Section 56(2)(x) Not Applicable Before 01.04.2017: ITAT Delhi

Rajendra Pal Singh Sandhu Vs ITO (ITAT Delhi)

Section 56(2)(x), introduced with effect from 01.04.2017, applies only to property received on or after that date and therefore cannot be invoked for Assessment Year 2017-18.

Issue: Whether the difference between stamp duty value and actual purchase consideration of an immovable property could be taxed under section 56(2)(x) in Assessment Year 2017-18.

Facts: The assessee and his wife jointly purchased a DDA LIG flat in Rohini, Delhi, on 27.07.2016 for ₹21,65,000, while the stamp duty value was ₹36,89,280. The Assessing Officer reopened the assessment and added ₹7,62,500, being the assessee’s 50% share of the difference of ₹15,25,000, under section 56(2)(x).

Tribunal’s Findings: The Tribunal held that section 56(2)(x), inserted by the Finance Act, 2017, expressly applies where property is received “on or after 1 April 2017.” Since the property was purchased and registered on 27.07.2016, the provision had no application to the year under appeal, i.e., AY 2017-18. The Tribunal emphasized that section 56(2)(x) creates a deeming fiction and such provisions must be strictly construed; their scope cannot be enlarged beyond the language used by Parliament.

The Tribunal also noted that the lower authorities invoked only section 56(2)(x) and not sections 69 or 69C, whose conditions are materially different. Therefore, the addition could not be sustained by resorting to any alternative provision.

Accordingly, the addition was deleted and the remaining grounds, including valuation-related arguments, were treated as academic.

Held: Section 56(2)(x) is applicable only from Assessment Year 2018-19 onward. Hence, no addition can be made in AY 2017-18 on account of the difference between stamp duty value and purchase consideration of immovable property.

Cases Relied upon:

• Rashmi Seventilal Vakharia v. ITO, ITA No. 3801/Del/2025, order dated 28.01.2026
• K.K. Nag Ltd. v. Addl. CIT, ITA No. 1304 & 1305/PN/10, order dated 25.05.2012
• Sarwan Kumar v. ITO, ITA No. 4379/Del/2009, order dated 28.01.2014
• DCIT v. Romell Housing LLP, ITA No. 3935/Mum/2023, order dated 18.10.2024

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal in ITA No. 2307/Del /2026 for Assessment Year: 2017-18 has arisen form the learned CIT(A)’s appellate order dated 21.01.2026 passed u/s 250 of the Income-tax Act, 1961 in DIN & Order No: ITBA/NFAC/S/250/2025-26/1085020580(1), which in turn has arisen from the assessment order dated 23.01.2022 passed by the ld. AO, NFAC, Delhi u/s 147 r.w.s 144B of the 1961 Act.(DIN: ITBA/AST/S/147/2021- 22/1039003063(1))

2. Brief facts of the case are that the assessee is an individual, and has declared income from salary. The case of the assessee was reopened by Revenue on the basis of information received from I & IC on 28.02.2019 that the assessee has purchased immovable property on less than the stamp duty value. The difference of stamp duty value was Rs. 15,25,000/-. Statutory notice u/s 148, dated 28.03.2021 was issued by the AO to the assessee, and in response thereof the assessee filed return of income on 24.04.2021 u/s 148 declaring income of Rs. 7,88,650/-. Statutory notices u/s/ 143(2) and 142(1) were issued to the assessee by the AO during the course of reassessment proceedings, and the assessee participated in the reassessment proceedings. The assessee during the course of reassessment proceedings submitted that the assessee’s share in the property is only 50% share, and the remaining 50% share is held by his wife Mrs. Gurpreet Kaur Sandhu. The assessee submitted that the property was purchased on 26.06.2017 situated at DDA LIG Flat No.195, 3rd Floor, GH-1, Sanskriti Apartments, Sector-28, Rohini, Delhi-110042 having area (plinth) of 42.00 sqm in more than four story building used for residential purposes. It was submitted that the property have been purchased for the total consideration of Rs. 21,65,000/- over which stamp duty of Rs. 1,84,500 was paid. It was submitted that stamp duty value of the property is Rs. 36,89,280/- The assessee filed before the AO, a copy of sale deed. The assessee also submitted before the AO that the assessee has taken home loan of Rs. 19,48,000/- from Axis Bank and balance amount of Rs. 2,17,000/- was paid in cash from savings. The assessee enclosed copy of bank statement before the AO. The AO invoked the provisions of Section 56(2)(x) of the 1961 Act. The AO observed that during reassessment proceedings, the assessee has not doubted valuation of the stamp duty and the assessee never sought for valuation by DVO u/s 50C(2) of the Act. The AO observed that the assessee himself submitted that the stamp duty value of the property is Rs. 36,89,280/- (which is Rs. 39,00,000 as per sale deed). The AO observed that the consideration paid is Rs. 21,65,000/- which is less than stamp duty value by an amount of Rs. 15,25,000/- and the difference between stamp duty value and sale consideration paid is more than Rs. 50,000/-. The AO made additions in the hands of the assessee to the tune of Rs. 7,62,000/-(sic. Rs. 7,62,500/-) (50% of Rs. 15,25,000) in the hands of the assessee vide re-assessment order dated 23.01.2022 passed by the AO u/s 147 read with Section 144B of the 1961 Act. The AO had earlier issued SCN dated 12.01.2022 to the assessee along with draft assessment year, to which the assessee did not made any compliance thereof.

