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Income Tax Appellate Tribunal, KOLKATA ‘B(SMC
Before: Shri P.M. Jagtap, Vice-
This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals), Durgapur dated 20.03.2019 and the solitary issue involved therein relates to the addition of Rs.19,25,617/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) under section 56(2)(vii)(b) of the Act.
The assesese in the present case is an individual, who is carrying on medical profession. The return of income for the year under consideration was filed by him on 27.03.2015 declaring total income of Rs.12,45,530/-. As noticed by the Assessing Officer during the course of assessment proceedings, the assessee during the year under consideration had purchased an immovable property for a consideration of Rs.43,12,068/-. The value of the said property as determined by the competent authority for the purpose of payment of stamp duty, however, Assessment Year: 2014-2015 Shri Rupam Sinha was Rs.62,37,685/-. The Assessing Officer, therefore, invoked section 56(2)(vii)(b) of the Act and added the difference of Rs.19,25,617/- to the total income of the assessee in the assessment completed under section 143(3) vide an order dated 31.08.2016.
Against the order passed by the Assessing Officer under section 143(3), an appeal was filed by the assessee before the ld. CIT(Appeals) challenging the addition made by the Assessing Officer under section 56(2)(vii)(b) of the Act. During the course of appellate proceedings, it was submitted on behalf of the assessee that the immovable property in question was agreed to be sold by the vendor and purchased by the assessee on 05.01.2010 vide a letter of allotment and since a sum of Rs.2,50,000/- was also paid by the assessee to the vendor in terms of the said agreement, section 56(2)(vii)(b) was not applicable as per the provisos to section 56(2)(vii)(b). The ld. CIT(Appeals) did not find merit in this contention raised on behalf of the assessee and proceeded to confirm the addition made by the Assessing Officer under section 56(2)(vii)(b) for the following reasons given in paragraph no. 7 to 10 of his impugned order:- “7. At this stage, it is necessary to refer to the provisions of section 56(2)(vii)(b) of the Act, which are 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) (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 Assessment Year: 2014-2015 Shri Rupam Sinha
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 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;]
In the present case, the controversy relates to the application of the Provisos to section 56(2)(vii)(b). It is stated therein that there has to be an 'agreement' between the purchaser and the seller. An agreement implies, a document which sets in the terms and conditions and the rights and duties of the persons involved in the agreement and that the said document is legally enforceable.
What the Id. AR has relied upon is a letter issued by the builder to the appellant after he paid a sum of Rs.2,50,000 to the builder. The letter under reference states that since the appellant has paid Rs.2,50,000 which forms 20% of the total cost of Rs.43,33,737 the aforesaid flat has been allotted to the appellant. It also details out the payment schedule at future dates such as, 20% on allotment, 10% on completion of Foundation, 10% on completion of first floor casting, 5% on completion of 3rd floor casting and so on and so forth. It also states that possession shall be handed over to the appellant on payment of the remaining 5% of the total cost.
It is observed that the letter under reference is not an 'Agreement' in the strictest term of the word. It is a letter on a plain paper (not on a judicial or non-judicial stamp paper) which acknowledges that the appellant has paid Rs.2,50,000 towards purchase of the said property and it enlists the stages at which the appellant is supposed to make further payments before the possession can be handed over to him. The letter makes it clear that a 'space' which is yet to be constructed has been 'allotted' to the appellant. This in no way is an agreement to 'sale'. At best, this is an acknowledgment of payment made by the appellant and an assurance by the builder that if payments as per schedule are made, the property would be handed over to him. If the appellant failed to adhere to the conditions laid in the letter, the possession of the flat would not be given to him. Therefore, the Id. AR's argument that this was an agreement, is found to be untenable. Hence, the document being relied upon by the Id. AR, in my view, serves no purpose so far as application of proviso to section 56(2)(vii)(b) of the Act is concerned”.
Assessment Year: 2014-2015 Shri Rupam Sinha Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.
I have heard the arguments of both the sides and also perused the relevant material available on record. The ld. Counsel for the assessee has invited my attention to the letter of allotment dated 05.01.2010 placed at pages no. 15 & 16 of the paper book to point out that the immovable property in question comprising of Flat No. 17E in Tower-4 at Diamond City South, Tollygunge, Kolkata was agreed to be sold by the concerned Developer M/s. Shree Rajat Enterprises to the assessee on 05.01.2010 itself. He has contended that the booklet was also annexed by the Developer to the said allotment letter stipulating all the terms and conditions of the said transaction. He has also invited my attention to the copy of final Conveyance Deed executed on 06.12.2013, wherein it was categorically mentioned that “sale agreement shall mean the allotment letter dated 05.01.2010 issued by the Developer to the Purchaser, with booklet of terms and conditions annexed thereto, whereby and whereunder the purchaser agreed to purchase and acquire the said Unit and shall include any modification/supplementary documents if made in writing in connection with the said Unit”. Keeping in view this stipulation specifically made in the final Conveyance Deed and having regard to the letter of allotment dated 05.01.2010 issued by the concerned Developer specifying all the terms and conditions of the transaction of sale of immovable property in question between the assessee and the said Developer, I find merit in the contention of the ld. Counsel for the assessee that the letter of allotment dated 05.01.2010 was in the nature of an agreement between the assessee and the concerned Developer for transfer of immovable property. The amount of consideration for the transfer of immovable property in question thus was fixed on 05.01.2010 in terms of the said agreement and the assessee having paid a part of the said consideration by cheque before the date of the said agreement, the stamp duty value as on 05.01.2010 is required to be taken for the purpose Assessment Year: 2014-2015 Shri Rupam Sinha of applying section 56(2)(vii)(b) as per the 1st and 2nd proviso to the said section. I, therefore, set aside the impugned order passed by the ld. CIT(Appeals) on this issue and direct the Assessing Officer to re-compute the addition, if any, to be made under section 56(2)(vii)(b) by taking into consideration the stamp duty value of the immovable property in question as on 05.01.2010.
In the result, the appeal of the assessee is treated as allowed for statistical purposes. Order pronounced in the open Court on November 27, 2019.