Stamp Value As On Date Of Agreement Of Sale Of Property Has To Be Considered For Applicability Of Section 56(2)(vii)(b): ITAT

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that stamp value as on the date of agreement of sale of the property, in the year 2010 (i.e., Rs. 1.4 Cr), has to be considered for the applicability of Section 56(2)(vii)(b) of the Income Tax Act.

The bench of Challa Nagendra Prasad (Judicial Member) and B. R. R. Kumar (Accountant Member) has deleted the addition of Rs. 40.45 lakhs made under Section 56(2)(vii)(b). The bench noted that the assessee entered into an agreement fixing the amount of consideration for the purchase of the immovable property in the year 2010, but the actual registration took place in 2013, and, further, the assessee paid a part of the consideration by check in the year 2010 before the date of the agreement.

The appellant/assessee, a non-resident individual, did not file a return of income for the assessment year 2014–15 on the premise that the total income had not exceeded the exemption limit. Based upon the information received by the Assessing Officer that the assessee has purchased an immovable property for INR 2,22,45,000, reassessment proceedings were initiated under Section 147, and notice was served on the appellant.

In response to the notice, the assessee filed a return of income on January 24, 2022. During the reassessment proceedings, it was submitted before the AO that the assessee had purchased a residential flat from M/s Prakash Estates for a consideration of Rs 1,82,00,000.

During the assessment proceedings, AO invoked provisions of Section 56(2)(vii)(b) on the premise that the stamp value on the date of registration being 13.08.2013 (being Rs. 2,22,45,000/-) shall be taken into consideration, while the assessee argued that the stamp valuation on the date of agreement, i.e., 21.06.2010, was to be taken into consideration. The AO passed a draft assessment order making an addition of Rs 40,45,000 (i.e., 2,22,45,000 being the stamp value as of the date of registration) minus Rs 182,00,000 being the amount paid. The AO declined to give relief of the first proviso to Section 56(2)(vii)(b) on the premise that the phrase used in the said proviso is "may be taken" and not "shall be taken.".

The tribunal noted that the first proviso to Section 56(2)(vii)(b) categorically provides that where the date of agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purpose of this provision. The agreement fixing the consideration was entered into on June 21, 2022, with a value of Rs 1.82 crore, and the sale deed was registered on August 13, 2013. The prescription of the second proviso is fulfilled as the assessee paid a sum of Rs. 26 lakhs in FY 2010–11 (i.e., on June 17, 2010, even before the date of the agreement to sell was June 21, 2022) as part payment through the banking channel.

The tribunal allowed the appeal and held that the stamp value on the date of agreement in the year 2010 has to be considered.

Counsel For Appellant: Manuj Sabharwal

Counsel For Respondent: Vizay B. Vasanta

Case Title: Shyamkumar Madhavdas Chugh Versus The ACIT

Case No.: ITA No. 1673/Del/2023

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