2021 (5) TMI 631 - AT - Income Tax

Income from other sources - value adopted by the AO of the property purchased by the assessee will be stamp duty - HELD THAT - Since, at the time of execution of agreement to purchase, there was no provision in the Act for taking stamp duty as the value of the property for determination of capital gains, in case the consideration is paid less than the stamp duty value, therefore, the assessee did not apprehend any such action by the assessing officer. The assessee made part payment through cheque as per the terms of the agreement. In my view, mere mentioning of the date of the very next day on the cheque did not make any difference. A provision was made to take the value of consideration as stamp duty value if the consideration paid is less than the stamp duty value. However, saving clause by second proviso has been made applicable stating that, if the consideration has been paid as per value mentioned in the agreement to purchase, then the amount mentioned in the agreement can be taken the amount of consideration if the consideration referred to in the agreement or a part thereof, is paid on or before the date of agreement. This provision did not exist at the time of entering into the agreement to purchase in question. The case of the assessee is self-explanatory. The registry was done on 28-05-2013. However, the part payment was made by cheque on the next day of execution of agreement i.e. 20.07.2012, which in our view, was towards the fulfillment of the terms of the contract. Therefore, the Ld. AO is not justified in taking a hyper technical view, whereas, the facts of the case show that there is no malafide or false claim on the part of the assessee. The provisions of section 56 of the Act are for the purpose of the assessment of capital gains. Such deeming provisions do not suggest that the assessee had actually paid the consideration more than that was mentioned in the agreement or sale deed. The impugned addition made by the Ld. AO on the basis of deeming provisions and taking the difference as unaccounted income of the assessee is not sustainable in the eyes of law. Accordingly, the same is ordered to be deleted. Appeal of the assessee stands allowed.

Summary

Issues:
1. Discrepancy in stamp duty value and sale consideration of property.
2. Interpretation of section 56(2)(vii)(b) of the Income Tax Act, 1961.
3. Validity of agreement for sale and registration requirements.

Issue 1: Discrepancy in stamp duty value and sale consideration of property:
The appellant challenged the addition of income by the Assessing Officer (AO) due to a difference in stamp duty value and sale consideration of a property. The AO considered the stamp duty value as on the date of sale, while the appellant argued that part payment was made at the time of agreement execution. The AO added the difference as income from unexplained sources. The Commissioner of Income Tax (Appeals) upheld this addition. The Tribunal noted the discrepancy and found the AO's action unjustified.

Issue 2: Interpretation of section 56(2)(vii)(b) of the Income Tax Act, 1961:
The appellant contended that at the time of agreement, there was no provision to consider stamp duty value for determining capital gains if the consideration was less than the stamp duty value. The Tribunal agreed that the appellant made part payment through a cheque as per the agreement terms. The relevant provision was amended post the agreement date, allowing the stamp duty value to be considered if the consideration paid was less than the stamp duty value. The Tribunal found the AO's hyper-technical view unwarranted and ruled in favor of the appellant.

Issue 3: Validity of agreement for sale and registration requirements:
The AO argued that the agreement for sale was not registered, questioning its validity. However, the Tribunal pointed out that the law did not mandate registration for the agreement to be considered valid. The Tribunal emphasized that the payment made by the appellant was in accordance with the agreement terms, and the addition of income based on deeming provisions was unsustainable. Consequently, the Tribunal ordered the deletion of the impugned addition.
This judgment highlights the importance of interpreting tax laws accurately, considering the timing of transactions, and ensuring that additions to income are justified based on legal provisions.