appeal before the Ld. CIT(A)
Before the Ld. CIT(A), assessee submitted that during financial year relevant to assessment year under consideration, the assessee registered immovable property on 23/03/2018 that was purchased for consideration of ₹7,50,000/- on 09/10/2006. He submitted, that an agreement was entered into by assessee with the vendor vide agreement dated 19/10/2006, transferring the possession and all rights, title and interest in the said property to the assessee. He submitted that the entire sale consideration was paid by the assessee to the vendor in the year 2006 when the agreement was executed. The assessee submitted that, the registration of the agreement took place on 23/03/2018.
3.1 The Ld. CIT(A) after considering the submissions of the observed as held as under:
“5.2 The addition made by the Assessing Officer and the submissions of the appellant have been perused. It is seen from the assessment order that the appellant purchased an immovable property for a consideration of Rs.7,50,000/- and the stamp duty for the purpose of Section 50C read with Section 56(2)(x) of the Act is Rs.39,45, 128/-. It is a fact that the appellant paid stamp duty of Rs.1,97,500/- on the value of Rs.39,45, 128/- and had not disputed the stamp duty value before the stamp valuation authorities. The appellant filed copy of agreement for sale during appeal proceedings. The said agreement is stated to be entered on 19th October, 2006 between Khodabhai Dhudabai Gohil and the appellant Mr.Nivruti Mahadev Ghadge for purchase of tenement i.e.
Room No.104 situated in Priyadarshan Co-op Housing Society Ltd for a consideration of Rs.7,50,000/- and the said property was registered on 23.03.2018. On verification of agreement for sale dated 19.10.2006, it is noticed that there is no mention of payment of Rs.7,50,000/- and mode and date of payment in the agreement. The provisions of Section 56(2)(x) of the Act states that 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. In the instant case, there is no mention of payment of consideration and the mode of payment in the agreement for sale and the appellant failed to file copy of bank account in support of the claim. The said agreement for sale is not registered before the registering authority. Further, the appellant has not filed evidence of sources for purchase of the above property. As such, the conditions laid down under section 56(2)(x) of the Act has not been fulfilled by the appellant and also failed to produce source for the said purchase of immovable property. In view of the above, the addition made by the AO is upheld and the ground raised in this regard is dismissed.
6. Ground No.2 relate to restriction of the differential amount i.e. Rs.31,95,128l-(Rs.39,75, 128 - 7,50,000). The AO held that the appellant purchased a property for a consideration of Rs.7,50,000/-. However, the appellant paid stamp duty of Rs. 1,97,500/- for the value of Rs.39,45,128/. The AO added the entire amount of Rs.39,45,128/- as income from other sources: The appellant in his submissions stated that the appellant had purchased the property for Rs.7,50,000/- and hence, if any, should be restricted to the differential amount i.e. Rs:31,95, 128/- (Rs.39,75,128 - 7,50,000). The submissions of the appellant is perused and found that th ippellant is taking plea for two sale considerations for which he is indirectly acceptin the sale consideration of the stamp duty value of Rs.39,75,128/-. The contention of the appellant is not accepted as the appellant has not filed proof of payment of Rs.7,50,000/- or filed copy of bank account statement in support of the claim. In view of the above, the ground No.2 is dismissed.”
Aggrieved by the order of the Ld.CIT(A), assessee is in appeal before the Tribunal.
The Ld.AR submitted that Ground No.1-3 raised by assessee pertains to the addition of ₹ 39,45,128/- by invoking section 56(2)(x) of the Act.
4.1 The Ld.AR submitted that, the said property was MAHADA property, and it was received by the vendor from MAHADA. He submitted that as per circular number 01/06/2005 issued by MAHADA, there was restriction to transfer such property for a period of 10 years. The said circular relied by the Ld. AR is in vernacular language, and is placed at page 8-9 of the paper book. The Ld.AR submitted that, the original vendor obtained possession of the said property from MAHADA in the year 2005. Subsequently, an Agreement to Sell was entered into with assessee on 19/10/2006, wherein all right title and interest in the said property was transferred by the original vendor to assessee. The said agreement to sell is placed at page 12-23 of the paper book. The Ld.AR submitted that the original vendor had also filed an affidavit to further strengthen the Agreement to sell dated 19/10/2006 to the assessee.
