2018 (7) TMI 127 - AT - Income Tax

Addition u/s. 56(2)(vii)(b)- Held that - Since the conveyance deed has been executed on 26.03.2013, the sale transaction has happened in the AY 2013-14, sec. 56(2)(vii)(b)(ii) of the Act was not applicable because for inadequate consideration the amended provision is applicable with effect from 01.04.2014 that means the said provision is applicable from AY 2014-15. Since the consideration for purchase of property was agreed upon by the vendor and the assessee at ₹ 30 lakhs, no addition was possible under sec. 56(2)(vii)(b) of the Act as the law stood at that time and we note that later the entire sale consideration has been paid by account payee cheque by the assessee to the vendor, therefore, the addition was not sustainable. Hence, the Ld. CIT(A) has rightly allowed the appeal of the assessee - dismiss the revenue s appeal.

Summary

Issues:
Appeal against deletion of addition made under section 56(2)(vii)(b) of the Income-tax Act, 1961 for assessment year 2013-14.

Analysis:
The sole issue in this appeal was the deletion of an addition made by the Assessing Officer (AO) under section 56(2)(vii)(b) of the Income-tax Act, 1961. The AO added ?1,69,81,700 as income of the assessee, alleging that a flat was purchased without consideration and its fair market value should be assessed as income from other sources. The assessee contended that the sale was for ?30,00,000, paid through account payee cheques, and hence, the provision of section 56(2)(vii)(b) did not apply. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition after finding that the sale was indeed for consideration, as per the registered deed of conveyance. The CIT(A) noted that the vendor recorded the sale at ?2,19,70,001 and the appellant recorded it as a debt due to the vendor for ?30,00,000. The AO's assertion that the transfer was without consideration was deemed incorrect, given the commercial nature of the transaction and the relationship between the parties. The CIT(A) also highlighted that the Finance Act 2013 provisions were not retrospective and did not apply to the assessment year 2013-14.

The Appellate Tribunal noted that the assessee had produced the conveyance deed specifying the sale consideration as ?30,00,000. The entire payment was made subsequently through ICICI Bank and Kotak Mahindra Bank. The Tribunal also considered the documents submitted by the assessee to substantiate the payment of consideration to the vendor. The Tribunal highlighted the objective of the amendment introduced by the Finance Act 2013, which was not applicable to the transaction in question as it took effect from April 1, 2014. Since the sale transaction occurred in the assessment year 2013-14, the amended provision of section 56(2)(vii)(b)(ii) of the Act did not apply, and the addition made by the AO was not sustainable. Consequently, the Tribunal upheld the CIT(A)'s decision to delete the addition and dismissed the revenue's appeal.

In conclusion, the Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision to delete the addition made under section 56(2)(vii)(b) of the Income-tax Act, 1961 for the assessment year 2013-14.