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Facts
The assessee purchased a flat, and the AO made an addition under section 56(2)(vii) by considering the stamp duty value of the property as higher than the purchase price, while the agreement for purchase was entered into before the effective date of the said section. The assessee argued that the relevant section was not applicable as the agreement predated its enactment and a significant portion of the payment was made through banking channels before the effective date.
Held
The Tribunal held that Section 56(2)(vii) of the Income Tax Act was not applicable to the transaction as the agreement for purchase was entered into before the section's effective date of April 1, 2014, and substantial payments were made prior to this date. The Tribunal also noted that the AO erred in considering the cost of the flat as Rs. 69,28,000/- instead of the actual incurred cost of Rs. 91,48,462/-.
Key Issues
Whether Section 56(2)(vii) of the Income Tax Act, 1961, is applicable when the agreement for property purchase and substantial payments were made prior to its effective date. Whether the cost of the property was correctly determined by the AO.
Sections Cited
143(3), 250, 56(2)(vii), 56(2)(x), 50C
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Income Tax Appellate Tribunal, KOLKATA BENCHES “SMC”, KOLKATA
Before: DR.MANISH BORAD
Assessee by : Shri Abheshek Bansal, AR Revenue by : Smt. Madhumita Das, Addl. CIT Date of hearing : 28.11.2024 Date of pronouncement : 03.02.2025 आदेश / ORDER PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The captioned appeal pertaining to Assessment Year 2017- 18 at the instance of assessee is directed against the order dated 05.07.2024 passed by National Faceless Appeal Centre, Delhi u/s.250 of the Income-tax Act, 1961 (in short ‘the Act’) which in turn is arising out of Assessment Order dated 12.12.2019 passed u/s. 143(3) of the Act.
Assessee has raised following grounds of appeal :
For that the assessment order passed by the ld. AO is bad in law as well as on facts.
2. For that the Ld.AO and Ld.CIT(A) erred in invoking provisions of Sec.56(2)(vii)(b) and 56(2)(x) whereas the said section were not applicable during the year in which the agreement to purchase the property was entered into. Dilip Kumar Agrawal
3. For that even otherwise, the Ld. AO and Ld.CIT(A) erred in considering the cost of the flat at Rs.69,28,000/- instead of Rs.91,48,462/- as actually incurred by the appellant and her wife.
4. For that the Ld. AO erred in considering the stamp duty on the date of registration of the property instead of the date on which the property was booked by the assessee and agreement for purchase was entered into. 5. For that the Ld. AO erred in making addition u/s.56(2)(vii) directly on the basis of value adopted by the registering authority without referring the matter to the DVO. 6. For that under the facts and circumstances of the case, the addition of Rs.25,73,800/- u/s.56(2)(vii)(b)/56(2)(x) are liable to be deleted of the Act. 7. For that even otherwise, the addition made by the Ld.AO is arbitrary and excessive. 8. For that the appellant craves leave to add, alter or withdraw any ground(s) of appeal on or before hearing of the appeal.”
The grievance of the assessee is two fold, firstly, that provisions of section 56(2)(vii) of the Act are not applicable on the transaction in question during the year and secondly, the addition of Rs.25,73,800/- is uncalled for because the ld. AO has adopted the cost of Flat at Rs.69,28,000/- instead of Rs.91,48,462/-.
Facts in brief are that the assessee is an individual filed return of income for the A.Y. 2017-18 filed on 12.10.2018 declaring income of Rs.2,11,450/-. The case has been selected for scrutiny through CASS for the reason of showing less value of purchase of property as against the stamp authority followed by validly serving of notices u/s.143(2)/142(1) of the Act. Details called for by the AO were duly filed by the assessee. Ld. AO observed that during the year the flat has been registered through a Deed of Conveyance in favour of the assessee located at 7A, 7th floor, Block-1, 136, Jessore Road, Kolkata showing Dilip Kumar Agrawal purchase value at Rs.69,28,000/-. In the name of buyer, assessee’s name was appearing along with other co-owners namely Mrs.Geeta Agarwal. However, the stamp duty value of the said property was Rs.1,20,75,600/-. Ld. AO adopted the difference and added half of the amount and assessed the income in the hands of assessee at Rs.25,73,800/-.
Aggrieved assessee preferred appeal before the CIT(A) taking both the issues firstly, addition u/s.56(2)(vii) is not applicable and that the stamp value is to be considered as on the Date of Agreement which was entered into during the F.Y. 2012-13 and also that cost incurred by the assessee was Rs.91,48,462/- and not Rs.69,28,000/- and therefore no addition is called for. However, the assessee failed to fully satisfy the ld.CIT(A) and the appeal was partly allowed.
