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Facts
The assessee, an individual, filed his return of income for AY 2016-17. During scrutiny, it was observed that he purchased three properties for a value lower than the stamp duty valuation. The Assessing Officer treated the difference as income under section 56(2)(vii) of the Income Tax Act, 1961.
Held
The Tribunal held that the issue needed to be restored to the CIT(A) for verification of whether payments other than cash were made before the agreement date, as this was a condition for the benefit of the proviso to section 56(2)(vii)(b).
Key Issues
Whether the difference between the agreement value and stamp duty value of the properties can be treated as income under section 56(2)(vii), considering the payment mode and date of agreement.
Sections Cited
56(2)(vii), 50C
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Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SUNIL KUMAR SINGH
This appeal by the assessee is directed against order dated 04.12.2023 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2016-17, raising following grounds:
1. “The order dated 04/12/2023 bearing No. ITBA/NFAC/S/250/2023-24/ 1058423368(1)Passed under section Jalaluddin Mohammed Ali Khan Jalaluddin Mohammed Ali Khan 2 ITA No. 47/MUM/2024 250 of Income Tax Act. 1961 by the Hon'ble CIT[Appeal], National 250 of Income Tax Act. 1961 by the Hon'ble CIT[Appeal], National 250 of Income Tax Act. 1961 by the Hon'ble CIT[Appeal], National Faceless Appeal Centre [NFAC], Delhi, is unreasonable, arbitrary, Faceless Appeal Centre [NFAC], Delhi, is unreasonable, arbitrary, Faceless Appeal Centre [NFAC], Delhi, is unreasonable, arbitrary, against the provisions of I against the provisions of Income Tax Act, 1961 and therefore liable to ncome Tax Act, 1961 and therefore liable to be quashed.
2. On the facts and in circumstance of the case and in law, the Hon'ble On the facts and in circumstance of the case and in law, the Hon'ble On the facts and in circumstance of the case and in law, the Hon'ble CIT[Appeals], NFAC, New Delhi has erred in confirming the addition CIT[Appeals], NFAC, New Delhi has erred in confirming the addition CIT[Appeals], NFAC, New Delhi has erred in confirming the addition under section 56(2)(vii) of the Act amounting to Rs.85.88.466 under section 56(2)(vii) of the Act amounting to Rs.85.88.466 under section 56(2)(vii) of the Act amounting to Rs.85.88.466/-being difference between Agreement value and stamp duty rates. difference between Agreement value and stamp duty rates. 2(i) The Honorable CIT has grossly erred in observing that Appellant 2(i) The Honorable CIT has grossly erred in observing that Appellant 2(i) The Honorable CIT has grossly erred in observing that Appellant has paid advance by way of cash whereas it is fact that part thereof has paid advance by way of cash whereas it is fact that part thereof has paid advance by way of cash whereas it is fact that part thereof was paid by banking channel also and hence proviso to was paid by banking channel also and hence proviso to was paid by banking channel also and hence proviso to section 56(2)(vii)(b) are applicable. 56(2)(vii)(b) are applicable.
