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Facts
The assessee appealed against the Ld. CIT(A)'s order which upheld an addition of Rs. 3,92,87,988/- made by the AO under Section 56(2)(x) of the Income-tax Act, 1961. The addition was made because the purchase consideration was significantly lower than the Stamp Duty Authority's value. The assessee claimed the property was booked via an agreement dated 18.10.2011 with substantial payments made through banking channels, seeking the benefit of the proviso to Section 56(2), which allows considering the stamp duty value as of the agreement date.
Held
The Tribunal held that the assessee was prevented by "sufficient cause" from producing documents before the AO due to non-receipt of notices, thus satisfying the conditions of Rule 46A. The rigid interpretation of Rule 46A by the Ld. CIT(A) was contrasted with the spirit of equity and natural justice. The Tribunal set aside the impugned order and remanded the matter to the Ld. CIT(A) to admit additional evidence and direct the AO to conduct a comprehensive report and adjudicate the issue afresh.
Key Issues
Whether the Ld. CIT(A) erred in rejecting additional evidence and upholding the addition without considering the date of the agreement for property valuation, and whether the assessee had sufficient cause for not producing the evidence earlier.
Sections Cited
56(2)(x), 143(3), 46A
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Income Tax Appellate Tribunal, MUMBAI BENCH “B” MUMBAI
Before: SHRI OM PRAKASH KANT & MS. KAVITHA RAJAGOPAL
ORDER PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated 24.09.2025 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2018-19, raising following grounds:
1. That on the facts and circumstances of the case and law, the Ld. CIT (A) failed to appreciate that the Ld. AO has travelled beyond his
Bihari Parmanand Kandhari Bihari Parmanand Kandhari jurisdiction and made an addition with respect to the issue which jurisdiction and made an addition with respect to the issue which jurisdiction and made an addition with respect to the issue which was not the part of limited scrutiny. was not the part of limited scrutiny.
That on the facts and circumstances of the case and law, the Ld.
That on the facts and circumstances of the case and law, the Ld.
That on the facts and circumstances of the case and law, the Ld. CIT (A) failed to appreciate that the Ld. AO erred by making additi CIT (A) failed to appreciate that the Ld. AO erred by making additi CIT (A) failed to appreciate that the Ld. AO erred by making addition u/s 56(2) of the Act of Rs. 3,92,87,988/ u/s 56(2) of the Act of Rs. 3,92,87,988/- with respect to two with respect to two properties.
That on the facts and circumstances of the case and law, the Ld.
That on the facts and circumstances of the case and law, the Ld.
That on the facts and circumstances of the case and law, the Ld. CIT (A) failed to appreciate that the Ld. AO erred by making addition CIT (A) failed to appreciate that the Ld. AO erred by making addition CIT (A) failed to appreciate that the Ld. AO erred by making addition u/s 56(2) of the Act without appreciating u/s 56(2) of the Act without appreciating the fact that the market the fact that the market value of the aforesaid properties as on the date of allotment should value of the aforesaid properties as on the date of allotment should value of the aforesaid properties as on the date of allotment should be adopted instead of market value as on the date of registration. be adopted instead of market value as on the date of registration. be adopted instead of market value as on the date of registration.
That on the facts and circumstances of the case and in law, the 4. That on the facts and circumstances of the case and in law, the 4. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in rejecti Ld. CIT(A) erred in rejecting the additional evidence filed by the ng the additional evidence filed by the Appellant, including the bank statement, ready reckoner rate extract Appellant, including the bank statement, ready reckoner rate extract Appellant, including the bank statement, ready reckoner rate extract on the date of allotment, and the allotment letter. on the date of allotment, and the allotment letter.
That on the facts and circumstances of the case and in law, the 5. That on the facts and circumstances of the case and in law, the 5. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in rejectin Ld. CIT(A) erred in rejecting the allotment letter solely on the ground g the allotment letter solely on the ground that it was unregistered. that it was unregistered.
That on the facts and circumstances of the case and in law, the 6. That on the facts and circumstances of the case and in law, the 6. That on the facts and circumstances of the case and in law, the Ld. CIT(A), based on remand report, erred in rejecting the admission Ld. CIT(A), based on remand report, erred in rejecting the admission Ld. CIT(A), based on remand report, erred in rejecting the admission of bank payment on the ground that only one entry of bank payment on the ground that only one entry appeared in the appeared in the bank statement, without bank statement, without appreciating that the Appellant had paid appreciating that the Appellant had paid Rs. 2.5 lakh each for both properties (totalling Rs. 2.5 lakh), and the Rs. 2.5 lakh each for both properties (totalling Rs. 2.5 lakh), and the Rs. 2.5 lakh each for both properties (totalling Rs. 2.5 lakh), and the single entry reflected a consolidated payment. single entry reflected a consolidated payment.
