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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SRI MAHAVIR SINGH
O R D E R महावीर ससुंह, न्याययक सदस्य/ PER MAHAVIR SINGH, JM: This appeal of the assessee is arising out of the order of Commissioner of Income Tax (Appeals)]-7, Mumbai [in short CIT(A)], in Appeal No. CIT(A)-7/IT-94/184/2016-17 order dated 15.10.2018. The Assessment was framed by the Income Tax Officer, Ward-16(3)(5) Mumbai (in short ITO / AO) for the A.Y. 2014-15 vide order dated 28.12.2016, under section 143(3)
2 | P a g e Umesh Padamasi Gosar read with section 147 of the Income-tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in making addition of ₹29,73,054/- being difference in value between the stamp duty assessed and the value as per sale agreement of the property transaction by invoking the provisions of section 56(2)(vii)(b) of the Act. For this, assessee has raised the following effective ground No.1: - “1. On the facts and circumstances of the case and in Law, the learned Assessing Officer (Hereinafter referred to as the “LAO”) has erred in directing the addition of ₹29,73,054/- under section 56(2)(vii)(v) of the Act on the difference in value between the stamp duty assessed rate and the value as per sale agreement for property located at Khar (West), Mumbai. The addition pertains to transaction entered into the earlier assessment year 2013-14, when Section 56(2)(vii)(b) was not applicable and is illegal, infructuous and against the provisions of the Income Tax Act, 1961.”
Brief facts are that the assessee during the year under consideration i.e. FY 2013-14, had purchased an immovable
3 | P a g e Umesh Padamasi Gosar property for a consideration of ₹1.60 crores as recoded in the sale agreement. The AO noted that the market value of this property as per stamp duty valuation i.e. based on Circle rates is at ₹1,89,73,055/-. Accordingly, the AO required the assessee to explain as to why difference of ₹29,73,055/- be not added to the total income of the assessee under section 56(2)(vii)(b) of the Act. The AO rejected the explanation of the assessee and added the differential amount by stating that though the assessee has entered into an agreement for purchase of property on 28.03.2013, but the same was registered on 02.04.2013. According to AO, as the agreement was registered in FY 2013-14 relevant to this AY 2014-15, the provisions of section 56(2)(vii)(b) of the Act applies to the case of the assessee. Therefore, he made addition of ₹29,73,055/- being difference in the sale consideration. Aggrieved, assessee preferred the appeal before CIT(A).
The CIT(A) also confirmed the action of the AO after considering the submissions of the assessee by observing as under: - “From a perusal of the above section and the facts of the assessee’s case, it is clear that the assessee’s case falls under the mischief of the said section in as much as the assessee has received an immovable property after the 1st day of October, 2009 but before the 1st day of April, 2017
4 | P a g e Umesh Padamasi Gosar for a consideration of Rs.1,60,00,000/- which is less than the stamp duty value of the property of Rs.1,89,73,055/- by an amount exceeding fifty thousand rupees. Therefore, the difference amount between the stamp duty value of such property as exceeds such consideration shall be taxed as income from other sources. By virtue of first proviso, the date of the agreement (28.03.2013) fixing the amount of consideration (Rs.1,60,00,000/-) for the transfer of immovable property being not the same as the date of registration (02.04.2013), the stamp duty value on the date of the agreement (28.03.2013) may be taken for the purposes of the sub- clause (vii)(b)(ii) to section 56(2) of the Act. In the present case there is no difference between the stamp duty value as on the date of agreement and the date of registration and therefore, the provisos to section 56(2)(vii)(b)(ii) of the Act are not applicable to the assessee's case. I also find that the language of section 36(2)(vli)(b)(ii) of the Act is very unambiguous and the only point relevant is the stamp duty on the date of 5 | P a g e Umesh Padamasi Gosar registration and the stamp duty on date of agreement. The question as to when the transfer of rights in the property take place are not important under section 56(2)(viiXb)(ii) of the Act. The issue of date of transfer of rights in property are important for determination of year for capital gains tax which is not in dispute in the present appeal. In view of the above, I do not find any force in the contentions of the appellant that the transfer in property took place in A.Y.2013-14 and not in A.Y.2014-15 when the provisions of section 56(2)(vii)(b)(ii) of the Act were introduced. In the assessee's case, the registration of property undisputedly took place in AY 2014-15 and therefore the provision of section 56(2)(vii)(b)(ii) of the Act are attracted and I ma of the view that the AO was justified in adding the difference of ₹29,73,054/- between the stamp duty valuation of ₹1,89,73,055/- and the consideration as per agreement of ₹1,60,00,000/- to the total income of the assessee u/s 56(2)(vii)(b)(ii) of the Act.
Hence, the grounds of appeal are dismissed.”
6 | P a g e Umesh Padamasi Gosar Aggrieved, assessee came in appeal before Tribunal.