Briefly stated, facts of the case are that the assessee is an Briefly stated, facts of the case are that the assessee is an Briefly stated, facts of the case are that the assessee is an individual and filed return of income on 17.10.2016 declaring total filed return of income on 17.10.2016 declaring total filed return of income on 17.10.2016 declaring total income at Rs.3,98,830/ income at Rs.3,98,830/-. The return of income filed by the assessee . The return of income filed by the assessee was selected for scrutiny under the computer selection of scrutiny scrutiny under the computer selection of scrutiny scrutiny under the computer selection of scrutiny and statutory notices under the Income and statutory notices under the Income-tax Act, 1961 (in short ‘the tax Act, 1961 (in short ‘the Act’) were issued and served upon the assessee. During the course Act’) were issued and served upon the assessee. During the course Act’) were issued and served upon the assessee. During the course of the scrutiny proceedings, the Assessing Officer observed that the of the scrutiny proceedings, the Assessing Officer observed that the of the scrutiny proceedings, the Assessing Officer observed that the assessee had entered into an agreement with M/s HDIL i.e. Real sessee had entered into an agreement with M/s HDIL i.e. Real sessee had entered into an agreement with M/s HDIL i.e. Real Estate Developer for purchase of the three properties. The Assessing Estate Developer for purchase of the three properties. The Assessing Estate Developer for purchase of the three properties. The Assessing Officer further observed that the properties were purchased for a Officer further observed that the properties were purchased Officer further observed that the properties were purchased value less than value which was adopted by the stamp duty value less than value which was adopted by the stamp duty value less than value which was adopted by the stamp duty valuation authorities luation authorities. A chart of the difference in purchase value chart of the difference in purchase value and stamp duty valuation reproduced by the Assessing Officer is and stamp duty valuation reproduced by the Assessing Officer and stamp duty valuation reproduced by the Assessing Officer extracted as under:
Sr. No. Details of Property Details of Property Agreement Value Market value (in Rs.) (in Rs.) 706 Wing-3C, at project HDIL, , at project HDIL, Mumbai 40,07,638 68,50,500 606 wing 3C at project HDIL, Mumbai 606 wing 3C at project HDIL 39,86,698 68,50,500 607 Wing 3C in project HDIL, Mumbai 607 Wing 3C in project HDIL 39,86,698 68,50,500 Total 1,19,63,034 2,05,51,500/-
Jalaluddin Mohammed Ali Khan Jalaluddin Mohammed Ali Khan 3 ITA No. 47/MUM/2024 2.1 According to the According to the Assessing Officer, the properties were Assessing Officer, the properties were registered at a purchase value less than the stamp value and registered at a purchase value less than the stamp value and registered at a purchase value less than the stamp value and therefore, section 56( therefore, section 56(2)(vii) of the Act was attracted in the case of of the Act was attracted in the case of the assessee. In view of no responses by the assessee to the show In view of no responses by the assessee to the show In view of no responses by the assessee to the show cause issued, the Assessing Officer in the assessment order passed cause issued, the Assessing Officer in the assessment ord cause issued, the Assessing Officer in the assessment ord u/s 143(3) of the Act dated 24.12.2018, invoked u/s 143(3) of the Act dated 24.12.2018, invoked section 56(2)(vii) of section 56(2)(vii) of the Act and treated the difference of Rs.85,88,466/ treated the difference of Rs.85,88,466/ treated the difference of Rs.85,88,466/- between the stamp duty valuation and purchase value as deemed income under stamp duty valuation and purchase value as deemed income under stamp duty valuation and purchase value as deemed income under the head ‘income from other sources’ ad ‘income from other sources’.
On further appeal before the Ld. CIT(A), the assessee her appeal before the Ld. CIT(A), the assessee her appeal before the Ld. CIT(A), the assessee submitted that those properties were booked on 09.08.2010 and submitted that those properties were booked on 09.08.2010 and submitted that those properties were booked on 09.08.2010 and payment was also made payment was also made at the time of the booking. The assessee the time of the booking. The assessee filed allotment letters s issued by the Real Estate Developer. However, issued by the Real Estate Developer. However, the Ld. CIT(A) rejected the contention of the assessee on the ground rejected the contention of the assessee on the ground rejected the contention of the assessee on the ground that at the time of the booking of the properties that at the time of the booking of the properties, no cheque payment no cheque payment was made by the assessee and therefore, invoking second proviso to was made by the assessee and therefore, invoking second proviso to was made by the assessee and therefore, invoking second proviso to section 56(1)(vii) of the section 56(1)(vii) of the Act, benefit of first proviso cannot be first proviso cannot be allowed in the case of the assessee and accordingly he sustained the in the case of the assessee and accordingly he sustained the in the case of the assessee and accordingly he sustained the disallowance observing as under: disallowance observing as under:
