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Facts
The assessee purchased land for Rs. 74,09,555/- when the circle rate was Rs. 1,32,18,000/-. The Assessing Officer (AO) brought the difference of Rs. 58,08,445/- to tax under Section 56(2)(vii)(b)(ii) of the Income Tax Act, treating it as income from other sources.
Held
The Tribunal held that Section 56(2)(vii)(b)(ii) of the Income Tax Act is specifically applicable to individuals and Hindu Undivided Families (HUFs) and not to partnership firms. Therefore, the addition made by the AO was not sustainable.
Key Issues
Whether Section 56(2)(vii)(b)(ii) of the Income Tax Act, 1961, which deals with the taxation of income from purchase of property for a consideration less than the stamp duty value, is applicable to a partnership firm.
Sections Cited
250, 56(2)(vii)(b)(ii), 1961
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “B”NEW DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI SANJAY AWASTHI
सुनवाईक�तारीख/ Date of hearing: 02.03.2026 11.03.2026 उ�ोषणाक�तारीख/Pronouncement on आदेश /O R D E R PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
The appeal arises from order u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), dated 25.08.2025, passed by Ld. CIT(A)-NFAC.
In this case, the assessee is seen to have purchase land at Rs.74,09,555/- even when the circle rate was Rs.1,32,18,000/-. The Ld. AO brought the differentia amount (Rs.58,08,445/-) to tax u/s 56(2)(vii)(b)(ii) of the Act.
1.1 The assessee approached the CIT(A) where also he could not succeed on the basis of findings given in paras 4.2 & 4.3 of the impugned order.
1.2 The aggrieved assessee has approached the ITAT with grounds challenging this action.
Before us, the Ld. AR argued that section 56(2)(vii)(b)(ii) of the Act pertains to only an individual “or a Hindu undivided family”, whereas this case pertains to a partnership firm. It was argued that the assessee cannot be subjected to any enhancement of income under this provision since there is no provision whatsoever for taxing a partnership firm u/s 56(2)(vii)(b)(ii) of the Act. The Ld. AR also placed before us the case of Smt. Chandrasekaran Valarmathi vs. ITO (in order dated 29.11.2023 in which the following has been recorded in para 5 as under: - “Therefore, applying purposive construction to the facts of the present case, the property is deemed to have been acquired by the firm only and not by individual partners. This being so, the provisions of Sec. 56(2)(vii)(b)(ii) could not be pressed into service since these provisions do not apply to partnership firm at the relevant point of time. Therefore, in our considered opinion, the impugned addition is not sustainable. By deleting the same, we allow both the appeals.”
We have carefully considered the rival submissions and have gone through the record before us. We find from a perusal of the language of section 56(2)(vii)(b)(ii) of the Act that it is specifically applicable to individuals and HUFs. It is thus clear that since the assessee is a partnership firm hence, there can be no addition made under this particular section. In this regard, the coordinate bench decision in the case of Smt. Chandrasekaran Valarmathi (supra) of the Chennai ITAT is worth following, and we do so.
In the result, the addition made by the Ld. AO is directed to be deleted.
In the result, appeal is allowed.
Order pronounced in the open court on 11.03.2026