ACIT Vs Ashjit Realties Private Limited (ITAT Mumbai)
Sale Deed Registered After 1 April 2017, but Deal Completed Earlier: ₹17.69 Crore Section 56 Addition Deleted
A property sale deed was registered on 15 April 2017, after section 56(2)(x) came into effect. The Assessing Officer treated that date as decisive and taxed the difference between the deed consideration and the stamp valuation. The Mumbai Tribunal, however, examined the transaction’s full chronology: the buyer had paid the consideration years earlier, the deed had been executed, possession had been delivered, and the stamp adjudication process had begun before 1 April 2017. On those particular facts, it upheld deletion of the ₹17,68,86,000 addition.
How the ₹17.69 Crore Difference Arose
Ashjit Realties Pvt. Ltd., a construction and real-estate development company, acquired a Mumbai property known as “Gita Gruh” for ₹21 crore. The sale deed was registered on 15 April 2017. The stamp valuation authority had adopted a value of ₹38,68,86,000. During limited scrutiny concerning investment in immovable property, the Assessing Officer subtracted the stated consideration from that stamp value and added the difference of ₹17,68,86,000 as income from other sources under section 56(2)(x). This took assessed income to ₹17,69,72,610, against returned income of ₹86,610.
The company appealed. Its position was that the registration date did not capture when it had entered into and acted upon the transaction. The Commissioner (Appeals) accepted that position, held that the transaction had crystallised in financial year 2016–17, and deleted the addition. The Revenue challenged that relief before the Tribunal.
Payments, Deed and Possession Preceded the New Provision
The chronology was central to the decision. Ashjit had paid the full ₹21 crore to Rohan Developers Pvt. Ltd. between March 2011 and August 2012. Under an amended term sheet dated 2 December 2015, the vendor agreed to sell the property if the amount was not refunded by 30 June 2016.
The sale deed was executed on 13 October 2016, and possession was handed over on that date. Ashjit applied to the stamp duty authority for adjudication on 22 March 2017; an interim order followed on 24 March 2017. The company recorded the property as an asset in its audited financial statements as at 31 March 2017. Stamp duty was then paid on 12 April 2017, and registration took place three days later.
The company explained that the gap between execution and registration arose from the stamp duty adjudication process. It relied, among other authorities, on the Mumbai Tribunal decision in DCIT v. Romell Housing LLP.
Revenue’s Case: Registration Completed the Transfer
The Revenue argued that an immovable property of this value could be validly transferred only by a registered instrument. In its submission, legal ownership and receipt of the property were therefore completed on 15 April 2017, during financial year 2017–18. Since section 56(2)(x) applied from 1 April 2017, the Assessing Officer had rightly applied it to the difference between consideration and stamp valuation.
The Revenue also questioned whether the earlier ₹21 crore advances should be treated as the property’s cost. The company responded that the payments, execution of the deed, delivery of possession and commencement of the registration process had all occurred before the new provision came into force.
Tribunal Looked at the Transaction as a Whole
The Tribunal considered the events cumulatively. This was not a transaction first negotiated or paid for after 1 April 2017. The entire consideration had been paid years earlier, while execution of the deed and delivery of possession occurred on 13 October 2016. Even the application for stamp duty adjudication had been made before 1 April 2017.
In that setting, the Tribunal regarded registration on 15 April 2017 as the culmination of a process already underway, rather than a basis, by itself, to apply section 56(2)(x) to the transaction. It therefore found no reason to interfere with the Commissioner (Appeals)’s deletion of the addition.
The Tribunal also noted two valuation facts. The stamp adjudication order relied upon by the Assessing Officer had later been set aside by the High Court on 9 October 2018, with a direction for fresh consideration. A Government Registered Valuer’s report valued the property as at 13 October 2016 at ₹13,47,96,000, below the ₹21 crore paid. The Assessing Officer had nevertheless made the addition by reference to the registration date and the then stamp valuation.
What Was Left Open
Ashjit had raised alternative arguments that the property was acquired as stock-in-trade for redevelopment, that there was no subsisting stamp duty value, and that the assessment had been completed without the show-cause notice or draft variation contemplated under section 144B. The Tribunal did not decide those issues. Having upheld deletion on the transaction chronology, it left the alternative contentions open and dismissed the Revenue’s appeal.
