Case Law Details
Vinit Ramnath Parkar Vs ITO (ITAT Mumbai)
Section 56(2)(x) Addition Partly Sustained as Allotment Letter Held Not Agreement for Sale: ITAT Mumbai
The assessee appealed against the order dated 29.10.2025 for AY 2020-21 challenging an addition of ₹45,51,307 under Section 56(2)(x)(b)(B) of the Income-tax Act. The assessee, a non-resident, was subjected to reassessment proceedings under Sections 148A and 148 based on information received from the Insight Portal. During the assessment, the Assessing Officer noted that the assessee had registered an agreement for purchase of an immovable property. While the assessee claimed a purchase cost of ₹56,42,500 and furnished payment details of ₹44,87,248, the Assessing Officer adopted the stamp duty valuation of ₹1,01,93,807 and, after directions of the DRP, made an addition of ₹45,51,307 under Section 56(2)(x)(b)(B), being the difference between the stamp duty value and the actual purchase consideration.
Before the Tribunal, the assessee submitted that the property was jointly owned with his father and that a letter of allotment dated 29.10.2010 fixed the consideration, whereas registration took place in May 2019. Relying on the first proviso to Section 56(2)(x), the assessee contended that where the date of agreement and the date of registration are different, the stamp duty value as on the date of the agreement should be adopted. It was also argued that the stamp duty value as on 29.10.2010 was ₹33,27,000 and that ready reckoner rates may not reflect the actual value of flats. Alternatively, the assessee submitted that any addition should be restricted to his beneficial ownership share in the jointly owned property. The Revenue contended that an allotment letter could not be treated as an agreement for the purposes of Section 56(2)(x)(b)(B) and supported adoption of the stamp duty value prevailing on the date of registration.
The Tribunal observed that although the assessee had received a letter of allotment dated 29.10.2010, another flat had subsequently been allotted on 05.04.2016 and the property ultimately registered on 18.05.2019 was the later allotted flat. It held that the claim for adopting the value as on 29.10.2010 was unsupported by the primary facts. Interpreting the first proviso to Section 56(2)(x)(b)(B), the Tribunal distinguished between an allotment letter and an agreement for sale. It held that an allotment letter is a preliminary document confirming reservation of a unit and initial payment, whereas an agreement for sale is a formal, legally binding and registered contract fixing the terms and consideration for transfer of immovable property. Consequently, the Tribunal held that the allotment letter could not be treated as an agreement for sale for the purposes of Section 56(2)(x)(b)(B) and declined to grant the benefit of the first proviso. It also observed that the decisions relied upon by the assessee related to computation under the head “Capital gains” and were distinguishable.
On the alternative plea, the Tribunal found that the property had been jointly purchased by the assessee and his father, as evidenced by the allotment letter and the registered deed. It held that the entire addition could not be made in the hands of the assessee alone and directed the Assessing Officer to restrict the addition in the ratio of the assessee’s beneficial ownership between him and his father. The appeal was partly allowed. The order was pronounced on 25.05.2026.
Cases Discussed:
- Mrs. Urmila Jagdish Mehta vs. ACIT, [2026] 182 taxmann.com 12 (Mumbai – Trib.).
- PCIT vs. Vembu Vaidyanatha, [2019] 101 taxmann.com 436 (Bombay HC).
- CIT vs. Ramakrishnan, [2014] 48 taxmann.com 55 (Delhi HC).
- ACIT vs. Sanjay Kumath, [2014] 42 taxmann.com 38 (Indore – Trib.).
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal filed by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘Act’) by the Income Tax Ward 3(3)(1), Mumbai [in short, ‘CIT(A)’], dated 29.10.2025 for the assessment year (AY) 2020-21.
2. The grounds of appeal raised by the assessee are as under:
“1. The learned Assessing Officer erred in facts and in law in making addition of Rs. 45,51,307/- u/s 56(2)(x)(b)(B) of the Income Tax Act, 1961 to the returned income of the Appellant being the difference between purchase consideration and the valuation as per the stamp duty authorities, on the date of registration, without appreciating that the flat had been allotted on 29th October 2010 on which date the stamp duty value was 33,27,000.
2. The learned Assessing Officer erred in facts and in law in passing the impugned order, without taking into consideration the documents submitted during the entire proceedings.
