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Facts
The assessee filed a return declaring income from other sources, including interest, income under Section 56(2)(x), and pension income. The Assessing Officer (AO) reopened the assessment and made additions on account of cash deposits and income from other sources related to a property sale. The CIT(A) deleted the addition on cash deposits but sustained the addition under Section 56(2)(x).
Held
The Tribunal noted that the assessee argued Section 56(2)(x) is applicable to purchasers and not sellers. Both parties agreed to restore the issue to the Assessing Officer for fresh adjudication. The Tribunal restored the issue to the AO to provide an opportunity to the assessee to substantiate their case.
Key Issues
Whether Section 56(2)(x) of the Income Tax Act is applicable to the seller of a property when the difference between stamp duty value and transaction value is considered. Whether the addition made by the AO and sustained by CIT(A) was in accordance with law.
Sections Cited
56(2)(x), 147, 148, 143(2), 142(1), 144B, 56(1), 54
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI R. K. PANDA & MS. ASTHA CHANDRA
Latika Sakharam Patil ITO, Ward-1(1), Jalgaon Shantivan Taleti, Abu Road, Vs. Sirohi, Rajasthan – 307026 PAN: ALNPP6226F (Appellant) (Respondent) Assessee by : Shri Vipul Khandhar (Virtual) Department by : Shri Vishwas Mundhe Date of hearing : 20-02-2025 Date of pronouncement : 27-02-2025 O R D E R PER R. K. PANDA, VP :
This appeal filed by the assessee is directed against the order dated 01.08.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2017-18.
Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 12.07.2017 declaring taxable income of Rs.6,24,566/-. The entire income declared by the assessee was income from other sources which consists of Rs.44,562/- as interest, Rs.3,72,500/- u/s 56(2)(x) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) and Rs.2,07,504/- as pension income. On the basis of information available on record that the assessee has deposited cash amounting to Rs.12,18,566/- in the bank account during the demonetization period which was actually held in the name of Mr. Hemant Patil who expired in December, 2015, the Assessing Officer reopened the assessment after recording the reasons. The assessee in response to the same requested the Assessing Officer to treat the return originally filed as return in response to the notice u/s 148 of the Act. Thereafter, the Assessing Officer issued notices u/s 143(2) and 142(1) of the Act, in response to which the assessee filed various details from time to time. The Assessing Officer completed the assessment u/s 147 r.w.s. 144B of the Act on 22.03.2022 determining the total income of the assessee at Rs.31,99,582/- wherein he made the following additions: (i) Cash deposits taxed u/s 56(1) of the IT Act Rs.9,58,566/- (ii) Income from other source u/s 56(2)(x) of the IT Act Rs.17,76,450/-
In appeal the Ld. CIT(A) / NFAC deleted the addition on account of cash deposit of Rs.9,58,566/-. He, however, sustained the addition of Rs.17,76,450/- by observing as under: “Ground No. 2:- The grounds of appeal No. 2 is directed against the addition made by the Ld. AO on account of income from other sources u/s 56(2)(x) of the I.T. Act, 1961 of amount Rs. 17,76,450/- being the difference in stamp duty and the transaction value. During the course of assessment proceedings, the Ld. AO made the impugned addition as the assessee had sold an immovable property for the consideration of Rs.20,50,000/- as per the submissions of the assessee, whereas the stamp duty value was Rs.38,26,450/-. During the course of assessment proceedings, instead of offering Rs. 17,76,450/- (difference of stamp duty value and sale consideration) the assessee computed capital gain and claimed deduction u/s 54 of the I.T. Act Therefore, the Ld. AO made the impugned addition of the difference amount of Rs.17,76,450/- as income other from other sources u/s 56(2)(x) of the I.T. Act, 1961 to the total income of the assessee.
During the course of appellant proceedings, the appellant has submitted that the appellant is seller of the property and the section 56(2)(x) is applicable on receiver / purchaser of the property. The appellant has submitted that the Ld. AO has erred in applying section 56(2)(x) and has interpreted it wrongly. On perusal of the submission made by the appellant, it has been the observed that deduction u/s 54 cannot be allowed and as per the provision of section 56(2)(x), the difference in stamp duty and the transaction value needs to be brought to tax. From the facts and circumstances as stated above, the addition of Rs. 17,76,450/- made by the by the Ld. AO on account of income from other sources u/s 56(2)(x) of the I.T. Act, 1961. In view of the facts as stated above, the ground of appeal of the appellant is not sustainable and is liable to be rejected. The ground of appeal No. 2 is Dismissed.”
4. Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the sole effective ground which reads as under: The CIT(A) erred both in law and on facts in confirming the addition of Rs.1776450/- being difference between stamp duty and transaction value.
The Ld. Counsel for the assessee at the outset submitted that the provisions of section 56(2)(x) of the Act as quoted by the Assessing Officer are applicable to the purchasers whereas the assessee in the instant case is the seller. Since the assessee is a seller and the said provisions are applicable to the purchaser, therefore, without giving any finding either by the Assessing Officer or the Ld. CIT(A) / NFAC, addition made by the Assessing Officer and sustained by the Ld. CIT(A) / NFAC is not in accordance with law. He accordingly submitted that he has no objection if the matter is restored to the file of the Assessing Officer for deciding the issue afresh.
The Ld. DR on the other hand while supporting the orders of the Assessing Officer and the Ld. CIT(A) / NFAC submitted that he has no objection if the matter is restored to the file of the Assessing Officer for fresh adjudication of the issue.
After hearing both sides, we find the Assessing Officer in the instant case made addition of Rs.9,58,566/- on account of cash deposit in the bank account during the demonetization period and addition of Rs.17,76,450/- u/s 56(2)(x) of the Act. We find the Ld. CIT(A) / NFAC deleted the addition of Rs.9,58,566/- on account of cash deposit in the bank account but sustained the addition of Rs.17,76,450/- which has been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that the provisions of section 56(2)(x) of the Act are not applicable to the assessee since the same are applicable to the purchasers, whereas the assessee in the instant case is the seller. It is also his submission that since the Assessing Officer has not given any finding on this issue and the Ld. CIT(A) / NFAC has merely sustained the addition made by the Assessing Officer without giving any finding regarding the applicability of the said provisions, therefore, he has no objection if the matter is restored to the file of the Assessing Officer. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to grant one opportunity to the assessee to substantiate his case by filing the requisite details and decide the issue as per fact and law. The assessee is also hereby directed to make his submissions, if any, before the Assessing Officer on the appointed date without seeking any adjournment under any pretext, failing which the Assessing Officer is at liberty to pass appropriate order as per law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 27th February, 2025.
Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 27th February, 2025 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: अपीलार्थी / The Appellant; 1. 2. प्रत्यर्थी / The Respondent 3. The concerned Pr.CIT, Pune 4. DR, ITAT, ‘SMC’ Bench, Pune गार्ड फाईल / Guard file. 5. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune
S.No. Details Date Initials Designation 1 Draft dictated on 27.02.2025 Sr. PS/PS 2 Draft placed before author 28.02.2025 Sr. PS/PS Draft proposed & placed before the 3 JM/AM Second Member Draft discussed/approved by Second 4 AM/AM Member 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS Date on which the file goes to the Head 9 Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order