Loading judgment…
Facts
The assessee purchased a residential property for Rs. 2,72,00,000, while the stamp duty value was Rs. 2,77,13,500. The difference of Rs. 5,13,500, which is approximately 1.88% of the purchase consideration, was treated as an addition under section 56(2)(vii)(b) of the Income Tax Act by the AO and confirmed by the CIT(A). The assessee appealed against this.
Held
The Tribunal noted that the difference between the stamp duty value and the actual sale consideration was less than 5%. It referred to the third proviso of section 50C(1) and CBDT circulars, which provide a tolerance band for such variations due to bonafide reasons. Therefore, the addition made under section 56(2)(vii)(b) was not sustainable.
Key Issues
Whether the addition made under section 56(2)(vii)(b) of the Income Tax Act is justified when the difference between the stamp duty value and the actual sale consideration is within the tolerance band provided by law.
Sections Cited
56(2)(vii)(b), 50C(1), 143(1), 148, 139(4)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SMT. BEENA PILLAI
Per : Beena Pillai, Judicial Member:
Present appeal filed by the assessee arises out of dated 24/06/2024 passed by NFAC Delhi for assessment year 2017-18 on following grounds of appeal:
1. The learned Commissioner of Income Tax (Appeals) erred in law & fact by dismissing the appeal of the appellant of additions of Rs.5,13,500- on account of addition u/s 56(2) (vii) (b) of the Income Tax Act, 1961.
2. The learned Commissioner of Income Tax (Appeals) erred in law and fact by not considering the appellant's plea that the addition of Rs. 5,13,500 as addition u/s 56(2) (vii) (b) of the Income Tax Act, 1961 is bad in law. The appellant purchased a residential property in Thakur Jewel Co-op. Housing Society Ltd on 31.08.2016 for a purchase consideration amounting to Rs.2,72,00,000/-. The Stamp duty value of such property amounted to Rs.2,77,13,500/-. The difference between the purchase consideration and Stamp duty value amounted to Rs.5,13,500/- only which was approximately 1.88% of the purchase consideration.
3. The learned Commissioner of Income Tax (Appeals) erred in law and fact y overlooking that as per amendment made in section 50C(1), by inserting third proviso thereto and by enhancing tolerance band for variations between stated sale consideration vis-à-vis stamp duty valuation from 5 per cent to 10 per cent are effective from date on which section 50C, itself was introduced, i.e. 1-4- 2003.
The appellant states that the transaction undertaken by the appellant is well within the ambit of law. The appellant during the appellate proceedings submitted detailed explanation and various judgements supporting the claim.
5. The appellant states that the learned Commissioner of Income Tax (Appeals) erred in law and fact by not passing a speaking order on the aforesaid matter or rebut the appellant's grounds of appeal
by any evidences contradicting the appellant's Submissions.
6. The Appellant craves leave to add, amend, alter and / or withdraw the aforesaid ground of appeal.”
2. At the outset, the Ld.AR submitted that Ranvijay Haldhar Singh, the assessee deceased on 15/05/2024 and the family was busy with final rights of the deceased assessee. The Ld.AR vide application dated 27/12/2024 filed copy of the death certificate of the assessee in support.
2.1. It is also submitted that, the legal heir was brought on record on the Income Tax Portal and subsequently Form 36 filed on 17/10/2024. The Ld.AR submitted that, the title of Form 36 however remained to be changed which may be considered since the verification of Form 36 has been carried down on legal heir of the deceased assessee.
Mr. Ranvijay Haldhar Singh 2.3. It is submitted that this caused delay of 55 days in filing the present appeal before the Tribunal was unintentional and prayed for the condonation of delay in filing the present appeal before this Tribunal.
2.4. The Ld. DR did not raise any objections to the submissions of the assessee.
2.5. It is noted that there is a reasonable cause made out by the Ld.AR, in the delay caused in filing present appeal before this Tribunal. Considering the submissions of both sides delay of 55 days in filing the present appeal before this Tribunal stands condoned. Accordingly application dated 27/12/2024 stands allowed and the appeal is taken up to be decided on merits.
Brief facts of the case are as under:
The assessee was engaged in the business of supply contractor and supply of Sand material. During the year under consideration, assessee earned income from house property, business income being (remuneration from partnership firm M/s. Neha Realtors) and income from other sources The assessee filed his return of income on 27/11/2017, declaring gross total income of Rs.6,33,037/- u/s.139(4) of the act.
3.1. The return was processed and intimation u/s. 143(1) was issued. Subsequently, notice u/s.148 of the act was issued to the assessee on 30/06/2022, in response to which, the assessee submitted that, income tax return originally filed by the assessee on 27/11/2017 may be treated as the return in lieu of notices u/s.148 of the act. The assessee was thereafter furnished with the reasons recorded for reopening that reads as under: “On perusal of analysis of data and information received, it is observed that the assessee is found to have entered the purchases consideration of the property during the financial year 2016-17 to the tune of Rs.2,72,00,000/-. Also the stamp value of the said property is Rs.2,77,613,500/- therefore the provision of section 56(2) (x) of the act is attracted in this case.” 3.2. In the response to the said notice, assessee submitted detailed reply on 06/03/2023 alongwith details as called upon by the Ld.AO. The assessee filed copy of the registered agreement, loans statement, bank statement in respect of purchase of property. The Ld.AO after considering the submission of assessee made addition being the differences between the stamp duty value and the agreement value u/s.56(2)(vii)(b) of the act, amounting to Rs.5,13,500/-.
