2020 (8) TMI 511 - AT - Income Tax

Addition u/s 56(2)(b) - addition of the differential amount between the same consideration shown in the sale documents and stamp duty valuation taken by the Sub-Registrar - CIT(A) has upheld the addition made by the A.O. on the similar reasoning that the assessee has failed to produce the agreement with the builder at the time of booking of the flat - HELD THAT - The first and second proviso carve out the exception for taking stamp duty value on the date of agreement prior to the date of registration if an amount of consideration or part thereof has been paid by any mode other than the cash before the date of agreement for transfer of such immovable property. If there is an agreement between the parties, fixing the amount of consideration for transfer of immovable property prior to the date of registration and the purchaser has made the payment of consideration or part thereof before the date of that registered agreement for transfer by any mode other than cash then the value as determined for the stamp duty will be taken on the date of such earlier agreement. All these facts are duly acknowledged by the parties in the registered agreement that earlier there was a booking of flat and the assessee paid part payment of consideration. Hence, the proviso first and second to Section 56(2)(vii) of the Act would be applicable in the case and the stamp duty valuation or the fair market value of the immovable property shall be considered as on the date of booking and payment made by the assessee towards booking of the flat. Accordingly, the orders of the authorities below are set aside and the matter is remanded to the record of the A.O. to apply the stamp duty valuation as on 10/10/2010 when the assessee booked the flat and made the part payment of consideration and consequently, if any difference being the stamp duty valuation is higher than the purchase consideration paid by the assessee, the same would be added to the income of the assessee under the provisions of Section 56(2)(vii)(b) - Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Addition of ?15,39,496/- under Section 56(2)(b) of the Income Tax Act, 1961 due to inadequate consideration.

Issue-Wise Detailed Analysis:

1. Addition of ?15,39,496/- under Section 56(2)(b) of the Income Tax Act, 1961 due to inadequate consideration:

The appeal concerns the addition of ?15,39,496/- made by the Assessing Officer (A.O.) under Section 56(2)(b) of the Income Tax Act, 1961. The assessee, a proprietor of M/s Mahendra Gulkand Works, filed a return declaring a total income of ?7,08,230/-. During scrutiny, the A.O. noted that the assessee purchased a flat for ?1,38,03,550/- on 17/09/2014, while the Sub-Registrar valued it at ?1,53,43,036/-. The A.O. invoked Section 56(2)(b) to add the differential amount of ?15,39,496/-.

The assessee contended that the flat was booked on 10/10/2010, with an earnest payment of ?12,38,090/-. The A.O. did not dispute the payments made on 10/10/2010 and 14/10/2010 but denied the claim due to the absence of an agreement prior to the registered sale agreement dated 17/09/2014. The A.O. added the differential amount based on the stamp duty valuation at the time of registration.

The CIT(A) upheld the A.O.'s decision, noting the failure to produce an agreement from 2010. The assessee argued that the booking itself constituted an agreement, supported by a letter from the builder dated 16/10/2017 confirming the payments. The assessee claimed that the stamp duty value should be considered as of the booking date, not the registration date.

The Tribunal found no dispute regarding the payments made in 2010. The key issue was whether the stamp duty valuation should be taken as of the booking date or the registration date. The Tribunal noted that the builder confirmed the booking and payments, and the final agreement included a payment schedule. The Tribunal concluded that the booking and part payment constituted an agreement, with terms and conditions agreed upon at the booking time.

Section 56(2)(vii) states that if an immovable property is received for a consideration less than the stamp duty value, the excess amount is chargeable to income tax. However, the provisos allow for considering the stamp duty value as of an earlier agreement date if part of the consideration was paid before the registration date by non-cash means.

The Tribunal acknowledged the earlier booking and payments, applying the provisos to Section 56(2)(vii). The Tribunal remanded the matter to the A.O. to apply the stamp duty valuation as of 10/10/2010, when the flat was booked and part payment made. If the stamp duty valuation exceeded the purchase consideration, the difference would be added to the assessee's income under Section 56(2)(vii)(b).

Conclusion:

The appeal was allowed for statistical purposes, with the Tribunal directing the A.O. to reassess the stamp duty valuation as of the booking date and make necessary adjustments to the assessee's income. The order was pronounced on 19th August 2020.