That on the facts and circumstances of the case and i 7. That on the facts and circumstances of the case and i 7. That on the facts and circumstances of the case and in law, the Ld. CIT(A), based on the remand report, wrongly doubted the Ld. CIT(A), based on the remand report, wrongly doubted the Ld. CIT(A), based on the remand report, wrongly doubted the payment, without appreciating that Rs. 2.5 lakh was paid towards payment, without appreciating that Rs. 2.5 lakh was paid towards payment, without appreciating that Rs. 2.5 lakh was paid towards each of the two flats. each of the two flats.
That on the facts and circumstances of the case and in law, the 8. That on the facts and circumstances of the case and in law, the 8. That on the facts and circumstances of the case and in law, the Ld. CIT(A), based on the reman Ld. CIT(A), based on the remand report, has doubted the payment d report, has doubted the payment on the mere ground that the same was nominal. on the mere ground that the same was nominal.
The central issue in this appeal pertains to an addition of The central issue in this appeal pertains to an addition of The central issue in this appeal pertains to an addition of ₹3,92,87,988/- made under made under Section 56(2)(x) of the Income of the Income-tax Act, 1961 ("the Act"). During the assessment proceedings under Act, 1961 ("the Act"). During the assessment proceedings under Act, 1961 ("the Act"). During the assessment proceedings under Section 143(3), the Assessing Officer (AO) observed that the Section 143(3), the Assessing Officer (AO) observed that the Section 143(3), the Assessing Officer (AO) observed that the Bihari Parmanand Kandhari Bihari Parmanand Kandhari purchase consideration of the subject property was significantly purchase consideration of the subject property was significantly purchase consideration of the subject property was significantly lower than the value adopted by the Stamp Duty Authority. He lower than the value adopted by the Stamp Duty A lower than the value adopted by the Stamp Duty A accordingly called upon the assessee as why the addition should accordingly called upon the assessee as why the addition should accordingly called upon the assessee as why the addition should not be made u/s 56(2)(x) of the Income not be made u/s 56(2)(x) of the Income-tax Act, 1961 (in short ‘the tax Act, 1961 (in short ‘the Act’). In the absence of an explanation or supporting documentation In the absence of an explanation or supporting documentation In the absence of an explanation or supporting documentation from the assessee at the assessment stage, from the assessee at the assessment stage, the AO treated the the AO treated the differential amount of differential amount of Rs.3,92,87,988/- as "Income from Other as "Income from Other Sources."
2.1 On further appeal, the assessee filed a letter before the Ld. On further appeal, the assessee filed a letter before the Ld. On further appeal, the assessee filed a letter before the Ld. CIT(A) and contended that the property was booked via an and contended that the property was booked via an and contended that the property was booked via an agreement dated 18.10.2011 18.10.2011, with substantial payments made al payments made through banking channels at that time. Consequently, the assessee through banking channels at that time. Consequently, the assessee through banking channels at that time. Consequently, the assessee sought the benefit of the sought the benefit of the proviso to Section 56(2), which mandates , which mandates that where the date of agreement and the date of registration are that where the date of agreement and the date of registration are that where the date of agreement and the date of registration are not the same, the stamp duty value as on not the same, the stamp duty value as on the date of the agreement the date of the agreement may be considered.
2.2 The Ld. CIT(A) though called for the remand report of the The Ld. CIT(A) though called for the remand report of the The Ld. CIT(A) though called for the remand report of the Assessing Officer, but , but he declined to admit this evidence, holding he declined to admit this evidence, holding that the assessee had failed to satisfy the "sufficient cause" that the assessee had failed to satisfy the "sufficient cause" that the assessee had failed to satisfy the "sufficient cause" threshold under Rule 46A. The Ld. CIT(A) reasoned that since the le 46A. The Ld. CIT(A) reasoned that since the le 46A. The Ld. CIT(A) reasoned that since the AO had issued specific show AO had issued specific show-cause notices, the failure to produce cause notices, the failure to produce the agreement during the assessment was an inexcusable lapse. the agreement during the assessment was an inexcusable lapse. the agreement during the assessment was an inexcusable lapse. The relevant finding of the Ld. CIT(A) is reproduced as under: The relevant finding of the Ld. CIT(A) is reproduced as under: The relevant finding of the Ld. CIT(A) is reproduced as under:
Bihari Parmanand Kandhari Bihari Parmanand Kandhari “5.3.2.1 It is fur 5.3.2.1 It is further submitted that Rule 46A conditions not met. ther submitted that Rule 46A conditions not met. The AO did not deny admission of this evidence. The assessee The AO did not deny admission of this evidence. The assessee The AO did not deny admission of this evidence. The assessee simply did not submit it during assessment. There is no persuasive simply did not submit it during assessment. There is no persuasive simply did not submit it during assessment. There is no persuasive sufficient cause for failure to produce this letter when the issue of sufficient cause for failure to produce this letter when the issue of sufficient cause for failure to produce this letter when the issue of undervaluation of flat was squarely under examination. Despite ation of flat was squarely under examination. Despite ation of flat was squarely under examination. Despite knowing the importance of establishing the agreement date, the knowing the importance of establishing the agreement date, the knowing the importance of establishing the agreement date, the assessee chose not to furnish this document earlier, nor did he assessee chose not to furnish this document earlier, nor did he assessee chose not to furnish this document earlier, nor did he indicate any inability or request more time. The proceedings indicate any inability or request more time. The proceedings indicate any inability or request more time. The proceedings provided adequ provided adequate opportunity as the AOs notices and show cause ate opportunity as the AOs notices and show cause specifically invited all relevant evidence. Therefore, none of the Rule specifically invited all relevant evidence. Therefore, none of the Rule specifically invited all relevant evidence. Therefore, none of the Rule 46A conditions justify admission of this letter now. 46A conditions justify admission of this letter now.”