Aggrieved by the order of the Ld.AO, the assessee preferred appeal before the Ld.CIT(A).
4. Before the Ld.CIT(A), the assessee alleged various issues on validity of reopening as well as addition made. The Ld.CIT(A) after considering the submissions of the assessee upheld the reopening of the assessment and also confirmed the addition made by the Ld.AO by observing as under:
“7.4 In the instant case of the appellant, he has purchased immovable property or consideration which is less than the stamp duty of the property by an amount exceeding Rs.50,000/-, that is, by a difference amount of Rs.5,13,500/- and hence his case squarely falls under the provisions of the above mentioned section 56(2)(vii)(b)(ii) of the Act.
Mr. Ranvijay Haldhar Singh 7.5 The AO taxed the difference amount in the impugned assessment order as per the above deeming provision of the section as existing during the AY 2017-18 under consideration. In view of the above, I find no infirmity in the impugned order of the AO and see no reason to interfere with the same. The addition of Rs.5,13,500/- made by the AO by applying the deeming provisions of section 56(2)(vii)(b) of the Act as applicable for the AY under consideration is therefore confirmed. Hence, this set of ground/s of appeal taken by the appellant is dismissed.”
Aggrieved by the order of the Ld.CIT(A), assessee is in appeal before this Tribunal.
The Ld.AR submitted that, assessee has not challenged the legal issues before this Tribunal and the grounds raised are only on the additions confirmed by the Ld.CIT(A). He submitted that all the grounds raised by the assessee relate to one single issue on the addition made u/s. 56(2)(vii)(b) of the act to be bad in law.
5.1. The Ld.AR submitted that, assessee purchased residential property namely Flat 1903, 19th Floor, B Wing, Thakur Jewel Co- op. Housing Society Ltd, Thakur Village, Kandivall (East), Mumbai, Maharashtra 400101 on 31.08.2016. It is submitted that, assessee paid total consideration towards purchase of the said property amounting to Rs.2,72,00,000/-. The Ld.AR submitted that, assessee purchased said property by taking loan from syndicate bank to the tune of Rs.219,00,000/- and the balance amount of Rs.53 lakhs was paid by assessee through banking channels. He placed reliance of the loan statement enclosed at page 147-148 of the paper book.
5.2. The Ld.AR submitted that, difference between the purchase consideration and stamp duty value amounting to Rs.5,13,500/- is approximately 1.88% of the purchase consideration and by Mr. Ranvijay Haldhar Singh virtue of third proviso to section 50C(1), the difference in the present fact is below the tolerance band of 5% as per the amendment introduced with effect from 01/04/2003.
5.3. The Ld.AR submitted that, section 50C and section u/s. 56(2)(vii)(b) being anti avoidance provisions, are similarly worded as they deem the stamp duty valuation to be the full value consideration for sale/purchase of immovable property being land/building or both where the actual consideration receivable is less than the stamp duty valuation. The Ld.AR further submitted that, by virtue of amendment by Finance Act 2018 with effect from 01-04-2019, the marginal difference was increased to 10% which is applicable to transactions that fall u/s.56(2)(vii)(b). The Ld.AR in support placed reliance on the decision of coordinate bench of this Tribunal in case of Joseph vs. DCIT reported in (2021) 130 taxmann.com 250 and Maria Ferrandes Cheryl vs. ITO reported in (2021) 123 taxmann.com 252, he submitted that this Tribunal considered marginal relaxation between the sale consideration vis-a vis stamp duty valuation to be out of scope of adjustment contemplated in the anti avoidance provision. He also referred to the CBDT Circular No. 08/2018 explaining the reasons for insertion of third proviso to section 50C(1) that accepts that various could be on account of variety of factors being bonafide as unintended consequences. He thus prayed for the addition to be deleted in the hands of the assessee.
5.4. On the contrary, the Ld. DR relied on the orders passed by authorities below.
There is no doubt that the variation between stamp duty value and actual consideration is less than 5% and the remedy has been provided by the legislature by inserting the third proviso to section 50C(1) for unintended consequences of the main provision. There is no doubt as that section 50C is a deeming fiction, to substitute apparent sale consideration by notional consideration computed on the basis of stamp duty valuation rate. However, by virtue of the third proviso to section 50C(1), the tolerance band with respect to certain degree of variation between the stamp duty valuation and the actual sale consideration is allowed, considering the fact that, they are within the permissible limits. It is noted that, CBDT itself accepted that there could be bonafide reason to explain such small variation between the sale consideration of the immovable property vis-à- vis the stamp duty valuation, and therefore the regen of section 50C(1) was relaxed. The various decisions of the Tribunal relied by the Ld.AR in the paper book and those referred to herein above, deals with this aspect. This Tribunal noted that as differences between the stamp duty valuation and the actual sale consideration is within the tolerance band, no addition can be made u/s. 56(2)(vii)(b) of the act.
6.1. Respectfully following the same based on above discussion, I direct the Ld.AO to delete the addition made in the hands of the assessee as the differences in the present facts of the case Accordingly, grounds raised by the assessee stands allowed.
In the result, appeal filed by the assessee stands allowed.
Order pronounced in the open court on 31.12.2024.