Now the assessee is in appeal before the Tribunal raising the grounds extracted above.
Ld. Counsel for the assessee referring to the detailed written submissions covering all the grounds of appeal
and the paper book containing 136 pages which includes Purchase Agreement dated 19.06.2012 and other details of payments made to Mrs. Bimla Devi Bothra and Promoter during F.Y. 2012-13 onwards. He further submitted that section 56(2)(vii) is not applicable in the facts of the instant case as the said section has been made applicable from 01.04.2014 but the Agreement for purchase has been entered into in the F.Y. 2012- 13 and major amount has already been paid through banking channel prior to 01.04.2014. Reliance placed on the decision of Coordinate bench of the Tribunal in the case of Benudhar Dilip Kumar Agrawal Gokulanand Biswal Vs. National e-assessment Centre in dated 29.05.2023.
8. On the other hand, ld. Departmental Representative vehemently argued relying on the orders of the lower authorities.
9. I have heard the rival submissions made by the parties and perused the record placed before me. I will first take the legal issue raised by the assessee that section 56(2)(vii) of the Act is not applicable in the case of assessee and the impugned addition deserves to be deleted on this account itself. Section 56(2)(vii) of the Act which was inserted by the Finance Act, 2013 w.e.f.01.04.2014 reads as under :
“(vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009 but before 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,— (i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; (ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration: Provided that where the date of the 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 the agreement may be taken for the purposes of this sub-clause: Provided further that the said proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property; (c) any property, other than immovable property,— (i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property; (ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration : Dilip Kumar Agrawal Provided that where the stamp duty value of immovable property as referred to in sub-clause (b) 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 sub-clause (b) as they apply for valuation of capital asset under those sections : Provided further that this clause shall not apply to any sum of money or any property received— (a) from any relative; or (b) on the occasion of the marriage of the individual; or (c) under a will or by way of inheritance; or (d) in contemplation of death of the payer or donor, as the case may be; or (e) from any local authority as defined in the Explanation to clause (20) of section 10; or (f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or (g) from any trust or institution registered under section 12AA or section 12AB; or (h) by way of transaction not regarded as transfer under clause (vicb) or clause (vid) or clause (vii) of section 47. Explanation.—For the purposes of this clause,— (a) "assessable" shall have the meaning assigned to it in the Explanation 2 to sub- section (2) of section 50C; (b) "fair market value" of a property, other than an immovable property, means the value determined in accordance with the method as may be prescribed; (c) "jewellery" shall have the meaning assigned to it in the Explanation to sub- clause (ii) of clause (14) of section 2; (d) "property" means the following capital asset of the assessee, namely:— (i) immovable property being land or building or both; (ii) shares and securities; (iii) jewellery; (iv) archaeological collections; (v) drawings; (vi) paintings; (vii) sculptures; (viii) any work of art; or (ix) bullion; (e) "relative" means,— (i) in case of an individual— (A) spouse of the individual; (B) brother or sister of the individual; (C) brother or sister of the spouse of the individual; (D) brother or sister of either of the parents of the individual; (E) any lineal ascendant or descendant of the individual; Dilip Kumar Agrawal
(F) any lineal ascendant or descendant of the spouse of the individual; (G) spouse of the person referred to in items (B) to (F); and (ii) in case of a Hindu undivided family, any member thereof; (f) "stamp duty value" means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property;”
Now perusal of the above provision indicates that in case of the purchase of any immovable property where the Date of Agreement fixing the amount of consideration or transfer of immovable property and the Date of Registration are not the same, the stamp value on the Date of Agreement may be taken for the purpose of this clause and further second proviso states that first proviso will apply only where the amount of consideration referred therein or part thereof has been paid by any mode other than cash on or before the Date of Agreement for the transfer of such immovable property.