“4.3.1 The appellant argued that he had purchased the properties on The appellant argued that he had purchased the properties on The appellant argued that he had purchased the properties on 09.08.2010 but registered on 11.5.2015, a delay of five years due to 09.08.2010 but registered on 11.5.2015, a delay of five years due to 09.08.2010 but registered on 11.5.2015, a delay of five years due to the project bein the project being delayed by the Builder. The cost of purchase of g delayed by the Builder. The cost of purchase of agreed by the purchaser and builder was as per the rates on August, agreed by the purchaser and builder was as per the rates on August, agreed by the purchaser and builder was as per the rates on August, 2010. However, the rate as per sec. 50C was based on the rates of 2010. However, the rate as per sec. 50C was based on the rates of 2010. However, the rate as per sec. 50C was based on the rates of valuation as on May 2015 a difference of Five years. valuation as on May 2015 a difference of Five years. 4.3.2 As per provis 4.3.2 As per proviso to sec. 56(2)(vii)(b), where the date of agreement o to sec. 56(2)(vii)(b), where the date of agreement fixing the amount of consideration for the transfer of immovable fixing the amount of consideration for the transfer of immovable fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp property and the date of registration are not the same, the stamp property and the date of registration are not the same, the stamp
Jalaluddin Mohammed Ali Khan Jalaluddin Mohammed Ali Khan 4 ITA No. 47/MUM/2024 duty value on the date of the agreement may be taken for the duty value on the date of the agreement may be taken for the duty value on the date of the agreement may be taken for the purpose of this sub section. However, the said proviso shall apply this sub section. However, the said proviso shall apply this sub section. However, the said proviso shall apply only in a case where the amount of consideration referred to therein, only in a case where the amount of consideration referred to therein, 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 or a part thereof, has been paid by any mode other than cash on or 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 immov before the date of the agreement for the transfer of such immov before the date of the agreement for the transfer of such immovable property. In the appellant's case the advance was paid by way of property. In the appellant's case the advance was paid by way of property. In the appellant's case the advance was paid by way of CASH. Hence the exception were not applicable in this appellant Hence the exception were not applicable in this appellant Hence the exception were not applicable in this appellant case and sec. 56(2)(vii)(b) is squarely applicable in the appellant case and sec. 56(2)(vii)(b) is squarely applicable in the appellant case and sec. 56(2)(vii)(b) is squarely applicable in the appellant case. Considering the gamut of issues dealt with in case. Considering the gamut of issues dealt with in the assessment the assessment order, the decision of the assessing officer is upheld and Ground order, the decision of the assessing officer is upheld and Ground order, the decision of the assessing officer is upheld and Ground raised in this appeal is dismissed. raised in this appeal is dismissed.”
4. Before us, the Ld. counsel for the assessee has filed a Paper Before us, the Ld. counsel for the assessee has filed a Paper Before us, the Ld. counsel for the assessee has filed a Paper Book containing pages 1 to 43 and submitted that the assessee had Book containing pages 1 to 43 and submitted that the assessee had Book containing pages 1 to 43 and submitted that the assessee had made certain payments by cheque also however same were rtain payments by cheque also however same were rtain payments by cheque also however same were not noticed by the Ld. CIT(A) and therefore, the matter may be restored noticed by the Ld. CIT(A) and therefore, the matter may be restored noticed by the Ld. CIT(A) and therefore, the matter may be restored back to the file of the Ld. CIT(A) or the Assessing Officer for back to the file of the Ld. CIT(A) or the Assessing Officer for back to the file of the Ld. CIT(A) or the Assessing Officer for considering the date of the payment by cheque and the date of the considering the date of the payment by cheque and the date of the considering the date of the payment by cheque and the date of the agreement and accordingly give bene ent and accordingly give benefit of the stamp duty valuation. fit of the stamp duty valuation.
The Ld. Departmental Representative (DR) on the other hand The Ld. Departmental Representative (DR) on the other hand The Ld. Departmental Representative (DR) on the other hand relied on the order of the lower authorities. relied on the order of the lower authorities.
