2024 (7) TMI 1486 - AT - Income Tax

Addition u/s 56(2)(x) - Difference between consideration and Stamp duty value of property - HELD THAT - According to the provisions of section 56(2)(x) of the act where any person receives from any person on or after the first day of April 2017, any immovable property for a consideration whereas the Stamp duty value of such property exceeds such consideration by more than ₹ 50,000 or amount equal to 10% of the consideration than such amount should be considered as an income chargeable to income tax under the head income from other sources. If the parties have agreed to an agreement prior to the year where the amount of consideration is fixed, and consideration is paid in a specified manner, then stamp duty value on the date of agreement should be considered for the purpose of computing the income of the assessee. Provisions of section 50C will also apply to such provision. Thus, it is apparent that provisions of section 50C are applicable to the seller and provisions of section 56(2)(x) applies to the buyer. At present the benefit of 10% of the tolerance limit is provided under section 50C and the same tolerance limit also applies to provisions of section 56(2)(x) of the act. Therefore, in the present case the benefit of 10% of the tolerance limit should be allowed to the assessee as if it has operated since the inception of the provisions of section 56(2)(x) and section 50C of the act. In view of this, the addition made in the hands of the assessee is not in accordance with the law and hence the learned assessing officer is directed to delete the addition. Assessee appeal allowed.

Summary

Issues:
1. Appeal against dismissal of assessment order under section 143(3) of The Income Tax Act, 1961.
2. Delay in filing appeal before the CIT - A and condonation of the same.
3. Discrepancy between consideration and Stamp duty value of property leading to addition under section 56(2)(x) of the act.

Analysis:
1. The appellant filed an appeal against the assessment order passed by the National faceless appeal Centre Delhi for the assessment year 2020-21. The appellant, an individual, had shown income from various sources in the return filed. The assessing officer added an amount to the total income under section 56(2)(x) due to a difference in the valuation of a property purchased by the appellant in 2013. The appeal was dismissed, leading to the appellant approaching the ITAT Mumbai.

2. The appellant's appeal before the CIT - A was delayed by 30 days, citing reasons of being out of station. However, the delay was not condoned as the appellant failed to provide sufficient evidence to justify the delay. The appellant contended that the delay was nominal and without any mala fide intention, urging for condonation of the delay. The ITAT Mumbai noted the contentions of both parties but decided not to delve into the delay issue further, focusing on the merits of the case.

3. On the merits, the ITAT Mumbai observed that the difference between the consideration and Stamp duty value of the property was only Rs. 595,000, falling within the tolerance limit. Referring to section 56(2)(x) of the act, it was highlighted that if the Stamp duty value of a property exceeds the consideration by more than Rs. 50,000 or 10% of the consideration, such amount is chargeable to income tax. The ITAT Mumbai emphasized that the tolerance limit of 10% should be applicable to the buyer, similar to section 50C for the seller. Therefore, the addition made by the assessing officer was deemed not in accordance with the law, directing the deletion of the addition and allowing all grounds of appeal by the appellant.

In conclusion, the ITAT Mumbai reversed the assessing officer's order, emphasizing the application of the tolerance limit and directing the deletion of the addition made to the appellant's income.