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Facts
The assessee purchased two plots of land for a consideration less than the stamp duty valuation. The Assessing Officer invoked Section 56(2)(vii)(b) of the Act and added the difference between the purchase price and stamp duty value. This led to a reassessment order.
Held
The Tribunal found that the crucial issue was whether the land was held as stock-in-trade or a capital asset. The Tribunal also considered the applicability of Section 56(2)(vii)(b) and the relevant financial year for valuation.
Key Issues
Whether the provisions of Section 56(2)(vii)(b) are applicable to land held as stock-in-trade, and the relevant period for stamp duty valuation.
Sections Cited
56(2)(vii)(b), 143(3), 263
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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
Assessment Year : 2014-15 Vikas Ratanlal Jain, Vs. ITO, Ward-1(1), Plot No.32, Station Road, Aurangabad. Vedant Nagar, Chhatrapati Sambhajinagar, Aurangabad- 431005. PAN : AFAPJ5847B Appellant Respondent Assessee by : Shri Nandkishor S. Daga & Shri Nitesh N. Daga Revenue by : Shri Shashank Ojha Date of hearing : 18.08.2025 Date of pronouncement : 29.10.2025 आदेश / ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 15.01.2025 passed by Ld. CIT(A)/NFAC for the assessment year 2014-15.
The appellant has raised the following grounds of appeal :-
01. On the facts and circumstances of the case and in law, the Learned CTT(A) along with the Learned AO has erred in contending that provisions of S. 56(2)(vii)(b) is applicable to all the immovable properties even if such land is considered as stock in trade. As mentioned in the explanation to the aforesaid section, property means the ‘capital asset’ of the assessee and hence if land is considered as stock in trade, provisions of such section are not applicable to such purchase. Reliance is placed on the various judicial precedents wherein it has been held that the provisions of S. 56(2)(vii)(b) are not applicable to stock in trade but is applicable only to capital assets: Commissioner of Income Tax Vs. Ashok Agarwal (HUF) ITAT Jaipur - and Satendra Kaushik Vs. ITO-ITAT Jaipur-ITA No. 392/JP/2019 02. On the facts and circumstances of the case and in law, the Learned CIT (A) along with the Learned AO has erred in contending that such pieces of lands purchased were not shown as stock in trade. The assessee had shown such assets as stock in trade in his personal balance sheet since no transaction was carried with respect to this business except of making payments towards purchase of such plots and payment of required fees or Nazarana to corporation. The intention of the appellant was to do the business of the plotting since the appellant along with others borne the cost of development along with Nazarana from their own respective bank accounts. This can also be substantiated with the fact that the assessee has declared the income from sale of such plots under the head 'Profits and Gains from Business and Profession' in the F.Y. 2015-16 and stock of unsold plots are still being reported by the appellant in his balance sheet as on the date.
3. Without prejudice to the above grounds and on the facts and circumstances of the case and in law, the Learned CIT (A) along with the Learned AO has erred in contending that the property purchase transaction has been carried out in FY 2013-14 whereas the agreement to sale was carried out in FY 2011-12 itself. Hence, the provisions of S. 56(2)(vii)(b) applicable for FY 2011-12 should be applied which covers transactions of immovable properties received without consideration only and since in the given case, the property was purchased with some consideration although lower than the stamp duty valuation, the scenario in the given case is not covered in the provisions of S. 56(2)(vii)(b) of the Act applicable for FY 2011-12. Reliance in this regard is placed on the decision of honorable Vishakhapattanam ITAT in case of ACIT Vs. Anala Anjibabu (2020) 207 TTJ (Vishakha) 239 (ITA No. 415/Viz/2019) wherein the same issue for the same assessment year was discussed.
4. The Learned CIT (A) has erred in not commenting on the grounds of appeal
raised by the appellant with reference to the plots being considered as stock in trade along with applicability of S. 56(2)(vii)(b) and not commenting on the submission of appellant with respect to the applicability of S. 56(2)(vii)(b) for FY 2011-12 and not FY 2013-14. It is well settled law that the order of the officer shall state the points for determination and also consider the grounds taken by the appellant and his order should be a speaking order.
05. The Learned CIT(A) has erred in not providing the enough opportunity of being heard. Considering the above, we request you to evaluate our grounds of appeal and oblige.’
