2025 (2) TMI 1083 - AT - Income Tax

Addition u/s 56(2)(x) - difference between the DVO s valuation and the set forth value - DR contended that the Ld. CIT(A) erred in treating the allotment letter as an agreement for sale and that accordingly the value should not be deemed as at the financial year 2009-10 - scope of amendment to section 56(2)(x) of the Act brought in Finance Act 2020 of increasing tolerance limit from 5% to 10% with effect from 01/04/2021 under section 56(2)(X)(b)(B). HELD THAT - With respect to Unit No. 103 the incremental difference exceeds 10% i.e. 10.01%. The Ld. AR contended that any excess over 10% should be added We hold that the provision of section 56(2)(x)(b)(B) has retrospective effect and is applicable to the impugned assessment year. Accordingly we uphold the view adopted by the Ld. CIT(A) in reducing the addition under section 56(2)(x). With respect to section 56(2)(x)(b)(B) we remit the matter to the file of the Ld. AO for allowing the assessee the incremental differences as per the said Act for the alleged properties. In the case of Unit No. 103 the excess over 10% shall be considered for addition. Consequently the appeal of the assessee is allowed.

Summary

The issues presented and considered in the judgment are as follows:1. Whether the valuation of a property based on an allotment letter should be considered as at the financial year of allotment or the financial year of payment.2. Whether the assessee is entitled to the benefit under section 56(2)(x)(b)(B) of the Income-tax Act, 1961 for a valuation difference less than 10%.Issue-wise detailed analysis:Issue 1:- Relevant legal framework and precedents: The case involved the interpretation of section 56(2)(x) of the Income-tax Act, 1961.- Court's interpretation and reasoning: The Court considered the arguments of both parties regarding the valuation of the property based on the allotment letter date versus the payment date.- Key evidence and findings: The valuation report by the Department Valuation Officer (DVO) was crucial in determining the difference between the DVO's valuation and the set forth value.- Application of law to facts: The Court held that the valuation should be considered as at the date of allotment, not the date of payment, and that the assessee is entitled to the benefit under section 56(2)(x)(b)(B) for a valuation difference less than 10%.- Treatment of competing arguments: The Court rejected the Revenue's argument and accepted the assessee's position based on the evidence and legal interpretation.- Conclusions: The Court remitted the matter to the Assessing Officer (AO) for allowing the assessee the incremental differences as per the Act for the properties. The appeal of the assessee was allowed.Significant holdings:- The provision of section 56(2)(x)(b)(B) has retrospective effect and is applicable to the impugned assessment year.- The Court upheld the view adopted by the Ld. CIT(A) in reducing the addition under section 56(2)(x) and allowed the appeal of the assessee.In conclusion, the Court ruled in favor of the assessee, allowing their appeal and dismissing the revenue's appeal. The judgment clarified the valuation method for properties based on allotment letters and the application of section 56(2)(x)(b)(B) for valuation differences.