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Facts
The assessee, an individual and Non-Resident Indian, purchased an immovable property. The Assessing Officer (AO) made an addition of Rs. 21,10,673/- under Section 56(2)(x)(b) of the Income-tax Act, considering the difference between the stamp duty value and the purchase consideration.
Held
The Tribunal held that the agreement for sale was executed on March 31, 2017, which falls in the Financial Year 2016-17, and the corresponding Assessment Year is 2017-18. Section 56(2)(x) was introduced w.e.f. April 1, 2017. Therefore, the addition made by the AO in Assessment Year 2018-19 was not sustainable and is void ab-initio.
Key Issues
Whether the addition made under Section 56(2)(x) of the Income Tax Act is sustainable when the agreement for sale was executed prior to the introduction of the said section.
Sections Cited
147, 144C(13), 144C(1), 56(2)(x)(b), 43CA, 47, 50C, 155, 14
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “C” :: PUNE
Before: DR.DIPAK P. RIPOTE & SHRI VINAY BHAMORE
आदेश/ ORDER
PER DR. DIPAK P. RIPOTE, AM:
This is an appeal filed by the Assessee directed against the Assessment Order under section 147 r.w.s 144C(13) of the Act, for A.Y.2018-19 passed on 25.12.2024 emanating from order of the Dispute Resolution Panel-3, Mumbai, dated 26.11.2024 for A.Y.2018-19 emanating Draft Assessment Order under section 144C(1) of the Act, dated 15.03.2024. The grounds of appeal
raised by the assessee are as under :
1. Learned AO was not correct in proceeding further with the impugned assessment proceedings as the whole proceedings were lacking in legality
2. The appellant wishes to make a detailed submission on the issue of legality at the time of hearing of the case, which may please be allowed
3. Without prejudice to the issues pertaining to legality, the Learned AO was not correct in making addition of Rs 21,10,673/- u/s 56(2)(x)(b), considering the offer made by the builder to bear all the taxes and duties by himself
4. The appellant wishes to make a detailed submission on the issue of merit of the case at the time of hearing of the case, which may please be allowed
5. The Appellant craves leave of Your Honor to add/alter / delete any of the above cited grounds on or before the date of hearing of this appeal.
6. The appellant makes a humble request to please grant a personal hearing on the case.
Findings & Analysis : 2. We have heard both the parties and perused the records. In this case, on 03.06.2025(Tuesday) Mr.Deepak Gadgil-CA had appeared along with the Assessee for the hearing before this Tribunal.
2.1 During the hearing, we requested ld.AR to file copy of the impugned agreement for purchase of immoveable property, for which ld.AR requested for time. Accordingly, the case was adjourned to 05.06.2025(Thursday). On 05.06.2025, only the Assessee had appeared and had filed copy of the agreement to sale. The case was heard on 05.06.2025.
As per the Final Assessment Order, Assessee is an Individual and a Non-Resident Indian in the assessment year concerned. As per information flagged on Insight Portal and available on NMS module for Financial Year (hereinafter referred to as F.Y.) 2017-18 relevant to Assessment year (hereinafter referred to as A.Y.) 2018- 19, the assessee’s case was identified as non-filer, with potential tax liabilities by analyzing the transactions entered into by the assessee. In the Assessment Order, Assessing Officer has reproduced those transactions.
3.1 During the assessment proceedings, after considering the submissions of the Assessee, which contains copy of purchase deed, copy of Index-II of the property, details of source regarding payment made for purchase of property, the Assessing Office made an addition of Rs.21,10,673/-. The relevant Paragraph-7 of the assessment order is reproduced hereunder : “7. In view of the aforesaid facts & discussion it is concluded that no cogent and forceful facts with regard to non-applicability of provisions of section 56(2)(x)(b) of the Income-tax Act have been furnished by assessee in his case. The assessee has put the onus on the builder for selling out the property to him below Stamp duty value which is not at all reasonable. The provisions applicable in case of builder for selling out the immovable property by receiving consideration lesser than the stamp duty value are strictly governed by the provisions of section 43CA and the purchaser has nothing to do with this. As the violation of provisions of Section 56(2)(x)(b) of the Income-tax Act(with effect from 01/04/2017) is prima facie apparent from the copy of index-ii and provisos as mentioned in the said section are not fulfilled in the case of assessee, therefore. an addition of Rs.21,10,673/-(difference of stamp duty value amounting to Rs.1,73,05,673/- & purchase value amounting to Rs.1,51,95,000/-) is made under the head ‘Income from Other Sources’ in the case of assessee.”
It is a fact that Assessee Pandurang Kashinath Bhilare along with his Wife Mrs.Sunanda Pandurang Bhilare has jointly purchased a row house from M/s.K.N.Associates vide Agreement dated 31.03.2017. We have perused the said Agreement to Sale and noted that it was executed on 31.03.2017. The first page of the said agreement is scanned and reproduced here as under :
4.1 Thus, it can be observed that the impugned agreement for purchase of immovable property was executed on 31.03.2017, which is F.Y.2016-17 and corresponding A.Y.2017-18. However, we have already reproduced the relevant paragraphs of the Assessment Order, it is noted that Assessing Officer has made addition in A.Y.2018-19(F.Y.2017-18). Thus, the Assessing Officer has made impugned addition in the Wrong Assessment Year. Hence, the addition of Rs.21,10,673/- is not sustainable.
4.2 Section 47 of the The Registration Act 1908 is reproduced here as under : “ Section 47: Time from which registered document operates.—
A registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or made, and not from the time of its registration.”
4.3 Thus, as per Section 47 of The Registration Act 1908, the Registered Document operates from the date of its execution and not from the date of its registration. In this case the impugned Agreement to Sale was executed on 31/03/2017. Hence, it shall operate from 31/03/2017.
4.4 However, in this case the Assessing Officer has made addition in A.Y.2018-19 which is bad in law as the Agreement to Sale was executed on 31/03/2017 and it operates from 31/03/2017.
4.5 Therefore, the Assessing Officer is directed to delete the addition of Rs.21,10,673/-.
The Assessing Officer has applied Section 56(2)(x) of the Act, in the case of the Assessee. The Section 56(2)(x) is reproduced here as under : “56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources", if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E.
(2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head "Income from other sources", namely :— ………………………
(x) where any person receives, in any previous year, from any person or persons on or after 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,—
(A) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; (B) 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: Following item (B) shall be substituted for the existing item (B) of sub-clause (b) of clause (x) of sub-section (2) of section 56 by the Finance Act, 2018, w.e.f. 1-4-2019 :
(B) for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely:— (i) the amount of fifty thousand rupees; and (ii) the amount equal to five per cent of the consideration: Provided that where the date of 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 agreement may be taken for the purposes of this sub-clause :
Provided further that the provisions of 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, on or before the date of agreement for transfer of such immovable property:
Provided also that where the stamp duty value of immovable property 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 this sub- clause as they apply for valuation of capital asset under those sections;
(c) any property, other than immovable property,—
(A) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;
(B) 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.”
5.1 Thus, it can be observed that Section 56(2)(x) was introduced w.e.f. 01.04.2017, whereas the agreement was executed on 31.03.2017. Thus, the relevant section 56(2)(x) was not applicable to the case of the assessee. Hence the addition of Rs.21,10,673/- made by the AO invoking section 56(2)(x) is void ab-initio. Accordingly, even on this ground the Assessing Officer is directed to delete the addition.
In the result the appeal of the Assessee is allowed. Order pronounced in the open Court on 21 July, 2025.