3. Being aggrieved, the assessee filed first appeal before the Ld. CIT(A). The assessee submitted that the assessee is a bank employee having income from salary. The assessee submitted that the assessee’s share in the property is only 50% share, and the remaining 50% undivided share is held by his wife Mrs. Gurpreet Kaur Sandhu. The property was purchased on 26.06.2017(as recorded in re-assessment order) situated at DDA LIG Flat No.195, 3rd Floor, GH-1, Sanskriti Apartments, Sector-28, Rohini, Delhi- 110042 having area (plinth) of 42.00 sqm in more than four story building used for residential purposes. It was submitted that the property have been purchased for the total consideration of Rs. 21,65,000/- over which stamp duty of Rs. 1,84,500 was paid. It was submitted that stamp duty value of the property is Rs. 36,89,280/-. It was submitted that the case of the assessee was reopened by Revenue by invoking provisions of Section 147 r.w.s 148 of the Act. It was submitted that the AO invoked provisions of Section 56(2)(x) of the 1961 Act as the sale consideration was less than the stamp duty value of the property. It was submitted that there are instances of the similar property wherein the property in the same area in nearby locality were sold below stamp duty. The assessee submitted details of such instance of properties sold in the nearby area as under:

The assessee submitted before the Ld. CIT(A) that the details of similar properties sold in the near by area in the same locality demonstrate that in these cases also consideration paid is less than the stamp duty value, which as per the assessee clearly demonstrate that there is no under valuation by the assessee in purchase of the aforesaid property. The assessee also filed before ld. CIT(A) valuation report dated 03.02.2022 from the registered valuer who value the said property at Rs. 21,69,000/- valuing the property at 01.07.2016. The assessee also filed before ld. CIT(A) confirmation from one of the property dealer which as per assessee confirmed that the market price of the properties in the same locality was less than stamp duty value during the financial year 2015-16. The assessee requested ld. CIT(A) that the matter be referred to ld. DVO for valuation of the aforesaid property. The Ld. CIT(A) dismissed the appeal of the assessee and upheld the reassessment framed by the AO, by holding that the assessee has not made any request before the AO for referring the property to DVO for valuation, and further that assessee did not challenged the stamp duty valuation before the AO.