We have heard the rival submissions and perused the record. We have heard the rival submissions and perused the record. We have heard the rival submissions and perused the record. The Ld. Counsel for the assessee has categorically stated before us The Ld. Counsel for the assessee has categorically stated before us The Ld. Counsel for the assessee has categorically stated before us that the notices issued during the assessment proceedings were not that the notices issued during the assessment proceedings were not that the notices issued during the assessment proceedings were not served upon the assessee, thereby precluding any meaningful served upon the assessee, thereby precluding any meaningful served upon the assessee, thereby precluding any meaningful representation before the AO and epresentation before the AO and producing the necessary producing the necessary document in support of its contention that assessee had already document in support of its contention that assessee had already document in support of its contention that assessee had already entered into an agreement in the year 2011 for purchase of the entered into an agreement in the year 2011 for purchase of the entered into an agreement in the year 2011 for purchase of the property.
3.1 We find that the assessee was prevented by "sufficient ca We find that the assessee was prevented by "sufficient ca We find that the assessee was prevented by "sufficient cause" from producing the relevant documents before the Assessing from producing the relevant documents before the Assessing from producing the relevant documents before the Assessing Officer, accordingly the conditions of the Rule 46A are satisfied. accordingly the conditions of the Rule 46A are satisfied. accordingly the conditions of the Rule 46A are satisfied. The rigid interpretation adopted by the Ld. CIT(A) regarding Rule The rigid interpretation adopted by the Ld. CIT(A) regarding Rule The rigid interpretation adopted by the Ld. CIT(A) regarding Rule 46A stands in contrast to the spirit of equity and the mandate of 46A stands in contrast to the spirit of equity and the man 46A stands in contrast to the spirit of equity and the man natural justice.
3.2 The proviso to Section 56(2)(x) is a beneficial provision The proviso to Section 56(2)(x) is a beneficial provision The proviso to Section 56(2)(x) is a beneficial provision intended to protect taxpayers from fluctuations in stamp duty rates intended to protect taxpayers from fluctuations in stamp duty rates intended to protect taxpayers from fluctuations in stamp duty rates between the date of agreement and final registration. To deny the between the date of agreement and final registration. To deny the between the date of agreement and final registration. To deny the Bihari Parmanand Kandhari Bihari Parmanand Kandhari assessee the opportunity to prove t assessee the opportunity to prove the existence of such an he existence of such an agreement—especially when the non especially when the non-production is attributed to the production is attributed to the non-receipt of notices receipt of notices—would be to prioritize form over substance. would be to prioritize form over substance.
3.3 Accordingly, we set aside the impugned order on this issue Accordingly, we set aside the impugned order on this issue Accordingly, we set aside the impugned order on this issue and direct the Ld. CIT(A) to: and direct the Ld. CIT(A) to:
(i) Admit the additional evidence filed by the assessee under Rule additional evidence filed by the assessee under Rule additional evidence filed by the assessee under Rule 46A. (ii) Remand the the the matter matter matter to to to the the the Assessing Assessing Assessing Officer Officer Officer for for for a a a comprehensive report on the merits and veracity of the said comprehensive report on the merits and veracity of the said comprehensive report on the merits and veracity of the said evidence. (iii) Adjudicate Adjudicate the issue afresh, ensuring the assessee is the issue afresh, ensuring the assessee is granted a fair opportunit granted a fair opportunity to substantiate the claim that the y to substantiate the claim that the transaction is governed by the value prevalent on the date of transaction is governed by the value prevalent on the date of transaction is governed by the value prevalent on the date of the 2011 agreement. the 2011 agreement.