On going through the paper book filed by the assessee, I notice that the assessee has purchased the said property from Smt. Bimla Devi Bothra who firstly entered into an Agreement with the Promoter on 28.04.2010. Thereafter, on 19.06.2012 another Agreement was entered into between Smt. Bimla Devi Bothra and Mr. Dilip Kumar Agrawal along with nomination Agreement with the Promoter and that Smt. Bimla Devi Bothra nominated the flat in favour of Mr.Dilip Kumar Agrawal. So it shows that the transaction of purchase of the flat in question was initiated by the assessee vide Agreement dated 19.06.2012 which is prior to the insertion of section 56(2)(vii) of the Act. Now it is to be examined whether any payment other than the mode of cash has been given by the assessee for purchase of the said flat. Details has been filed by the assessee mentioning the dates, name of Bank and the amount through which Dilip Kumar Agrawal payments have been made to the Promoter, Bimla Devi Bothra and others and the same is reproduced below : Dilip Kumar Agrawal
The above details indicating the payments made during the F.Y. 2012-13 and F.Y.2013-14 are further supported by copy of bank statements filed in the paper book placed at page 8. So it remains an undisputed fact that Agreement for purchase of property in question was made during the F.Y. 2012-13 itself. Therefore, firstly section 56(2)(vii) of the Act will have no application since it has been brought into the statute from 01.04.2014 and secondly the stamp value if any to be considered is to be on the date of entering the Agreement, i.e. 19.06.2012 and thirdly the addition in the hands of assessee if any could have been made only after referring it to the District Valuation Officer.
My view that section 56(2)(vii) of the Act is not applicable on the facts of the instant case is further supported by the Dilip Kumar Agrawal decision of Coordinate Bench of the Tribunal in the case of dated 29.05.2023 wherein on identical facts the Tribunal held as under :
“6. We heard the rival submissions and perused the material on record. The sole crux of the disputed issue envisaged by the Ld.AR that, the CIT(A) has erred in sustaining addition to the extent of 50% of difference in stamp duty value of the flat as per SRO and purchase consideration as per agreement overlooking the various facts and the evidences. We find that the purchase agreement is dated 13.07.2009 and it was registered on 14-7-2017 placed at page 1 to 37 of the paper book and the purchase agreement was entered much prior to 01.04.2017 and the provisions of Sec. 56(2)(x) of the Act are incorporated from Finance Act 2017 and is applicable prospectively from 01.04.2017. The Ld. AR submitted that the date of agreement was inadvertently mentioned as entered on 13.07.2019 instead of 08.10.2009. Further, the first/initial payment of Rs.2 Lakhs was made by cheque by the assessee, Whereas the date of agreement and date of initial cheque payment are prior to the incorporation of Sec. 56(2)(x) of the Act in the Finance Act 2017 effective from A.Y 2017-18. The Ld.AR has relied on the fallowing judicial decisions.(i)Principal Commissioner of income tax Vs Naina Saraf (2022)142 taxmann.com 147(Rajasthan)(9- 05-2022)(ii) Rajib Rathindra Saha Vs Income Tax Officer (International Taxation)(2022)139 taxmann.com 211(Mumbai Trib)(21-02-2022 and (iii)Shri Ashutosh Jha (HUF) VS I.T.O Ranchi in dated 30-4-2021.
7. We find that the assessee has purchased the flat vide agreement dated 13.07.2009 and the section 56(2)(x) of the Act was not in the statute book, and also it is well settled principle of Law that a charging section cannot be pressed into service retrospectively unless it is specifically provided for by the legislature. The provisions of Sec. 56(2)(x) of the Act are incorporated in the Finance Act 2017 with the prospective applicability from A.Y.2017-18 and the transactions entered into prior to 1.04.2017 would not suffer any implications of the section. Whereas in the present case, the transaction of purchase of flat is vide agreement dated 13.07.2009 and it was registered on 14-7-2017 in the F.Y.2018-19. Further, merely because the first payment of Rs.2 lakhs was made on 8-10- 2009 subsequently after date of agreement, the revenue cannot rely on the second proviso to section 56(2)(x) of the Act and tax the difference in stamp duty value of flat as per SRO and purchase consideration as per agreement. Since the section56(2)(x) of the Act is not applicable to the assessee, as the agreement was entered prior to 1-04-2017, hence the second proviso cannot be made applicable and the assessee cannot be fastened the liability in the light of second proviso to section 56(2)(x) of the Act. We considering the facts, circumstances, submissions, ratio of the judicial decisions set-aside the order of the CIT(A) and direct the Assessing officer to delete the addition and allow the grounds of appeal in favour of the assessee. Dilip Kumar Agrawal
In the result, the appeal filed by the assessee is allowed.”
Before concluding, I also notice that ld. AO erred in treating cost of flat incurred by the assessee at Rs.69,28,000/- because the assessee has furnished the details which clearly prove that the assessee has incurred the cost of Rs.91,48,462/-. Therefore, the very basis adopted by the AO invoking provision of section 56(2)(vii) of the Act are on incorrect facts. Finding of ld.CIT(A) are set-aside. Effective Grounds of appeal raised by the assessee are allowed and impugned addition stands deleted.
In the result, the appeal of the assessee is allowed.