2025 (3) TMI 406 - AT - Income Tax

Applicability of provision of 56(2)(vii)(b)(ii) - assessee had purchased immovable property and there was a difference of value as disclosed by the assessee and adopted by the Stamp Valuation Authority - HELD THAT - Revenue s action in invoking provisions of section 56(2)(vii)(b)(ii) is not sustainable in the eyes of law for the reason that the agreement executed on 01/06/2012 between the purchaser and the seller which fall during the financial year 2012 13 relevant to the assessment year 2013 14. The possession was also took place on the same date i.e. on 01/06/2012. Substantial part of payment has also been made during the financial year 20121 13 relevant to the assessment year 2013 14 while the provisions of section 56(2)(vii)(b)(ii) was not in existence during this period of transaction and the date of taking over the possession. In fact the provisions of section 56(2)(vii)(b)(ii) have been inserted in the statute w.e.f. 01/04/2014 i.e. during the assessment year 2014 15 and not before that while the assessee has already executed agreement during the assessment year 2013 14 itself and hence the provisions of section 56(2)(vii)(b)(ii) are not applicable to the said transaction per se. Thus consequent upon such amendment inserted in the statute the addition made by the AO and confirmed by CIT(A) has no legs to stand. Decided in favour of assessee.

Summary

The issues presented and considered in this legal judgment are as follows:1. Whether the Assessing Officer correctly applied the provisions of Sec. 56(2)(vii)(b)(ii) which was inserted prospectively from 1st April 2014.2. Whether the Assessing Officer provided a reasonable opportunity to the assessee to prove the market value of the property.3. Whether the Assessing Officer obtained the opinion of the valuation officer regarding the market value of the property.4. Whether the Assessing Officer proved that an additional amount over the agreement value was paid by the appellant to the seller causing a loss to the revenue.5. Whether the Assessing Officer failed to give the benefit of the first provision of Sec. 56(2)(vii) to the appellant.6. Whether the Assessing Officer failed to consider that the property was situated in a lower-class area and hence fetched a lower price.The detailed analysis of the issues is as follows:The facts of the case involve the assessee, engaged in the business of civil contracting, purchasing an immovable property for 60,00,000 from M/s. Shri Gurukrupa Builders and Developers. The stamp duty value of the property was 69,76,000. The Assessing Officer proposed to treat the difference between the purchase consideration and the market value as "Income From Other Sources" under section 56(2)(vii)(b)(ii) of the Act.The Court considered the submissions of the appellant and the findings of the Assessing Officer. The Court analyzed the provisions of Sec. 56(2)(vii)(b)(ii) and its applicability to the transaction in question. The Court noted that the provision was inserted in the Income Tax Act w.e.f. 1.4.2014 and was not applicable to transactions before that date. The Court observed that the agreement for the property was executed before the insertion of the provision, and substantial payments were made prior to the provision coming into force.The Court held that the provisions of Sec. 56(2)(vii)(b)(ii) were not applicable to the transaction in question as they were inserted after the execution of the agreement and the substantial payments made by the assessee. Therefore, the addition made by the Assessing Officer under section 56(2)(vii)(b)(ii) was deemed unsustainable in law. The Court allowed the appeal of the assessee, setting aside the order of the learned CIT(A).The significant holdings of the judgment include the Court's interpretation that the provisions of Sec. 56(2)(vii)(b)(ii) were not applicable to the transaction due to the timing of the agreement and payments made by the assessee. The Court concluded that the addition made by the Assessing Officer under the said provision was not legally sustainable, leading to the allowance of the assessee's appeal.In conclusion, the Court's analysis focused on the correct application of the relevant provisions of the Income Tax Act to the specific transaction in question, ultimately leading to the allowance of the assessee's appeal based on the inapplicability of Sec. 56(2)(vii)(b)(ii) to the facts of the case.