2022 (5) TMI 265 - AT - Income Tax

Addition u/s. 56(2)(vii)(b)(ii) - difference between the stamp duty value and the consideration paid - primary objection raised by the assessee against addition made u/s. 56(2)(vii)(b)(ii) is that since the assessee had paid stamp duty and had executed the agreement on or before 31/03/2013, amended provisions of section 56(2)(vii)(b)(ii) of the Act would not get attracted - HELD THAT - As per the amended provisions of sub clause (b) to section 56(2)(vii), where an individual or HUF receives in any previous year any immovable property for a consideration which is less than stamp duty value of such property, the Assessing Officer can made addition of the difference between the stamp duty value and the consideration paid. Prior to amendment by the Finance Act, 2013 there was no provision u/s.56(2)(vii)(b) of the Act to make addition in respect of consideration less than the stamp duty value. The scope of section 56(2)(vii) has been enlarged after amendment w.e.f. 01/04/2014. Since, in the present case agreement was executed on 31/03/2013 i.e. during the Assessment Year 2013-14, the provisions of section 56(2)(vii)(b) of the Act as applicable to the assessment year 2013-14 would apply. Registration of agreement on the subsequent date would not alter the situation. The registration of agreement is a compliance of a legal requirement under the Registration Act, 1908. Thus, in the facts of case we are of considered view that the authorities below have erred in invoking the provisions of section 56(2)(vii)(b)(ii) as amended by the Finance Act, 2013. Ergo, ground No.2 of the appeal is allowed.

Summary

Issues:
1. Addition under section 56(2)(vii)(b)(ii) of the Income Tax Act, 1961.
2. Referral to DVO for valuation.
3. Application of amended provisions of section 56(2)(vii)(b)(ii).
4. Charging of interest under sections 234A, 234B, and 234C.
5. Initiation of penalty proceedings under section 271(1)(c).
6. Validity of assessment order due to lack of signature.

1. Addition under section 56(2)(vii)(b)(ii) of the Income Tax Act, 1961:
The primary issue in this case was the addition of Rs.18,53,457 under section 56(2)(vii)(b)(ii) of the Income Tax Act, 1961. The dispute arose from the timing of the agreement execution and stamp duty payment in relation to the relevant assessment year. The assessee argued that since the agreement was executed and stamp duty paid before the amendment effective date, the amended provisions should not apply. The Tribunal agreed with the assessee, emphasizing that the registration of the agreement on a later date did not change the applicability of the provisions. Therefore, the addition was deemed unwarranted, and the assessee's appeal on this ground was allowed.

2. Referral to DVO for valuation:
The CIT(A) had referred the matter to the DVO for valuation as of 31/03/2013, the date of agreement execution. The assessee contended that the valuation should have been sought as of 16/04/2010, the date of earnest money payment. However, since the primary issue was resolved in favor of the assessee, this alternate submission became irrelevant and was not further discussed.

3. Application of amended provisions of section 56(2)(vii)(b)(ii):
The Tribunal highlighted the amendment to section 56(2)(vii)(b)(ii) by the Finance Act, 2013, expanding the scope of the provision. It clarified that the amended provisions applied to cases where the agreement was executed during the relevant assessment year. The registration of the agreement was deemed a legal compliance and did not alter the applicability of the provisions. Consequently, the authorities were found to have erred in invoking the amended provisions in this case.

4. Charging of interest under sections 234A, 234B, and 234C:
The Tribunal noted that the levy of interest under sections 234A, 234B, and 234C was mandatory and consequential. As a result, the challenge to the charging of interest was dismissed for lack of merit.

5. Initiation of penalty proceedings under section 271(1)(c):
The Tribunal deemed the challenge to penalty proceedings premature and dismissed the appeal on this ground accordingly.

6. Validity of assessment order due to lack of signature:
The assessee had raised a concern regarding the validity of the assessment order due to the absence of a signature. However, the representative chose not to press this ground at that stage, leaving the issue open for future consideration.

In conclusion, the appeal by the assessee was partly allowed based on the primary issue related to the addition under section 56(2)(vii)(b)(ii), while other grounds raised by the assessee were either dismissed or deemed premature for deliberation.