4. Still Aggrieved, the assessee has now filed an appeal before the Tribunal. The Ld. Counsel for the assessee submitted that Section 56(2)(x) was inserted by Finance Act, 2017 with effect from 01.04.2017. It was submitted that the Section 56(2)(x) shall be applicable from the assessment year 2018-19 onwards. It was submitted that the appeal presently before the Bench is for AY 2017-18, and since Section 56(2)(x) is applicable from the assessment year 2018-19 onwards, and hence the whole proceedings are liable to be quashed on this short ground itself. The Ld. Counsel for the assessee submitted that there was a difference between the stamp duty value as adopted by State Government and the sale consideration. It was submitted that the property was purchased on 27.07.2016 (date of registration of sale deed) situated at DDA LIG Flat No.195, 3rd Floor, GH-1, Sector-28, Rohini, Delhi-110042 having area (plinth) of 42.00 sqm in more than four story building used for residential purposes. It is submitted that said locality is called Sanskriti Apartments. It was submitted that the property have been purchased for the total consideration of Rs. 21,65,000/- over which stamp duty of Rs. 1,84,500 was paid. It was submitted that stamp duty value of the property is Rs. 36,89,280/-. The said flat is purchased from Mrs. Rehana W/o Mr. Hamidullah R/o C-5, Amba Bagh. Block-C, Kishan Ganj, Delhi. The copy of sale deed registered on 27.07.2016 (Sub Registrar VIE, New Delhi- Registration No. 796 in Book No 1 Vol No. 29) is filed, placed in paper book/page 2-13.It is stated by ld. Counsel for the assessee that the assessee is co-owner with 50% ownership undivided rights while the remaining 50% ownership undivided rights in the said property are with his wife namely Mrs. Gurpreet Kaur Sandhu. It was submitted that the sale transactions with respect to similar properties in the near by locality during the same period was almost close to the sale consideration paid by the assessee, while value as adopted by Stamp duty authorities were much higher. My attention was drawn to the copies of sale deed’s filed by the assessee for similar properties in the nearby locality, which are placed in paper book/page 19-64. My attention was also drawn to the valuation report dated 03.02.2022 prepared by Er. H L Gupta, 9/77, Sector -3, Rajinder Nagara, Sahibabad, Ghaziabad, U.P. wherein this flat is valued by the aforesaid registered valuer at Rs. 21,69,000/- as on 01.07.2016(placed in paper book at page 65-68). The assessee has also placed on record copy of certificate issued by Gupta Properties dated 02.02.2022 wherein it is certified that the market price of the properties in Sector 28 &29 covered under Pin Code 110042 in financial year 2015-16 were less than the registration/circle rate u/s 47A of the Stamp Duty Act. It was submitted that the assessee made request before the Ld. CIT(A) for referring the matter to DVO for valuation of the aforesaid property, but the ld. CIT(A) did not refer the matter to the DVO. It was submitted that the ld. CIT(A) did not even called for remand report with respect to additional evidences filed for the first time by the assessee before ld. CIT(A). It was submitted that all these evidences were ignored by Ld. CIT(A), and the appeal of the assessee was decided against the assessee. The assessee also relied upon the decisions of the ITAT Mumbai Bench in the case of Rashmi Seventilal Vakharia v. ITO in ITA No.3801/Del/2025 vide order dated 28.01.2026 and the decision of ITAT Pune Bench in case of K.K. Nag Ltd. v. Addl. CIT in ITA No. 1304 & 1305/PN/10 vide order dated 25.05.2012. The assessee also relied upon the decision of ITAT Delhi Bench in case of Sarwan Kumar v. ITO in ITA 4379/Del/2009, order dated 28.01.2014. As an alternative plea, prayers were made to restore the matter back to the file of the AO for denovo assessment after referring the matter to DVO for valuing the property.

4.2 Ld. Sr. DR relied upon orders of authorities below.

5. I have considered rival contentions and perused the material on record including case laws. I have observed that the assessee along with his wife Mrs. Gurpreet Kaur Sandhu(both holding 50% undivided share) has purchased property being LIG flat on 27.07.2016 situated at DDA LIG Flat No.195, 3rd Floor, GH-1, Sector-28, Rohini, Delhi- 110042 havening area (plinth) of 42.00 sqm situated in the layout plan of Rohini Residential Scheme, Rohini, Delhi. I have observed that the said LIG Flat was purchased for the total consideration of Rs. 21,65,000/- over which stamp duty of Rs. 1,84,500 was paid. I have observed that stamp duty value of the property is Rs. 36,89,280/-. The said flat is purchased from Mrs. Rehana W/o Mr. Hamidullah R/o C-5, Amba Bagh. Block-C, Kishan Ganj, Delhi. The entire consideration was paid before execution of sale deed on 22.07.2016, and the details are recorded in the sale deed viz. Rs. 18,00,000/- vide pay order no. 405923 dated 20.07.2016 issued by Axis Bank Rs. 1,48,000/- vide pay order no. 405925 dated 20.07.2016 issued by Axis Bank and Rs. 2,17,000 in cash. I have observed that the sale deed was registered on 27.07.2016 with Sub Registrar VIE, New Delhi- Registration No. 796 in Book No 1 Vol No. 29. Thus, the property was duly conveyed under Registration Act, 1908 in the financial year 2016-17 i.e. during the impugned assessment year 2017-18.Thus, the assessee received the property after execution of sale deed on 27.07.2016 The copy of sale deed registered on 27.07.2016 (Sub Registrar VIE, New Delhi- Registration No. 796 in Book No 1 Vol No. 29) is filed, placed in paper book/page 2-13.I have observed that the AO has invoked provisions of Section 56(2)(x) of the 1961 Act and brought to tax difference between the sale consideration and the stamp duty value. The ld. CIT(A) has confirmed the additions and dismissed the appeal filed by the assessee. I have observed that Section 56(2)(x) was introduced by Finance Act, 2017 w.e.f. 01.04.2017. The Section itself stipulates that “ where any person receives, in any previous year, from any person or persons on or after the 1st day of April, 2017-

