2021 (10) TMI 865 - AT - Income Tax

Addition u/s 56(2)(vii)(b) - difference between the stamp value and the purchase consideration - sale consideration on the lesser value of prevailing Jantri rates - Difference of value is the stamp valuation worked out as per the value adopted by the Stamp Valuation Authority(SVA) - HELD THAT - CIT(A) not discarded the contention of the assessee by taking view that no separate brake up of market value of actual plot, road, common area given in the sale deed is not established and that the recorded consideration is the market value of actual plot as per Stamp Valuation Authority (SVA), thus, concurred with the finding of the AO. We find that the AO made addition without verifying the facts either from the seller about the receipt of excess sale consideration. As assessee specifically stated before the lower authorities that he has paid 1% additional stamp duty on in accordance with the regulation of State Government and the additional stamp duty is levied to recover a loss of revenue which the State Government has to suffer on portion of land used in road and other amenities provided by the land organiser, which does not form part of sale consideration. The payment of additional stamp duty is outside the purview of valuation of asset, it has no bearing or impact on the market value of property assessed by the Stamp Valuation Authority. AO and the ld. CIT(A) has not made any effort to verify the assertion of the assessee. We further find that the AO made addition only on the basis of additional stamp duty. There is no evidence on record to suggest that the assessee has shown sale consideration on the lesser value of prevailing Jantri rates - we do not find any justifiable reason for making the addition in the hand of assessee - Appeal raised by the assessee is allowed.

Summary

Issues:
1. Addition made under section 56(2)(vii)(b) of the Income Tax Act for the assessment year 2014-15.

Analysis:
1. The appeal was filed against the orders of the Commissioner of Income Tax (Appeals) for the assessment year 2014-15. The main issue raised by the assessee was the addition made under section 56(2)(vii)(b) of the Income Tax Act. The Assessing Officer noted that the assessee purchased immovable property for ?46 lakhs but paid stamp duty of ?2,71,500, leading to a difference in the value of the property. The AO treated this difference as income from "Other Sources" and made an addition of ?9,40,816. The assessee contended that the additional stamp duty was not part of the market value of the property and should not be considered as deemed sale consideration.

2. The legal representative of the assessee argued that the additional stamp duty was levied as per State Government regulations and was unrelated to the market value of the property. The Stamp Valuation Authority's assessment did not consider the specific circumstances of the purchase, such as the location of the property and the amenities provided. The AO and the CIT(A) did not adequately verify these assertions and made the addition solely based on the additional stamp duty paid. The Tribunal found that there was no justification for the addition and directed the AO to delete the ?9,40,816 addition made under section 56(2)(vii)(b) of the Act.

3. The Tribunal emphasized that the additional stamp duty paid by the assessee was in compliance with government regulations and did not reflect the actual market value of the property. The AO's failure to consider the specific circumstances of the purchase and the purpose of the additional stamp duty led to an unjustifiable addition to the assessee's income. Therefore, the Tribunal allowed the appeal and directed the deletion of the addition made by the AO.

4. The decision highlighted the importance of thoroughly examining the facts and circumstances of a case before making additions to a taxpayer's income. In this instance, the Tribunal found that the additional stamp duty paid was not indicative of the actual market value of the property and should not have been treated as income under section 56(2)(vii)(b) of the Income Tax Act. The judgment serves as a reminder for tax authorities to consider all relevant factors before making assessments and additions to taxpayers' income.