We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on relevant material on record. In the case, the assessee had record. In the case, the assessee had purchased aforementioned three properties on 09.08.2010. The purchased aforementioned three properties on 09.08.2010 purchased aforementioned three properties on 09.08.2010 assessee filed a copy of the allotment letter filed a copy of the allotment letters issued by the Real issued by the Real Estate Developer namely M/s HDIC Estate Developer namely M/s HDICL, which are available on Paper which are available on Paper Book page 8, 20, and 32. H Book page 8, 20, and 32. However, those three properties were owever, those three properties were registered before the stamp duty authority on 11.05.2015 i.e. registered before the stamp duty authority on 11.05.2015 i.e. registered before the stamp duty authority on 11.05.2015 i.e. during the assessment year under consideration. The Assessing during the assessment year under consideration. The Assessing during the assessment year under consideration. The Assessing Officer observed difference in the agreement value entered into Officer observed difference in the agreement value entered into Officer observed difference in the agreement value entered into
Jalaluddin Mohammed Ali Khan Jalaluddin Mohammed Ali Khan 5 ITA No. 47/MUM/2024 between the parties and the valu between the parties and the value adopted by the stamp duty value e adopted by the stamp duty value authorities for the purpose of the registration of the property. The authorities for the purpose of the registration of the property. The authorities for the purpose of the registration of the property. The difference of Rs.85,88,466/ difference of Rs.85,88,466/- between the stamp duty value and between the stamp duty value and agreement value of the properties was treated by the Assessing agreement value of the properties was treated by the Assessing agreement value of the properties was treated by the Assessing Officer as income from other Officer as income from other sources invoking provision of section sources invoking provision of section 56(2)(vii) of the Act. The Ld. CIT(A) upheld the addition on the 56(2)(vii) of the Act. The Ld. CIT(A) upheld the addition on the 56(2)(vii) of the Act. The Ld. CIT(A) upheld the addition on the ground that at the time of entering into agreement on 09.08.2010, ground that at the time of entering into agreement on 09.08.2010, ground that at the time of entering into agreement on 09.08.2010, the assessee did not make any payment by way of cheque and the assessee did not make any payment by way of cheque and the assessee did not make any payment by way of cheque and therefore, the assessee do ore, the assessee do not qualify for the benefit of the proviso the benefit of the proviso to section 56(2)(vii) of the Act. For ready reference, the relevant to section 56(2)(vii) of the Act. For ready reference, the relevant to section 56(2)(vii) of the Act. For ready reference, the relevant section is reproduced as under: section is reproduced as under:
“(2) In particular, and without prejudice to the generality of the In particular, and without prejudice to the generality of the In particular, and without prejudice to the generality of the provisions of sub provisions of sub-section (1), the following incomes, shall be ncomes, shall be chargeable to income chargeable to income-tax under the head "Income from other tax under the head "Income from other sources", namely : sources", namely :— (i) to (vi) …………………………………. (vi) …………………………………. (vii)where an individual or a Hindu undivided family receives, in any (vii)where an individual or a Hindu undivided family receives, in any (vii)where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of year, from any person or persons on or after the 1st day of year, from any person or persons on or after the 1st day of October, 2009 but before the 1st day of April, 2017, October, 2009 but before the 1st day of April, 2017,— (a)any sum of money, without consideration, the aggregate value of (a)any sum of money, without consideration, the aggregate value of (a)any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate which exceeds fifty thousand rupees, the whole of the aggregate which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;(b)any immovable property, ch sum;(b)any immovable property,— (i)without consideration, the stamp duty value of which exceeds fifty (i)without consideration, the stamp duty value of which exceeds fifty (i)without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; thousand rupees, the stamp duty value of such property; (ii)for a consideration which is less than the stamp duty value of the (ii)for a consideration which is less than the stamp duty value of the (ii)for a consideration which is less than the stamp duty value of the property by an amount ex property by an amount exceeding fifty thousand rupees, the stamp ceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration: duty value of such property as exceeds such consideration: Provided that where the date of the agreement fixing the amount of Provided that where the date of the agreement fixing the amount of Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of consideration for the transfer of immovable property and the date of consideration for the transfer of immovable property and the date of registration are not registration are not the same, the stamp duty value on the date of the same, the stamp duty value on the date of the agreement may be taken for the purposes of this sub the agreement may be taken for the purposes of this sub-clause: clause:
