ITAT: Stamp Value As On The Date Of Agreement Of Sale, To Be Considered For The Applicability Of Section 56(2)(Vii)(B) Of The Income Tax Act

ITAT: Stamp Value As On The Date Of Agreement Of Sale, To Be Considered For The Applicability Of Section 56(2)(Vii)(B) Of The Income Tax Act

The Income Tax Appellate Tribunal (ITAT) Delhi Bench has ruled that the stamp value as of the agreement date for the property sale in 2010 (i.e., Rs.1.4 Cr) must be taken into account for the application of Section 56(2)(vii)(b) of the Income Tax Act.

The bench, consisting of Challa Nagendra Prasad (Judicial Member) and B. R. R. Kumar (Accountant Member), has removed the addition of Rs. 40.45 lakhs under Section 56(2)(vii)(b). The bench observed that the assessee finalized the consideration amount for purchasing the immovable property in 2010 through an agreement, but the actual registration occurred in 2013, and a partial payment was made by cheque in 2010 before the agreement date.

The appellant, a non-resident individual, did not file an income tax return for the assessment year 2014–15, believing that the total income remained below the exemption limit. However, following information received by the Assessing Officer regarding the appellant's purchase of an immovable property valued at INR 2,22,45,000, reassessment proceedings were initiated under Section 147, with a notice served on the appellant.

In reply to the notice, the assessee submitted a return of income on January 24, 2022. During the reassessment proceedings, it was presented to the Assessing Officer that the assessee had acquired a residential flat from M/s Prakash Estates for a consideration of Rs 1,82,00,000.

During the assessment proceedings, the Assessing Officer (AO) invoked the provisions of Section 56(2)(vii)(b), asserting that the stamp value on the registration date of 13.08.2013 (Rs. 2,22,45,000) should be considered. However, the assessee argued that the stamp valuation on the agreement date, i.e., 21.06.2010, should prevail. The AO issued a draft assessment order, adding Rs. 40,45,000 (calculated as Rs. 2,22,45,000, the stamp value on the registration date, minus Rs. 1,82,00,000, the amount paid). The AO declined to grant relief under the first proviso to Section 56(2)(vii)(b), contending that the phrase "may be taken" in the proviso does not mandate action.

The tribunal highlighted that the first proviso to Section 56(2)(vii)(b) explicitly states that if the date of agreement determining the consideration for the transfer of immovable property differs from the date of registration, the stamp duty value on the agreement date may be utilized for this provision. In this case, the agreement specifying the consideration was executed on June 21, 2022, amounting to Rs. 1.82 crore, while the sale deed was registered on August 13, 2013.The conditions outlined in the second proviso are satisfied as the assessee made a payment of Rs. 26 lakhs during the financial year 2010–11 (specifically, on June 17, 2010, predating the agreement to sell dated June 21, 2022), through the banking channel.

The tribunal granted the appeal and determined that the stamp value on the date of the agreement in the year 2010 should be taken into account.