Author’s Comments
The ruling depends on an unusually strong pre-1 April 2017 documentary trail: full payment, a term sheet, an executed deed, delivery of possession, an application to the stamp authority and recognition of the asset in audited accounts. It should not be read as saying that every deed registered after 1 April 2017 escapes section 56(2)(x) whenever an earlier agreement exists. The Tribunal examined what the parties had actually completed before that date.
The case also shows why the status of the stamp valuation deserves attention. Here, the figure used for the addition had not remained final, while the valuer’s reported figure was below the consideration paid. The Tribunal’s operative holding, however, was that section 56(2)(x) could not be applied to this transaction on its particular chronology. The ₹17,68,86,000 addition remained deleted.
Cases Discussed
- DCIT v. Romell Housing LLP, [2024] 168 taxmann.com 536 (ITAT Mumbai) — relied upon by the assessee before the CIT(A) and Tribunal in support of its contention that the subsequent registration date did not warrant application of section 56(2)(x) where the material transaction events had occurred earlier.
- Rajib Rathindra Saha v. ITO, ITA No.7352/Mum/2019, order dated 21.02.2022 (ITAT Mumbai) — relied upon by the assessee before the Tribunal along with other authorities in support of its case concerning the earlier completion of the material property transaction events.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. This appeal by the Revenue is directed against the order dated 07.11.2025 passed by the Commissioner of Income-tax (Appeals)-48, Mumbai [hereinafter referred to as “the Ld. CIT(A)”], under section 250 of the Income-tax Act, 1961 (“the Act”), arising from the assessment order dated 17.03.2021 passed by the National e-Assessment Centre, Delhi, under section 143(3) read with sections 143(3A) and 143(3B) of the Act for Assessment Year 2018-19.
2. The Revenue has raised the following grounds of appeal:
“1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in para 8.8 of his order in considering the advancement of loans of Rs. 21,00,00,000/- as a cost of the property?
2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in holding the date of forfeiture of loan instead of date of advancement of loan?
3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 17,68,86,000/- made by the Assessing Officer under section 56(2)(x) of the Income-tax Act, 1961, without properly appreciating the legal effect of registration of the sale deed, which confers valid transfer and legal ownership of immovable property?
4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the date of execution of the sale agreement (13.10.2016) is the relevant date for the purpose of section 56(2)(x), ignoring the fact that the registration of the deed on 15.04.2017, falling in Financial Year 2017-18, is the determinative event for completion of transfer under the Transfer of Property Act and Registration Act?
5. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that section 56(2)(x) is not applicable to the assessee’s case, despite the fact that the registration of the property, and hence the receipt of the immovable property, took place during the previous year relevant to A.Y. 2018-19, squarely attracting the provisions of the said section?
6. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in concluding that the transaction was “crystallized” prior to 01.04.2017 merely on the basis of execution of the sale agreement and payment of consideration, without considering the statutory requirement of registration for valid transfer of immovable property?
7. The appellant craves leave to add, delete, alter, modify, rectify, substitute or otherwise any or all of the grounds of appeal at or before the time of hearing of the appeal.”
3. Briefly stated, the assessee is a company engaged in the business of construction and real estate development. It filed its return of income on 11.09.2018 declaring total income of Rs. 86,610/-. The case was selected for limited scrutiny in respect of investment in immovable property. During the year, a sale deed concerning the immovable property known as “Gita Gruh”, situated at 4, Popatwadi/R.S. Sapre Marg, Mumbai, was registered on 15.04.2017. The document recorded a consideration of Rs. 21,00,00,000/-, whereas the stamp valuation authority adopted the value at Rs. 38,68,86,000/-. The Assessing Officer treated the difference of Rs. 17,68,86,000/- as income from other sources under section 56(2)(x) of the Act and assessed the total income at Rs. 17,69,72,610/-.