3. Facts of the case, in brief, are that the assessee is an individual furnished his return of income on 31.03.2015 declaring an income of Rs.1,048,430/-. The case was selected for scrutiny under CASS and the assessment order u/s 143(3) of the Act was passed on 13.12.2016 by accepting the income returned by the assessee. Subsequently, Ld. PCIT found that the assessee has purchased two plots of land for a consideration which was less than the stamp duty valuation and according to him the difference in the purchase value and stamp duty value was required to be added in the hands of the assessee in the light of section 56(2)(vii)(b) of the Act. Accordingly, Ld. PCIT initiated proceedings u/s 263 of the Act and the assessment order dated 13.12.2016 was declared as erroneous and prejudicial to the interests of the Revenue and the assessment order was set-aside to the file of the Assessing Officer to examine afresh in the light of section 56(2)(vii)(b) of the Act and reframe the assessment order after providing reasonable opportunity of hearing to the assessee. Vide order dated 30.08.2019, the Assessing Officer 143(3) r.w.s. 263 of the Act by determining taxable income at Rs.31,48,905/- as against the income returned by the assessee at Rs.10,48,430/-. The above assessed income includes addition of Rs.21,00,475/- made u/s 56(2)(vii)(b) of the Act.
Being aggrieved with the above reassessment order, the assessee preferred an appeal before Ld. CIT(A)/NFAC. After considering the reply furnished by the assessee, Ld. CIT(A)/NFAC dismissed the appeal filed by the assessee.
It is the above order against which the assessee is in appeal before this Tribunal.
Ld. AR appearing from side of the assessee submitted before us that the order passed by Ld. CIT(A)/NFAC is unjustified. Ld. AR submitted before the bench that the plots were held by the assessee as stock in trade and were not a capital asset therefore provisions of section 56(2)(vii)(b) of the Act are not applicable. Ld. AR further submitted that in subsequent year i.e. during Asstt. Year 2016-17 when the plots were sold by the assessee, income was shown under the head profits and gains from business or profession. Alternatively, Ld. AR along with other arguments submitted before the bench that Ld. CIT(A)/NFAC erred in not considering the Nazarana to the corporation by the assessee on behalf of the seller for the purposes of obtaining permission for sale of impugned plots of land. In this regard, copy of challans dated 30.03.2013 are produced before the bench. Ld. AR also submitted that as per para No.13 & 14 of the sale deeds dated 16.05.2013 it was specifically agreed by the parties to the sale deeds that the vendor shall bear the charges and expenses that is Nazarana payable to the Municipal Corporation for getting the permission of sale from the collector. Alternatively, Ld. AR also submitted that the registered agreement for purchase of impugned plots of land was entered into in financial year 2011-12 and part payment through banking channel was also made, therefore for the purposes of calculation of income from other sources i.e. section 56(2)(vii)(b) proviso of the Act the stamp duty value of financial year 2011- 12 should have been adopted instead of stamp duty value of financial year 2013-14. Accordingly, Ld. AR requested before the bench to delete the addition of Rs.21,00,475/- confirmed by Ld. CIT(A)/NFAC.
Ld. DR appearing from side of the Revenue relied on the orders passed by the subordinate authorities and requested to confirm the same.
8. We have heard Ld. counsels from both the sides and perused the material available on record including the paper book and copy of case laws furnished by the assessee. In this regard, we find that admittedly the assessee has purchased two plot of land for a consideration which is less than the stamp duty valuation and the Assessing Officer invoked the provisions of section 56(2)(vii)(b) of the Act and added the amount of Rs.21,00,475/- which represents the difference in actual purchase price and the stamp duty valuation price fixed by the registering authority. It was the contention of Ld. counsel of the assessee that the impugned plots were purchased for the purposes of business and the same were held as stock in trade and not as capital asset. In support of this contention, Ld. AR furnished copy of income tax return for assessment year 2016-17 wherein income from sale of above plot was shown under the head profits and gains of business or profession. It was also the contention of Ld. AR that during the period under consideration no activity was done on those plots therefore in the balance sheet of Shree Industries which is a proprietorship concern of the assessee the impugned plots were not appearing however the balance amount payable at the time of registry was withdrawn from the capital account. It was also contended by Ld. AR that the impugned plots were appearing in the personal balance sheet prepared by the assessee.
Alternatively, it was also the contention of Ld. AR that the assessee has paid required fees or Nazarana of Rs.55,89,553/- from his bank account, in March 2013 to the Municipal Corporation, which has also not been considered towards cost, either by the Assessing Officer or by Ld. CIT(A)/NFAC.
It was also the alternate contention of the assessee that as per the proviso to section 56(2)(vii)(b) of the Act the stamp duty value of the Financial Year 2011-12 was to be considered instead of stamp duty value of Financial Year 2013-14, since advance cheque payment was made & registered agreement was also entered in Financial Year 2011-12.
Considering the totality of the facts of the case & in view of above submissions, we deem it appropriate to set-aside the order passed by Ld. CIT(A)/NFAC and remand the matter back to the file of the Assessing Officer to pass reassessment order afresh i.e. de novo after providing reasonable opportunity of hearing to the assessee. The assessee is also hereby directed to respond to the notices issued by Ld. Assessing Officer in this regard and produce relevant documents/submission/additional evidences, if any, to