2024 (11) TMI 688 - AT - Income Tax

Addition u/s 56(2)(b)(vii) - amount which is in excess of the stamp duty value from the sale consideration added to the total income of the assessee under the head income from other sources HELD THAT - From the perusal of the letter of allotment dated 29/05/2007 issued by the builder, we find that the assessee along with her husband agreed to pay lump-sum consideration of INR 25,62,500 in respect of Flat A-504, 5th floor, A-Wing, Veermani Market, Mumbai-400009, admeasuring 663.50 ft along with one car parking. Apart from the various other terms and conditions, we find that the parties are also agreed to the schedule of payment of the total consideration of INR 25,62,500. There is no dispute regarding the fact that the terms as agreed vide afore-stated allotment letter were complied with by both parties and payment was made to the builder except an amount of INR 5,20,000 which was only pending to be paid on 31/03/2013, i.e. on the date of registration of the agreement. This fact is evident from page no.36 of the paper book. Thus, the allotment letter was not only duly accepted by the assessee along with her husband but other conditions were also fulfilled. Therefore, respectfully following the aforesaid decision, we are of the considered view that the allotment letter can be considered as an agreement to sell in the present case. Even though the date of agreement fixing the amount of consideration for the transfer of immovable property, in the present case, is not the same as the date of registration, however, for the applicability of the first proviso to section 56(2)(vii)(b) of the Act, it is further relevant that the amount of consideration or part thereof is paid by any mode other than cash on or before the date of agreement in terms of the second proviso to section 56(2)(vii)(b). Assessee has furnished a copy of statement of its bank account maintained with the Maharashtra Cooperative Bank Ltd from 11/03/2008 till 02/04/2009 in order to show the payments made to the builder. Since the letter of allotment was issued by the builder on 29/05/2007, therefore for the purpose of applicability of the first and second proviso to section 56(2)(vii)(b) of the Act, it is relevant that some evidence is brought on record to show that the consideration or part thereof was paid by the assessee by any mode other than cash on or before the date of the allotment letter, i.e. 29/05/2007. Even in the decision of the coordinate bench of the Tribunal relied upon by the assessee, as noted in the foregoing paragraphs, while directing the AO to compare the stamp duty valuation as on the date of allotment with the transaction value recorded in the registration document, we find that the coordinate bench took into consideration the fact that the taxpayer, in that case, paid an amount of INR 2 lakh at the time of booking prior to the allotment letter. In the present case, no such evidence of payment of agreed consideration or part thereof by any mode other than cash on or before the date of the allotment letter has been brought on record. Therefore, in order to grant one more opportunity to the assessee in the interest of justice and fair play, we deem it appropriate to restore this issue to the file of the jurisdictional AO for adjudication in view of our aforesaid findings with a direction to the assessee to furnish the evidence of payment of agreed consideration or part thereof by any mode other than cash on or before the date of allotment letter to prove the applicability of the first and second proviso to section 56(2)(vii)(b) - Appeal by the assessee is allowed for statistical purposes.

Summary

Issues Involved:

1. Applicability of Section 56(2)(b)(vii) of the Income Tax Act, 1961.
2. Consideration of the allotment letter as an agreement for sale.
3. Evidence of payment by modes other than cash prior to the agreement date.
4. Applicability of the provisos to Section 56(2)(b)(vii) of the Act.

Issue-wise Detailed Analysis:

1. Applicability of Section 56(2)(b)(vii) of the Income Tax Act, 1961:

The primary issue in this appeal is whether the addition of INR 54,64,000 to the assessee's income under Section 56(2)(b)(vii) of the Income Tax Act is justified. The Assessing Officer (AO) observed that the assessee purchased a flat for INR 25,62,500, whereas the stamp duty authority valued it at INR 80,26,500. Consequently, the AO added the difference to the assessee's income as "income from other sources." The CIT(A) upheld this addition, stating that no evidence was furnished to counter the applicability of Section 56(2)(b)(vii). The Tribunal examined the provisions, noting that if the consideration for immovable property is less than the stamp duty value by more than INR 50,000, the excess is taxable under this section.

2. Consideration of the Allotment Letter as an Agreement for Sale:

The assessee argued that the property was allotted via a letter dated 29/05/2007, and payments were made before registration. The Tribunal referred to prior decisions, notably Salochana Saijan Modi v/s ITO, which considered an allotment letter as equivalent to an agreement for sale. The Tribunal agreed that the allotment letter, which was accepted by both parties and followed by payments, could be regarded as an agreement to sell, thus potentially affecting the applicability of Section 56(2)(b)(vii).

3. Evidence of Payment by Modes Other Than Cash Prior to the Agreement Date:

The Tribunal noted the importance of proving that consideration was paid by modes other than cash before the agreement date to apply the provisos of Section 56(2)(b)(vii). The assessee provided bank statements showing payments to the builder but failed to furnish evidence of payments made before the allotment letter date. The Tribunal highlighted the necessity of such evidence to justify the application of the provisos.

4. Applicability of the Provisos to Section 56(2)(b)(vii) of the Act:

The Tribunal discussed the provisos, which allow considering the stamp duty value on the agreement date if the consideration or part thereof was paid by non-cash modes before the agreement. The Tribunal found no evidence of such payments before the allotment letter date in the current case. Therefore, the Tribunal decided to remand the issue back to the AO, allowing the assessee another opportunity to provide the necessary evidence to prove the applicability of the provisos.

In conclusion, the Tribunal set aside the impugned order on this issue and restored it to the AO for further adjudication, allowing the appeal for statistical purposes. The Tribunal emphasized the need for the assessee to demonstrate payment of consideration or part thereof by modes other than cash before the allotment letter date to benefit from the provisos of Section 56(2)(b)(vii).