3.4 While sending matter for sending matter for remand process, the he ld CIT(A) may direct the AO to verify the authenticity of the "Agreement to Sell" AO to verify the authenticity of the "Agreement to Sell" AO to verify the authenticity of the "Agreement to Sell" dated 18.10.2011, inter inter-alia, examining the original document to xamining the original document to ensure it is not a backdated instrument ensure it is not a backdated instrument and verifying the stamp erifying the stamp paper's date of purchase and the vendor from whom it was sourced paper's date of purchase and the vendor from whom it was sourced paper's date of purchase and the vendor from whom it was sourced to ensure it aligns with the purported execution date in 2011.The to ensure it aligns with the purported execution date in 2011.The to ensure it aligns with the purported execution date in 2011.The core requirement of the proviso to Section 56(2)(x) is that the ore requirement of the proviso to Section 56(2)(x) is that the ore requirement of the proviso to Section 56(2)(x) is that the consideration, or a part thereof, must have been paid by way of a consideration, or a part thereof, must have been paid by way of a consideration, or a part thereof, must have been paid by way of a prescribed electronic mode on or before the date of the agreement. prescribed electronic mode on or before the date of the agreement. prescribed electronic mode on or before the date of the agreement.
Bihari Parmanand Kandhari Bihari Parmanand Kandhari The ld CIT(A) may further direct the ld CIT(A) may further direct the AO to cross-verify the verify the payments mentioned in the 2011 agreement with the assessee's bank mentioned in the 2011 agreement with the assessee's bank mentioned in the 2011 agreement with the assessee's bank statements from that period statements from that period; verify that the payments were made erify that the payments were made directly to the seller of the property or their authorized agents as directly to the seller of the property or their authorized agents as directly to the seller of the property or their authorized agents as per the terms of the agreement per the terms of the agreement and ensure the amounts, da nsure the amounts, dates, and instrument numbers (Cheque/NEFT/RTGS) match the entries in instrument numbers (Cheque/NEFT/RTGS) match the entries in instrument numbers (Cheque/NEFT/RTGS) match the entries in the bank’s ledger. Upon successful verification of the agreement Upon successful verification of the agreement Upon successful verification of the agreement and the advance payments, the AO shall and the advance payments, the AO shall ascertain the official scertain the official Circle Rate or Stamp Duty Value Stamp Duty Value applicable to the specific pr applicable to the specific property category and location as of category and location as of 18.10.2011 and compare this 2011 ompare this 2011 valuation with the actual purchase consideration paid by the valuation with the actual purchase consideration paid by the valuation with the actual purchase consideration paid by the assessee. The ld CIT(A) may further direct the The ld CIT(A) may further direct the AO to apply the AO to apply the curative tolerance band curative tolerance band. If the difference between the purchase If the difference between the purchase consideration and the 2011 SDV falls within the prescribed 5% or consideration and the 2011 SDV falls within the prescribed 5% or consideration and the 2011 SDV falls within the prescribed 5% or 10% margin (as applicable retrospectively), no addition shall be 10% margin (as applicable retrospectively), no addition shall be 10% margin (as applicable retrospectively), no addition shall be warranted.
3.5 The ld CIT(A) may direct the ld CIT(A) may direct the AO to provide the assessee with a provide the assessee with a reasonable opportunity to explain any discrepanc reasonable opportunity to explain any discrepancies found during ies found during this verification process. The final Remand Report must be this verification process. The final Remand Report must be this verification process. The final Remand Report must be speaking, reasoned, and based on the documentary evidence speaking, reasoned, and based on the documentary evidence speaking, reasoned, and based on the documentary evidence provided, rather than mere conjectures. provided, rather than mere conjectures. To facilitate this process To facilitate this process of verification, the assessee is advised to produce the , the assessee is advised to produce the following before the AO (i) Certified Copy Certified Copy of the 2011 Agreement to Sell of the 2011 Agreement to Sell (ii) Attested Bank Statements for the financial year 2011 for the financial year 2011-12 highlighting the 12 highlighting the Bihari Parmanand Kandhari Bihari Parmanand Kandhari (iii) Confirmation Letter from the seller (if from the seller (if available) acknowledging the receipt of funds in 2011 (iv) Official available) acknowledging the receipt of funds in 2011 available) acknowledging the receipt of funds in 2011 Circle Rate Notification Circle Rate Notification from the relevant State Authority applicable from the relevant State Authority applicable for October 2011.
In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on ounced in the open Court on 23/02/2026. /02/2026.