4.2 The Ld.AR submitted that, based on the Agreement to sell, the assessee transferred electricity bill in his name. The society also issued certificate of membership to assessee on 10/04/2010. It is submitted that subsequently the assessee entered into sale deed on 23/03/2018 after the expiry of the restricted period of 10 years. This sale deed was registered with the sub- registrar of stamps in the. The Ld.AR submitted that, it was merely the registration of the document that happened in the relevant year under consideration, and the entire sale consideration was paid by assessee to the vendor in the year 2006. The Ld. AR submitted that, all relevant transfers pertaining to electricity meter, society membership indicate complete transfer of the said property to the assessee happened as a consequence in the year 2006. It is thus submitted by the Ld.AR that assessee’s case to not fall provisions of section 56 (2)(x) of the Act.
4.3 On the contrary the Ld.DR placed reliance on the orders passed by authorities below. The Ld.DR submitted that, the Agreement to Sell entered into by assessee in the year 2006 is an after thought and the actual transfer took place in the relevant year under consideration. I have perused the submissions advanced by both sides in the light of records placed before me.
It is an admitted fact that, Room No. 104 situated in Priyadaarshan cooperative Housing Society Ltd 118/L SB, Pawar Marg, Curry Road,(W), Mumbai 400013(hereinafter referred to as a set property) is developed by MAHADA which was originally allotted to one Shri. KHODABHAI DHUDABHAI GOHIL. As per the circular issued by MAHADA dated 02/03/2018 which is in continuation to the original circular issued dated 01/06/2005 it is clear that there was restriction imposed on the allottee’s to transfer such MAHADA allotted house in any manner whatsoever, for a period of 10 years from the date of allotment. The said property was however purchased by the assessee as per the Agreement to Sell dated 19/10/2006, but could not be registered.
5.1 Be that as it may, such conditions are never strictly followed by the allottees and MAHADA allotted properties are often sold before expiry of lock in period of 10 years. Similar situation arose in the present facts of the case, where assessee purchased the house that was allotted by MAHADA to the original allottee in the year 2006 by way of Agreement to Sell dated 19/10/2006.
5.2 It is noted that various documents like indemnity bond, affidavit was executed by the original allottee in favour of assessee, transferring all title and interest of the original allottee to the assessee for a consideration of ₹ 750,000. It is also noted that a general power of attorney has been executed by the original allottee in favour of the assessee to overcome any difficulty of transferring electric metre, obtaining ration card in the name of assessee on the address. It cannot be overlooked that the society also admitted the assessee as a member from 10/04/2010, even though 10 years had not lapsed.
5.3 As argued by the Ld.DR the Agreement to Sell dated 19/10/2006 entered into by assessee cannot be is an afterthought. It is noted that the Stamp paper on which the Agreement to Sell was executed is issued in the name of the assessee on 18/10/2006 and the document was been notarised on 19/10/2006. Unless the revenue comes out with evidence against these detail it is difficult to agree with the argument advanced by the Ld.DR. The electricity bill placed at page 10 of the paper book dated March 2011 also shows the name of the assessee appearing against the said flat. Even the ration card was issued to the assessee on 29/03/2011 shows that the name of the assessee against the said property. There is no doubt that the vendor (or original allottee by MAHADA) transferred all the right title and interest in the said property in the name of assessee. The registration of the sale deed carried on 23/03/2018 complete ownership of the said property in the name of assessee. It is noted that there is nothing on record brought by the Ld. DR or authorities below to prove any action taken by MAHADA against the original allottee or the assessee any violation.
As per the I.T. Act read with Transfer of Property Act, the said property was transferred in the name of assessee in the year 2006.
5.4 As on the date of registration, the value of the said property increased due to passage of time. Under such circumstances, provisions of Section 50C cannot be invoked merely because the value adopted by the assessee on 19/10/2006 was less than the stamp duty value as on date of Registration being 23/03/2018. It is noted that the Ld. AO Choose to assessee income adopting the SRO value as on the date of registration without carrying out any verification with the vendor.
5.5 I therefore direct the Ld. AO to delete the addition made in the hands of the assessee. Accordingly Grounds raised by the assessee stands allowed.
In the result appeal filed by the assessee stands allowed.
Order pronounced in the open Court on 14/01/2025.