ITO--19(2)(1), MUMBAI vs. JAYNTILAL BHERCHAND GANDHI, MUMBAI

Grounds of appeal raised in assessee’s appeal read as under :- “That on facts and circumstances of the case and in law Id. CIT (Appeals) has erred in confirming the addition made u/s. 56(2)(vii)(b) at Rs. 35,33,499/- being the difference between actual consideration paid and value determined by stamp valuation authority in respect of a residential flat purchased under construction without properly appreciating that there was gap of more than 3 years between the date of allotment duly backed by written allotment letter

Grounds of appeal

At the outset, in this case learned Counsel of the assessee submitted that the tax effect of Revenue’s appeal is less than the limit fixed by the CBDT in filing the appeal before the ITAT. Learned Departmental Representative did not controvert the same. He could not point out that the appeal falls in any of the exceptions carved in the said CBDT circular. Accordingly Revenue’s appeal stands dismissed as below tax effect, hence, not maintainable.

Brief facts of the case are that the assessee is a proprietor of M/s. Rajendra Metals Supply Corporation and deals in ferrous and non-ferrous metals. The assessee had entered into an agreement dt. 24.03.2014 for purchase of flat No. 2401, 24th floor, Orion Tower, Rajaram Mohan Roy Road, Mumbai 400 007, for a consideration of Rs.1,52,00,000/- against market value of Rs.1,87,33,499/- for which he paid a stamp duty of Rs.9,37,000/-. In reply to show cause notice as to why the difference on stamp duty value and agreement value (as given in agreement dt. 24.03.2014) should not be disallowed, the assessee submitted as follows:-

The AO did not accept this explanation that as per Sec. 56(2)(vii)(b) if the agreement fixing the amount of consideration for the transfer of immovable property is done before registration, the stamp duty value should be taken on the date of the agreement. In the instant case the assessee had considered the allotment letter dt. 06.08.2010 as agreement for fixing the consideration for purchase of flat. The AO further observed that the contention of the assessee that the allotment letter dt. 06.08.2010, issued by the builder, be taken as agreement for purchase of flat, was not acceptable in as much as :- • in the allotment letter there is no mutual consent of both the parties, as is required of in an agreement • the letter of allotment bears only the signature of the seller • no specific mention that the purchaser will agree to the price • the letter of allotment does not mention the configuration of the flat to be purchased • allotment letter is addressed to person/s other than the assessee • price of the flat and terms of payment is not quoted in the allotment letter

For the aforesaid reasons, the AO proceeded to add Rs. 35,33,499/- being the notional difference in the amount of stamp duty value and the actual consideration paid for purchasing the flat |to the total income of the assessee u/s 56(2)(vii(b) of the I.T.Act, 1961 under the head income from other sources.

Upon assessee’s appeal learned CIT(A) noted that the assessee has filed additional evidence. Learned CIT(A) considered the same. Learned CIT(A) rejected the assessee’s contention that stamp value as on date of allotment should be taken as he found that the assessee has failed to adduce satisfactory evidence that the date of agreement is 6.8.2010. Thereafter he held that “the proviso to section 56(2)(vii)(b) is therefore not attracted. Accordingly, the order of the learned Assessing Officer is upheld and the ground of appeal is dismissed.”

Against the above order the assessee is in appeal before us.

We have heard both the counsel and perused the records. Learned Counsel of the assessee contended that the assessee has duly entered into an agreement which need not be in writing. He said that in accordance with the agreement the assessee has been given allotment letter. That the assessee has already paid part of the consideration at the time of allotment hence he submitted that the same should be taken into account. In this regard he placed reliance upon certain case laws for the proposition that allotment letter issued and part of the consideration paid should be considered as sufficient compliance for taking the date of allotment as the date of agreement for the purpose of computation.

Per contra, learned Departmental Representative relied upon the orders of the authorities below.

Upon careful consideration we find ourselves in agreement with learned Counsel of the assessee. The assessee has entered into an agreement and consequently assessee has been duly given allotment letter and assessee has also paid part of the consideration at that time, hence, there is no infirmity in the assessee’s request that the date of allotment should be considered as date of agreement. Hon'ble Supreme Court decision in the case of Sanjeev Lal Vs. CIT (Civil Appeal No. 5899-5900 of 2014 vide order dated 1.7.2014) in this regard supports the above proposition. Accordingly, we set aside the orders of the authorities below and decide the issue in favour of the assessee.

In the result, Revenue’s appeal stands dismissed and assessee’s appeal stands allowed.