2018 (10) TMI 1104 - AT - Income Tax

Addition made u/s 56(2)(vii)(b)(ii) on account of purchase of immovable property - transfer of capital assets - date of the agreement with regard to the sale of the property - bogus transaction - Held that - The term transfer U/s 2(47)(v) 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 subsequently made up as 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 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. - Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Applicability of Section 56(2)(vii)(b)(ii) of the Income Tax Act, 1961 regarding the addition made by the Assessing Officer on account of the purchase of immovable property.

Issue-Wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee filed an appeal against the order dated 06/11/2017 of the CIT(A)-2, Jaipur for the A.Y. 2014-15, with a delay of one day. The assessee submitted an application for condonation of delay supported by an affidavit, explaining that the delay was due to a State holiday on 13/2/2018 and a subsequent holiday on 14/2/2018 for the ITAT. The Tribunal found the explanation reasonable, noting that the appeal documents were signed on 13/2/2018, and condoned the one-day delay.

2. Applicability of Section 56(2)(vii)(b)(ii) of the Income Tax Act, 1961:
The core issue was whether the addition made by the Assessing Officer under Section 56(2)(vii)(b)(ii) of the Act, based on the difference between the stamp duty value and the purchase consideration of an immovable property, was justified.

Facts and Arguments:
- The assessee purchased property at PNB-20, block B, Sushant City Machawa, Kalwar Road, Jaipur for ?10,51,000, while the stamp duty value was ?22,37,060.
- The Assessing Officer considered the stamp duty value as the purchase consideration and made an addition under Section 56(2)(vii)(b)(ii).
- The assessee contended that the purchase agreement was dated 28/3/2013, and the sale deed was registered on 28/4/2013. Hence, the transaction occurred in the preceding year, making Section 56(2)(vii)(b)(ii) inapplicable.
- The CIT(A) upheld the Assessing Officer’s view that the property was purchased only when the sale deed was registered on 26/4/2013, as the seller did not have full rights before this date.

Tribunal’s Findings:
- The Tribunal examined the agreement dated 28/3/2013 and the subsequent sale deed dated 26/4/2013. It noted that the seller had acquired the property from Ansal Township and Land Development Ltd. and had made full payment by 02/4/2008.
- The Tribunal referred to Section 56(2)(vii)(b) of the Act, which does not require the term "transfer" but uses "receives" in the context of immovable property.
- The Tribunal found that the part payment of ?4.00 lakhs on 28/3/2013 corroborated the existence of the agreement.
- Citing the Supreme Court decision in Sanjeev Lal Vs CIT, the Tribunal held that substantial rights in the property were transferred to the assessee on 28/3/2013, making the transaction fall outside the assessment year in question.
- Consequently, the Tribunal concluded that the provisions of Section 56(2)(vii)(b) could not be invoked for the year under consideration and deleted the addition made by the Assessing Officer.

Conclusion:
The Tribunal set aside the orders of the authorities below, allowed the appeal of the assessee, and deleted the addition made under Section 56(2)(vii)(b)(ii). The Tribunal clarified that the Assessing Officer could still assess any income for the earlier assessment year 2013-14 if applicable.

Order Pronouncement:
The order was pronounced in the open court on 05/10/2018.