3. The learned Assessing Officer completely ignored the fact that the stamp duty valuation is on the basis of a ready reckoner rate which is the standard rate applicable to the said area and that in the same area the valuation of flats may vary significantly, on account of a number of circumstances namely the age of the building, the vicinity the economic status of residents, and various other factors.
4. Without prejudice to the above and strictly in alternative, N considering the proviso to section 56(2)(x)(b)(8), if at all the stamp duty valuation is to be considered, it must be considered as that of FY 2010-11 and not of FY 2019-20 since the date of agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same.
5. The learned Assessing Officer failed to consider that the provisions of the first proviso to section 56(2)(x)(b)(8), shall apply since the amount of consideration or a part thereof, has been paid by way of mode other than cash on or before the date of agreement for transfer of such immovable property.
6. Strictly in the alternative and without prejudice to the above, if at all an addition, is to be sustained under section 56(2)(x)(8), then the addition should be in the ratio of his share in beneficial ownership between him and the other co-owner.
7. The appellant previously to add alter or amend any of the grounds of appeal prior to or at the time of hearing.”
3. Facts of the case, in brief, are that the assessee is a non-resident. Based on the information received from the Insight Portal, proceedings u/s 148A of the Act were initiated. Order u/s 148A(d) of the Act was passed and notice u/s 148 of the Act was issued on 08.03.2024. In response thereto, assessee filed return on 05.06.2024 declaring total income of Rs.4,850/-. In response to the notices u/s 143(2) and 142(1) of the Act, the appellant responded from time to time and filed details. During the year under consideration, the appellant registered an agreement for purchase of an immoveable property for a consideration of Rs.1,01,93,807/-. The AO observed that the assessee could provide the payment details only to the extent of Rs.44,87,248/-. The AO considered the total value of the property at Rs.1,08,05,807/-, which is the stamp duty valuation along with the stamp duty of Rs.6,12,000/- as against claim of appellant of Rs.56,42,500/-. Accordingly, the AO proposed an addition u/s 69 of the Act as unexplained investment to the extent of Rs.63,18,559/- [(Rs.1,08,05,807/ (-) Rs.44,87,248/-)] vide draft order u/s 144C(1) of the Act. Aggrieved by the draft order, the appellant filed objections before the DRP-2, Mumbai. Following the directions of the DRP u/s 144C(5) of the Act, the AO vide order u/s 147 of the Act dated 29.10.2025 made an addition of Rs.45,51,307/- u/s 56(2)(x)(b)(B) of the Act being difference between the full value of consideration as per stamp duty valuation of Rs. 1,01,93,807/- and the actual purchase cost of Rs. 56,42,500/-.
4. Aggrieved by the order of the AO, the appellant has filed the present appeal before the Tribunal. The Ld. AR submitted that the immoveable property purchased during the year under consideration is jointly owned by the appellant and his father, Mr. Ramnath Parkar. He submitted that although the property was registered in May 2019, the original agreement for reservation of the property was executed vide letter of allotment dated 29.10.2010 between the Developer and the joint purchasers i.e. the appellant and his father, Mr. Ramnath Parkar. Copy of the Letter of Allotment dated 29.10.2010 is enclosed at page Nos. 5 to 7 of Annexure 1 of the paper book. He submitted that the total amount paid for the said property (including share money, legal charges, entrance fees etc.) is Rs.66,51,165/-, out of which the appellant contributed Rs.44,87,248/- and the balance Rs.21,63,917/- was paid by his father, Mr. Ramnath Parkar, who is the co-owner of the said property. The details of payments made to the Developer vide his letter dated 12.04.2025 along with the summary of payments made is enclosed as Annexure 3 at page no. 30 to 33 of the paper book. The Ld. AR referred to the proviso to section 56(2)(x) of the Act reads as follows:
“56…………… (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head “Income from other sources”, namely:
(x) where any person receives, in any previous year, from any person or persons on or after the 1st day of April, 2017-
a. any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;
b. any immovable property, –
A. without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;
B. for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely: –
i. the amount of fifty thousand rupees, and
ii. the amount equal to 13(five) per cent of the consideration:
Provided 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 agreement may be taken for the purposes of this sub-clause
Provided further that the provisions of the first proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account 14[or through such other electronic mode as may be prescribed), on or before the date of agreement for transfer of such immovable property:……..”