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The language of the Section is very clear that it will be applicable when any person receives from any person or persons on or after the 1st day of April, 2017, inter-alia, any immovable property for a consideration, the stamp value of such property as exceeds such consideration, if the amount of such excess is more than higher of the following amounts, namely- (i) the amount of fifty thousand ; and (ii) amount equal to five(now substituted to 10% by Finance Act, 2020, wef 01.04.2021) percent of the consideration, then the excess of stamp value of the property over sale consideration shall be considered as income chargeable to tax under the head ‘income from other sources. Thus, it is evidently clear that Section 56(2)(x) shall be applicable only when the property is received on or after 01.04.2017. Secondly, Section 562(x) creates a deeming fiction wherein the excess of stamp duty value as adopted by the State Government over the actual sale consideration (subject to fulfillment of thresholds as mention above) shall be deemed to be the income chargeable to income-tax under the head ‘income from other sources’. In my considered view, scope of deeming fiction cannot be enlarged and has to be strictly construed. The said deeming fiction is to come into force from assessment years 2018-19 and onwards. I am presently concerned with assessment year 2017-18. Thus, Section 56(2)(x)of the 1961 Act has no applicability for assessment year 2017-18 or earlier years, and consequently no liability to tax can be fastened on the assessee for the impugned assessment year u/s 56(2)(x) of the 1961 Act. I have also observed that the authorities below have not invoked provisions of Section 69 or 69C, but rather provisions of Section 56(2)(x) has been invoked. The parameters of invoking provisions of Section 69 and 69C are quite different. Further, I have observed that the authorities below have mentioned the date of acquisition vide assessee’s reply as 26.06.2017(page 7/CIT(A) order and page 2 of assessment order), but the assessee has clearly stipulated before ld. CIT(A) that the assessee has paid consideration of Rs. 21,65,000/- wherein the Stamp duty value was Rs. 36,90,000/- as on 22.07.2016. The assessee has filed copy of registered sale deed executed wrt aforesaid property wherein stamp paper were purchased on 22.07.2016 (IN-DL74268130944273O), and sale deed was registered on 27.07.2016(registered sale deed placed on record in file-paper book/page 2-13). Even otherwise, if the AO contention is that the date of acquisition is 26.06.2017(although perverse finding), then also no addition can be made in the impugned assessment year as then in that situation additions can be made only in assessment year 2018-19. Presently I am seized of assessment year 2017-18. Thus, keeping in view entire facts and circumstances of the case, I delete the addition so made by the AO and as confirmed by ld. CIT(A) for the reasons that deeming fiction as created under Section 56(2)(x) cannot be invoked for assessment year 2017-18 as the said Section 56(2)(x) shall be applicable from assessment year 2018-19 and onwards. Reference is drawn to the order dated 18.10.2024 of ITAT, Mumbai in the case of DCIT v. Romell Housing LLP In ITA No. 3935/Mum/2023. Since, I have deleted the additions for the reasons as stated above, the other grounds became academic. I order accordingly.

6. In the result, the appeal filed by the assessee is partly allowed in the manner as indicated above.

Order is pronounced in the Open Court on 15.05.2026