Jalaluddin Mohammed Ali Khan Jalaluddin Mohammed Ali Khan 6 ITA No. 47/MUM/2024
Provided further that the said proviso shall apply only in a case Provided further that the said proviso shall apply only in a case Provided further that the said proviso shall apply only in a case where the amount of consideration referred to therein, or a part where the amount of consideration referred to therein, or a part 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 een paid by any mode other than cash on or before the een paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property; date of the agreement for the transfer of such immovable property; date of the agreement for the transfer of such immovable property;” 6.1 In view of the above provisions In view of the above provisions, it is evident that where the it is evident that where the immovable property is received for immovable property is received for a consideration which is less consideration which is less than stamp value of the property by a n stamp value of the property by an amount exceeding n amount exceeding Rs.50,000/-, the stamp duty v he stamp duty value of such property as exceeding alue of such property as exceeding such consideration shall be chargeable to tax in the hands of the such consideration shall be chargeable to tax in the hands of the such consideration shall be chargeable to tax in the hands of the individual/HUF as income from other sources income from other sources. The proviso further . The proviso further prescribe that when the date of registration and date of agreement that when the date of registration and date of agreement that when the date of registration and date of agreement fixing the amount of consideration are different then stamp value as fixing the amount of consideration are different then stamp value as fixing the amount of consideration are different then stamp value as on the date of the agreement may be taken for the purpose of on the date of the agreement may be taken for the purpose of on the date of the agreement may be taken for the purpose of section 56(2)(vii) of the Act. The second proviso further prescribed section 56(2)(vii) of the Act. The second proviso further prescribe section 56(2)(vii) of the Act. The second proviso further prescribe that benefit of the first proviso shall be allowed only in the case that benefit of the first proviso shall be allowed only in the case that benefit of the first proviso shall be allowed only in the case where part of the consideration has been paid by any mode other where part of the consideration has been paid by any mode other where part of the consideration has been paid by any mode other than the cash on or before the date of the agreement for transfer of than the cash on or before the date of the agreement for transfer of than the cash on or before the date of the agreement for transfer of such immovable properties. We find that the Ld. CIT(A) has upheld such immovable properties. We find that the Ld. CIT(A such immovable properties. We find that the Ld. CIT(A the addition invoking second proviso according to which part of the the addition invoking second proviso according to which part of the the addition invoking second proviso according to which part of the consideration has to be paid by way of mode other than cash consideration has to be paid by way of mode other than cash consideration has to be paid by way of mode other than cash whereas the assessee has made payment by way of the cash as per whereas the assessee has made payment by way of the cash as per whereas the assessee has made payment by way of the cash as per Paper Book page 9 & 10, 21 & 22, 33 & 34. But before us, the Ld. Paper Book page 9 & 10, 21 & 22, 33 & 34. But befor Paper Book page 9 & 10, 21 & 22, 33 & 34. But befor counsel for the assessee submitted that few other payments have counsel for the assessee submitted that few other payments have counsel for the assessee submitted that few other payments have been made by the assessee by way of the cheque which are been made by the assessee by way of the cheque which are been made by the assessee by way of the cheque which are available in the Paper Book from page 11 to 15, 23 to 27 and 35 to available in the Paper Book from page 11 to 15, 23 to 27 and 35 to available in the Paper Book from page 11 to 15, 23 to 27 and 35 to 39. Since, the Ld. CIT(A) has not examined these payme the Ld. CIT(A) has not examined these payme the Ld. CIT(A) has not examined these payments in the Jalaluddin Mohammed Ali Khan Jalaluddin Mohammed Ali Khan 7 ITA No. 47/MUM/2024 light of the second proviso to section 56(2)(vii) of the Act, therefore, light of the second proviso to section 56(2)(vii) of the Act light of the second proviso to section 56(2)(vii) of the Act we feel it appropriate to restore the issue in dispute back to the file we feel it appropriate to restore the issue in dispute back to the file we feel it appropriate to restore the issue in dispute back to the file of the Ld. CIT(A) for verification of the evidences of the assessee and of the Ld. CIT(A) for verification of the evidences of the assessee and of the Ld. CIT(A) for verification of the evidences of the assessee and decide the issue in accordan decide the issue in accordance with law. The grounds of appeal of ce with law. The grounds of appeal of the assessee are accordingly allowed for statistical purposes. the assessee are accordingly allowed for statistical purposes. the assessee are accordingly allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for In the result, the appeal filed by the assessee is allowed for In the result, the appeal filed by the assessee is allowed for statistical purposes.