Rajaviri Vs ITO (ITAT Delhi)
Delhi ITAT Deletes Section 56 Addition as Revenue Failed to Establish Agricultural Land Was a Capital Asset
The Delhi ITAT deleted the addition of ₹7,58,232 made under section 56 in respect of the purchase of agricultural land at a value lower than the stamp duty value. The Assessing Officer had invoked section 56 by treating the difference between the assessee’s share of the stamp duty value and the actual purchase consideration as income from other sources. The CIT(A) upheld the addition on the ground that the assessee had failed to produce contemporaneous evidence to rebut the stamp duty valuation.
Before the Tribunal, the assessee contended that section 56 was inapplicable because the land purchased was agricultural land and there was no finding by the Revenue that it constituted a capital asset within the meaning of Explanation (d) to section 56. The Tribunal accepted this contention, observing that neither the assessment order nor the appellate order contained any clear finding that the land was a capital asset for the purposes of section 56.
Holding that the very foundation for invoking section 56 was absent, the Tribunal deleted the addition of ₹7,58,232 without examining the dispute regarding the stamp duty valuation. The assessee’s appeal was accordingly allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
This assessee’s appeal for assessment year 2020-21, arises against the Ld. CIT(Appeals)/National Faceless Appeal Centre, New Delhi’s order in DIN & Order No : ITBA/NFAC/S/250/2025- 26/1087482712(1), dated 17.03.2026 involving proceedings under section 246A of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).
Heard both the parties. Case file perused.
2. The learned counsel for the assessee at the out invites the tribunal’s attention to Learned CIT(A)’s lower appellate discussions upholding the Assessing Officer’s action making section 56(2)(viib) addition of RS.7,58,232/- in the assessee’s hands reading as under:-
“06. Adjudication of the relevant grounds of appeal:- 6(a). I have carefully considered the assessment order and the material available on record including the submissions made by the appellant before the Assessing Officer. The facts of the case reveal that during the financial year relevant to the assessment year under consideration, the appellant along with four other persons jointly purchased an immovable property. As per the registered purchase deed, the property was purchased for a total consideration of Rs.25,00,000, whereas the stamp duty value of the said property as adopted by the registering authority was Rs. 56,90,000. The Assessing Officer worked out the proportional share of the appellant in the stamp duty value at Rs.13,53,232, while the purchase consideration attributable to the appellant’s share was Rs.5,94,000. Accordingly, the Assessing Officer treated the difference of Rs.7,58,232 as income of the appellant under the provisions of section 56 of the Income-tax Act.
During the assessment proceedings, the appellant submitted that the land purchased was agricultural land measuring about 0.211 hectare and that the consideration mentioned in the purchase deed represented the actual market value of the land. It was further contended that the land was not uniformly cultivable. According to the appellant, only a small portion of the land was fit for cultivation, whereas the remaining portion of the land was uneven, non-levelled and otherwise unsuitable for effective agricultural use. It was therefore argued that the actual market value of the land was much lower than the circle rate adopted for stamp duty purposes. In support of the said contention, the appellant also submitted certain photographs of the land and a valuation report prepared subsequently.
The Assessing Officer, however, did not accept the explanation of the appellant. The Assessing Officer observed that the photographs submitted by the appellant indicated presence of vegetation and ploughed fields which suggested that agricultural activity was being carried out on the land. The valuation report relied upon by the appellant was also not accepted on the ground that it was prepared much after the date of purchase and therefore could not reliably determine the fair market value of the property as on the date of acquisition.
6(b). I have carefully considered the submissions of the appellant. The primary contention of the appellant is that the land purchased was not uniformly cultivable and that only a small portion of the land was fit for cultivation, while the remaining portion was uneven, non-levelled or otherwise unsuitable for effective agricultural activity. It is contended that for this reason the actual market value of the property was substantially lower than the circle rate adopted for stamp duty purposes. However, apart from photographs of the land and a valuation report prepared subsequently, no cogent material has been placed on record to substantiate the claim that the fair market value of the property as on the date of purchase was significantly lower than the stamp duty value adopted by the registering authority.
In cases where an assessee seeks to rebut the stamp duty value, such claim is normally required to be supported by reliable contemporaneous evidence available at or around the time of the transaction. Such evidence may include, for example, comparable sale instances of similar land parcels in the same locality executed during the relevant period, revenue or land records indicating the nature and quality of the land, official reports showing that the land was uneven, rocky, waterlogged or otherwise unsuitable for cultivation, valuation reports prepared at the time of transaction, or any other contemporaneous documentary material demonstrating that the prevailing market value of the property was lower than the circle rate. In the present case, no such contemporaneous material has been furnished by the appellant.
Further, the photographs relied upon by the appellant, as noted by the Assessing Officer, show presence of vegetation and ploughed fields indicating that agricultural activity was possible on the land. The valuation report relied upon by the appellant was also prepared much after the date of purchase and therefore cannot conclusively establish the fair market value of the property as on the date of acquisition.
6(c). In the absence of reliable contemporaneous evidence to demonstrate that the stamp duty value adopted by the registering authority did not reflect the fair market value of the property, the explanation offered by the appellant cannot be accepted. Accordingly, the Assessing Officer was justified in invoking the provisions of section 56 and bringing to tax the difference between the stamp duty value attributable to the appellant’s share and the purchase consideration declared in the registered deed.
6(d). Therefore, the addition of Rs.7,58,232 made by the Assessing Officer under the head “Income from Other Sources” is upheld and the ground of appeal raised by the appellant is dismissed.”
3. That being the case, the revenue could hardly dispute that there is no clear-cut indication in both the assessment as wells as the learned CIT(A)’s lower appellate findings that the assessee’s land purchased herein is a capital asset going by section 56(vii) Explanation (d) of the Act. This tribunal is therefore finds merit in assessee’s in instant first and foremost argument to delete the impugned addition of Rs.7,58,232/- in very terms. Ordered accordingly.
4. The assessee’s appeal is allowed.
Order pronounced in the open court on 7th July, 2026.