I have heard the rival contentions and gone through the facts and circumstances of the case. I noted that the assessee had purchased immovable property at Khar West, Mumbai for a consideration of ₹1.60 crores vide an agreement for sale dated 28.03.2013. The assessee made part payment and possession of the property has been taken on the date of sale agreement i.e. 28.03.2013 but actually, the agreement was registered only on 02.04.2013. The details along with dates are as under: - Investment in Immovable property Amount Rs. (purchase) Date of Agreement 28/03/2013 Purchase consideration 1,60,00,000 Amount of stamp duty 9,83,500 Date of payment of stamp duty 15/02/2013 Date of Registration 02/04/2013 6. I noted that the provisions of section 56(2)(vii)(b) of the Act was inserted from 01.04.2013 and this provision is applicable only w.e.f. 01.04.2014 i.e. for and from AY 2014-15. In the present case before me, where the date of agreement and for stamp duty registration agreement is different then, which date is to be taken as applicable for this section. It is noted that this issue has been dealt by co-ordinate Bench of this Tribunal in the case of Sanjay Kumar Gupta vs. ACIT in vide order dated 05.10.2018, wherein the Tribunal has considered the applicability of provisions of section 56(2)(vii)(b) of the Act vide Para 9 as under: -
7 | P a g e Umesh Padamasi Gosar “9. We have considered the rival submissions as well as relevant material on record. The assessee has claimed to have purchased the property in question being B-29, Sushant City, Kalwar Road, Jaipur from one Shri Nav Naresh Jhanwar vide agreement dated 28/3/2013. The copy of the said agreement is placed at page No. 1 and 2 of the paper book. Though the said agreement is not registered but only attested by the Notary, however, the payment of part sale consideration on 28/3/2013 is duly mentioned in the sale deed dated 26/4/2013. The Assessing Officer considered the date of transaction as the sale deed dated 26/4/2014. Accordingly, the Assessing Officer made the addition as per Section 8 ITA 227/JP/2018_ Sanjay Kr. Gupta Vs ACIT 56(2)(vii)(b) of the Act by adopting stamp duty value of the property as purchase consideration and the difference was assessed to tax. The ld. CIT(A) while dealing with the issue has confirmed the action of the Assessing Officer by holding as under:
8 | P a g e Umesh Padamasi Gosar 3.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The Assessing Officer noted that the assessee had purchased an immovable property at Kalwar Road Jaipur for a consideration of Rs. 10,51,000/- which was valued for stamp purpose at Rs. 22,37,060/-. It was claimed in the assessment proceedings that the property had been taken possession of on 28/03/2013 by executing a sale agreement and receiving cash of Rs. 4,00,000/- and Rs. 6,51,000/- vide post dated cheque and the same was got registered on 28/04/2013. However, the Assessing Officer based on the reply of the assessee that property could not be registered earlier due to technical and legal reasons as the title of the flat was not transferred on 28/03/2013 in favour of the seller and the he did not have the right to deal with the immovable property as an owner on the date of agreement. Thus, on 9 | P a g e Umesh Padamasi Gosar 26/04/2013 the seller of the property became the owner when the flat was registered by M/s Ansal property and subsequently sold this land to the assessee.
Further, the Assessing Officer placed reliance on the registered sale deed which clearly stated that the actual physical possession was given on 26/04/2013 i.e. on the day of the registry. Based on the above, the Assessing Officer applied the provision of section 56(2)(vii)(b) of the I.T. Act as the transaction related to A.Y. 2014-15.
In the present proceedings it is submitted that the assessee by virtue of the agreement had acquired full rights in the property on 28.03.2013 and 9 ITA 227/JP/2018_ Sanjay Kr. Gupta Vs ACIT therefore the property was acquired during the F.Y. 2012-13 and provisions of section 56(2)(vii)(b) were not applicable.
10 | P a g e Umesh Padamasi Gosar As seen in the discussion above, on the day of the agreement, the seller himself was not the owner of the property and so could not have passed it on to the assessee. The entries in the sale deed also establish that 'the promoter has handed over actual possession of the said plot of land to the buyer" on the day of the registry Thus the transaction has to be considered for A.Y. 2014-15 & provision of section 56(2)(vii)(b)(ii) would be applicable, the addition made is confirmed. Ground of appeal is dismissed.
