2021 (9) TMI 102 - AT - Income Tax

Addition u/s 56(2)(vii)(b)(ii) - income from other sources - difference between the consideration amount paid and stamp duty value of property - HELD THAT - We find that neither the AO nor the ld CIT(A) investigated about the non-genuineness of the agreement. No notice to the seller was issued by ld CIT(A) before taking view that probably the agreement composition being anti date too . The ld CIT(A) took his view only on his presumption and assumption - AO invoked the provision of section 56(2)(vii)(b)(ii), without having any evidence of excess consideration over and above the sale deed. in addition to the sale consideration. Assessee entered in to agreement with the seller on 28.03.2013. The substantial part of the sale consideration was also paid to the seller, which is about 80% of the total sale consideration. Though, ultimately the sale deed was registered on 10.09.2013. The details of sale consideration is also mentioned in the registered sale deed, which strengthen the claim of the assessee that substantial part of consideration was paid on the day of execution of the initial agreement. The assessee claimed that the possession of the land was also obtained by them at the time of agreement. This fact is not disputed by the AO. Assessee entered in agreement with the seller, paid substantial consideration and obtained possession, the sub-clause-(ii) of clause (vii) of sub-section (2) of section 56 was not on the statue book - We find that in absence of sub-clause (ii) in the statue book as on the date of agreement to sale of the property, the AO was not entitle to invoke the said provision. Hence, the ground of appeal raised by the assessee is allowed. The AO is directed to delete the entire addition under section 56(2)(vii)(b)(ii). - Decided in favour of assessee.

Summary

Issues:
- Addition u/s 56(2)(vii)(b)(ii) of I.T. Act on property value difference

Analysis:
1. The appeal was against the order confirming the addition of ?10,35,918 under section 56(2)(vii)(b)(ii) of the Income Tax Act for the assessment year 2014-15. The Assessing Officer noted a difference between the consideration amount paid by the assessee and the stamp duty value of the property purchased by the assessee along with co-owners. The Assessing Officer contended that the property value was understated by the assessee, leading to the addition.

2. The assessee argued that the provision of section 56(2)(vii)(b)(ii) was not applicable as the property was purchased before the amendment effective from April 1, 2013. The assessee claimed that substantial consideration was paid before the amendment date, and possession was taken prior to that as well. However, both the Assessing Officer and the CIT(A) upheld the addition, stating that the amendment was widely known before its enactment.

3. During the appeal before the Tribunal, the assessee contended that the sub-clause (ii) of section 56(2)(vii) was introduced for AY 2014-15, allowing the AO to tax the difference if consideration was less than the stamp duty value. The assessee argued that since the sub-clause was not in effect at the time of the agreement, the AO could not apply it. The Tribunal referred to similar cases and held that the AO was not entitled to invoke the provision in the absence of sub-clause (ii) at the time of the property sale agreement.

4. The Tribunal found that the AO and CIT(A) did not investigate the genuineness of the agreement or provide evidence of excess consideration. The Tribunal noted that the substantial part of the consideration was paid before the amendment date, and possession was obtained at the time of the agreement. Therefore, the Tribunal allowed the appeal, directing the deletion of the entire addition under section 56(2)(vii)(b)(ii).

5. The Tribunal's decision was announced on August 31, 2021, in favor of the assessee, emphasizing that the AO was not entitled to apply the provision in the absence of the relevant sub-clause at the time of the property sale agreement.