4. Before the Ld. CIT(A), the assessee submitted that the sale deed had been executed on 13.10.2016, the entire consideration had been paid much earlier, between March 2011 and August 2012, and possession had also been handed over before the registration of the document. It was contended that section 56(2)(x), inserted with effect from 01.04.2017, could not be applied to a transaction completed before that date merely because the instrument was registered thereafter. Reliance was placed, inter alia, on the decision of the Coordinate Bench in DCIT v. Romell Housing LLP [2024] 168 taxmann.com 536 (Mumbai – Trib.). The Ld. CIT(A) accepted the contention that registration related back to the date of execution, held the transaction to have crystallised in Financial Year 2016-17 and deleted the addition. The Revenue is in appeal against the said relief.
5. The Ld. Departmental Representative relied upon the assessment order and the grounds of appeal. He submitted that an immovable property of the value prescribed by law can be validly transferred only through a registered instrument. According to him, legal ownership and receipt of the property stood completed on 15.04.2017, which fell in the previous year relevant to Assessment Year 2018-19. It was further submitted that the Ld. CIT(A) erred in treating the earlier advances as the cost of acquisition and in holding that the transaction had crystallised before section 56(2)(x) came into force.
6. The Ld. Authorised Representative supported the impugned order. He submitted that the entire purchase consideration had been paid before 02.12.2015; the sale deed was executed and possession was delivered on 13.10.2016; and the delay in registration occurred on account of adjudication before the stamp duty authority. Reliance was placed on DCIT v. Romell Housing LLP (supra), Rajib Rathindra Saha v. ITO in ITA No.7352/Mum/2019 dated 21.02.2022 and other decisions cited in the written submission. It was also submitted, without prejudice, that the property was acquired as stock-in-trade for redevelopment and that the assessment was completed without a show-cause notice/draft variation contemplated under section 144B of the Act.
7. We have heard the rival submissions and perused the material available on record. The chronology placed before us shows that the assessee paid the entire sum of Rs. 21,00,00,000/- to Rohan Developers Pvt. Ltd. between March 2011 and August 2012. Under the amended term sheet dated 02.12.2015, the vendor agreed to sell the property to the assessee if the amount was not refunded by 30.06.2016. Thereafter, the sale deed was executed and possession was handed over on 13.10.2016. The assessee applied to the stamp duty authority for adjudication of the stamp duty valuation on 22.03.2017. An interim order was passed on 24.03.2017, the property was recorded as an asset of the assessee in its audited financial statements as on 31.03.2017, stamp duty was paid on 12.04.2017 and the document was registered on 15.04.2017.
8. The above events have to be considered cumulatively. This is not a case where the assessee first negotiated, paid for or took steps to acquire the property after 01.04.2017. The entire consideration of Rs. 21,00,00,000/- had been paid several years earlier; the binding sale deed was executed and possession was delivered on 13.10.2016; and, significantly, the assessee itself applied for adjudication of stamp duty on 22.03.2017. Thus, all material acts on the part of the contracting parties as well as the initiation of the statutory process for registration stood completed before 01.04.2017. The subsequent registration on 15.04.2017 was the culmination of the process already commenced before that date.
9. We also notice that the valuation adopted by the Assessing Officer at Rs. 38,68,86,000/- did not attain finality. The adjudication order was set aside by the Hon’ble High Court on 09.10.2018 with a direction to decide the matter afresh. Further, the report of the Government Registered Valuer valued the property as on 13.10.2016 at Rs. 13,47,96,000/-, which was below the consideration of Rs. 21,00,00,000/- paid by the assessee. These material facts were available on record, but the Assessing Officer made the addition only with reference to the registration date and the then stamp duty valuation.
10. In these peculiar facts, the conclusion of the Ld. CIT(A) that section 56(2)(x), inserted with effect from 01.04.2017, could not be applied to the transaction does not call for interference. Accordingly, we find no infirmity in the order of the Ld. CIT(A) deleting the addition of Rs. 17,68,86,000/-. Since the issue is decided on this ground, the alternative contentions concerning stock-in-trade, absence of a subsisting stamp duty value and alleged violation of section 144B are left open. Grounds Nos. 1 to 6 are dismissed and Ground No. 7 is general in nature.
11. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 23/09/2026.