Thus, it is clear that the ld. CIT(A) declined to accept the claim on the ground that the seller did not have the right to deal with the immovable property as an owner on the date of agreement dated 28/3/2013 and accordingly treated the transaction took place only when the sale deed was registered on 26/4/2013. We find that as per the agreement to sell dated 15/9/2013 between the Ansal Township and Land Development Pvt. Ltd. and Nav Naresh Jhanwar, the said
11 | P a g e Umesh Padamasi Gosar property was agreed upon to be sold to the allottee subject to the payments as per the schedule annexed to the said agreement. The ld AR has filed the statement of the payment by the allottee and it is clear that the allottee of the said property had already made the entire payment of consideration to Ansal Township and Land Development Pvt. Ltd, subsequently known as Ansal Properties and Infrastructure Ltd.. Thus, in view of the fact that there was an agreement between the parties and in pursuant to the said agreement, the allottee 10 ITA 227/JP/2018_ Sanjay Kr. Gupta Vs ACIT had already paid the entire consideration to the developer and therefore, the substantial and material rights in the said property got vested with the allottee. Hence the competence of the allottee to transfer the said property to the extent of his right in the property cannot be disputed. Though, the formal sale deed was executed by the developer Ansal Properties and Infrastructure Ltd. only on 26/4/2013, however, the said sale deed has not created in a new right in favour of 12 | P a g e Umesh Padamasi Gosar the allottee but ratified the rights in the said property already vested with the allottee. Hence, as on 23/3/2013, the seller was very much competent to transfer his rights in the property in favour of the assessee. Accordingly, we do not find any substance and merit in the reasons assigning by the ld. CIT(A) to deny the claim of the assessee which is legally sustainable. Further it is also not in dispute that as per the sale deed dated 26/4/2013, a part payment of Rs. 4.00 lacs was stated to have been paid on 28/3/2013 which corroborates the existence of the agreement between the parties as on 28/3/2013. The term transfer U/s 2(47)(v) of the Act read with Section 53A of the Transfer of Property Act includes if a right in the property is transferred by one person to another person thereby the said right get extinguished from transferor and vested with the transferee by virtue of an agreement to sell then to that extent it amounts to transfer of capital assets. Even otherwise the deficiency of registration in the agreement was 13 | P a g e Umesh Padamasi Gosar subsequently made up as 11 ITA 227/JP/2018_ Sanjay Kr. Gupta Vs ACIT the sale deed was executed and registered and therefore, the transaction of transfer would take effect from the date of agreement which was subsequently culminated into the sale deed. Accordingly, in the facts and circumstances of the case when the agreement to sell dated 28/3/2013 has not been held to be bogus then the transaction would be treated to have been completed on 28/3/2013 and consequently the same would not fall in the year under consideration. Once the transaction of purchase of property in question is completed in the preceding year then the provisions of Section 56(2)(vii)(b) of the Act cannot be invoked on such transaction. Hence, we set aside the orders of the authorities below and delete the addition made by the Assessing Officer. We make it clear that the Assessing Officer is not remediless so far as the assessment of any income even for the earlier assessment year i.e. 2013-14.”
14 | P a g e Umesh Padamasi Gosar 7. I noted that the assessee has made payments towards acquisition of this flat and the assessee has also enclosed copy of bank statement reflected the following payments: - Date Cheque No. Amount (in Page Rs) No. 28.03.2013 770299 20,00,000 5 28.03.2013 770298 7,70,000 6 28.03.2013 851380 12,30,000 9 31.05.2013 958001 10,00,000 7 31.05.2013 958002 15,00,000 8 31.05.2013 958003 35,00,000 8 31.05.2013 958004 20,00,000 8 31.05.2013 958005 20,00,000 8 31.05.2013 958006 15,00,000 8 31.05.2013 851383 5,00,000 9 Total amount paid ₹ 1,60,00,000 8. Now, we have gone through the provisions of section 56(2)(vii)(b) of the Act which reads as under: - "56. …………… (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 :— ……………………………… (vii) where an individual or a Hindu undivided family receives, in any previous
15 | P a g e Umesh Padamasi Gosar year, from any person or persons on or after the 1st day of October, 2009 but before the 1st day of April, 2017,— ……………………………………..
(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 16 | P a g e Umesh Padamasi Gosar 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;
From the bare perusal of the above provisions which has been amended by Finance Act, 2013 and as substituted clause (b) of section 56(2)(vii) with effect from 01.04.2014, hence, the above provisions are applicable only for and from AY 2014-15 with effect from 01.04.2014. In view of the proviso to this section, above which clearly states that where the date of registration and date of agreement are different, the date of agreement would be considered as the date of application of section 56(2)(vii)(b) of the Act. The section implicitly recognizes the fact that the agreement date is the date of transfer of assessment and registration is merely procedural application in the context of transfer of ownership of asset. In the present case, the date of agreement is 28.03.2013 which correspondence to AY 2013-14 and the registration of agreement dated 02.04.2013, which falls in AY 2014-15. Considering the date of agreement takes significance for the purpose of application of section 56(2)(vii)(b) of the Act, the provisions as on that date would be important for applying the provisions of section. Hence, it is clear that the section being introduced from 01.04.2014 was not part of the statute on the date agreement i.e. 28.03.2013 and therefore, logically there cannot be any application of section 56(2)(vii)(b) of the Act.
17 | P a g e Umesh Padamasi Gosar Even otherwise, this issue is covered in favour of assessee by the decision of Co-ordinate Bench of this Tribunal in the case of Sanjay Kumar Gupta (supra). In view of the above, I am of the view that the addition made by AO and confirmed by CIT(A) is without any basis. Hence, I delete the addition and allow the appeal of the assessee. 10. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 17.12.2019.