4.1 The Ld. AR submitted that as per the first proviso to section 56(2)(x) of the Act, in cases where the date of registration and the date of agreement fixing the consideration are not the same, the stamp duty value as on the date of the agreement is to be considered. In the appellant’s case, the flat had been allotted on 29.10.2010, on which date the stamp duty value was Rs.33,27,000/-. He also submitted that the stamp duty valuation is on the basis of a ready reckoner rate which is the standard rate applicable to the said area and that in the same area the valuation of flats may vary significantly, on account of a number of circumstances namely the age of the building, the vicinity, the economic status of residents, and various other factors. He relied on the following decisions: (i) PCIT vs. Vembu Vaidyanatha [2019] 101 taxmann.com 436 (Bombay HC); (ii) CIT vs. Ramakrishnan [2014] 48 taxmann.com 55 (Delhi HC); (iii) Mrs. Urmila Jagdish Mehta vs. ACIT [2026] 182 taxmann.com 12 (Mumbai – Trib.) and (iv) ACIT vs. Sanjay Kumath [2014] 42 taxmann.com 38 (Indore – Trib.).
4.2 In the alternative and without prejudice to the above, he submitted that if at all an addition is to be sustained under section 56(2)(x)(B) of the Act, then the addition should be in the ratio of his share in beneficial ownership between him and the other co-owner.
5. On the other hand, the Ld. CIT DR supported the order of lower authorities. He submitted that allotment letter cannot be considered as agreement for the purpose of Section 56(2)(x)(b)(B) of the Act. Therefore, the AO has rightly applied the stamp duty valuation of Rs.1,01,93,807/- and actual purchase cost of Rs.56,42,500/-.
6. We have heard both sides and perused the materials on record. We have also gone through the provisions of the Act including section 56(2)(x)(b)(B). We have also deliberated on the decisions relied upon by the Ld. AR. The undisputed facts of the instant appeal are that the appellant was given letter of allotment dated 29.10.2010. Subsequently, another flat was allotted dated 05.04.2016. Hence, contention that value as on 29.10.2010 should be adopted is not at all acceptable because the claim is not supported by the primary facts. In fact, the property registered by the appellant was in respect of the flat which was allotted subsequently. The said property was subsequently registered vide registration deed dated 18.05.2019, where the stamp duty valuation was Rs.1,01,93,807/-. The Ld. AR has relied on the first proviso to section 56(2)(x)(b), as per which where the date of registration and the date of agreement fixing the consideration are not the same, the stamp duty value as on the date of agreement is to be considered. The relevant provisions of Section 56(2)(x)(b)(B) have already been reproduced at para 4 above and hence, not repeated here. What the section requires is “agreement fixing the amount of consideration for transfer of immovable property.” There is a distinction between “allotment letter” and “agreement for sale”. An allotment letter is a preliminary document issued by the developer confirming the reservation of a specific unit and the initial payment. On the other hand, an “agreement for sale” is a formal and legally binding contract registered with the government which details the exact terms, payment schedule and obligation of both parties. The allotment letter has some legal weight to protect the buyer from arbitrary price change etc., but it does not transfer the ownership. On the other hand, an agreement for sale is highly enforceable. It is a primary and detailed contract which defines consequences for delays and defaults. The allotment letter is normally not registered whereas the agreement for sale must be registered at the Sub-Registrar office under the State property law. It is thus clear that “allotment letter” cannot take place of “agreement for sale”, which is both registered and enforceable Therefore, the plea of the assessee that the allotment letter would serve the purpose of Section 56(2)(x)(b)(B) of the Act is not acceptable. Hence, the finding of the AO/DRP is as per law and does not require any interference. The ratio of the decisions relied upon by the appellant are distinguishable on facts because they pertain to computation of income under the head “Capital gains” u/s 14 E of the Act and not “Income from other sources” u/s 14 F of the Act.
7. Having held that the assessee is not entitled for the benefit of the first proviso to section 56(2)(x)(b) of the Act, let us examine the alternative claim of the assessee. It is clear that the property was jointly purchased by the appellant and his father. The same is clear from the allotment letter and the registered deed. Therefore, the entire addition cannot be made in the hands of the appellant. The AO is directed to add the amount in the ratio of the appellant’s share in the beneficiary ownership between him and his father. The ground is partly allowed.
8. In the result, the appeal of the assessee is partly allowed.
Order is pronounced on 25.05.2026.
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