Rajib Rathindra Saha Vs ITO (IT)-4(2)(1) (ITAT Mumbai)
Summary: The Mumbai ITAT partly allowed Rajib Rathindra Saha’s appeal and deleted an addition of Rs.18,53,457/- made under section 56(2)(vii)(b)(ii) of the Income Tax Act, 1961. The assessee had purchased Flat No.1104 in Zircon Building, a project of Nirmal LifeStyle, for Rs.68,45,550/-. Earnest money was paid on 16/04/2010, stamp duty was paid on 18/03/2013, the agreement was executed on 31/03/2013, and the agreement was subsequently registered on 02/04/2014. At the time of registration, the stamp duty value was Rs.87,02,007/-. The Assessing Officer treated the difference of Rs.18,53,457/- between the consideration and stamp duty value as taxable under section 56(2)(vii)(b)(ii).
The assessee contended that the relevant agreement had already been executed on 31/03/2013 and stamp duty had been paid on 18/03/2013. Therefore, the amendment to section 56(2)(vii)(b)(ii) made by the Finance Act, 2013 could not be applied merely because registration took place subsequently. Reliance was placed on Bajrang Lal Naredi Vs ITO, ITA No.327/RAN/2018, decided on 20/01/2020. The assessee alternatively argued that if valuation by the DVO was required, the relevant date should be 16/04/2010, when earnest money was paid, rather than 31/03/2013.
The Tribunal noted that section 56(2)(vii)(b) was amended by the Finance Act, 2013 with effect from 01/04/2014, i.e. from Assessment Year 2014-15. Before the amendment there was no provision under section 56(2)(vii)(b) for making an addition merely because consideration paid for immovable property was lower than its stamp duty value. In the present case, however, the agreement had been executed on 31/03/2013, falling in Assessment Year 2013-14. The Tribunal therefore held that the provisions applicable to Assessment Year 2013-14 governed the transaction.
The subsequent registration of the agreement did not alter this position. According to the Tribunal, registration of the agreement was compliance with a legal requirement under the Registration Act, 1908. Since the substantive agreement had already been executed on 31/03/2013, the authorities below erred in invoking section 56(2)(vii)(b)(ii) as amended by the Finance Act, 2013. The addition of Rs.18,53,457/- therefore could not survive. The primary ground was allowed and, consequently, the assessee’s alternative plea regarding DVO valuation became academic and was not adjudicated.
The Tribunal separately held that levy of interest under sections 234A, 234B and 234C was mandatory and consequential and therefore dismissed that ground. The challenge to initiation of penalty proceedings under section 271(1)(c) was held premature. The assessee did not press the ground challenging the assessment order as unsigned, and that issue was left open. The appeal was accordingly partly allowed.
Cases Discussed
- Bajrang Lal Naredi Vs ITO, ITA No.327/RAN/2018, decided on 20/01/2020 (ITAT Ranchi) — Relied upon by the assessee in support of the contention that the amended provisions of section 56(2)(vii)(b)(ii) could not be attracted merely because registration occurred subsequently.
FULL TEXT OF THE ITAT MUMBAI ORDER
This appeal by the assessee is directed against the order of Commissioner of Income Tax(Appeals) -58 Mumbai [ in short ‘the CIT(A)’ ] dated 23/10/2019 for the Assessment Year 2014-15.
2. The assessee in appeal has assailed addition of Rs.18,53,457/- u/s. 56(2)(vii)(b)(ii) of the Income Tax Act, 1961 ( in short ‘ the Act’).
3. Shri Himanshu Gandhi appearing on behalf of the assessee narrating the facts of the case submitted that the assessee had purchased a Flat No.1104 in Zircon Building a Project of Nirmal LifeStyle for a consideration of Rs.68,45,550/-. The assessee had paid earnest money for purchase of the aforesaid flat on 16/04/2010. Thereafter, an agreement was executed between the assessee and Nirmal Lifestyle Ltd. on 31/03/2013. The stamp duty for execution of the agreement was paid by the assessee on 18/3/2013. In support of his contention the ld. Authorized Representative for the assessee referred to the receipt dated 18/03/2013at page 5 of the Paper Book and copy of non- judicial stamp paper and the copy of agreement at page 6 and 10 to 58 of the Paper Book. The ld. Authorized Representative for the assessee pointed that the aforesaid agreement was registered on 02/04/2014. On the date of registration the stamp duty value of the property was Rs.87,02,007/-. In assessment proceedings for Assessment Year 2014-15 the Assessing Officer held that since the agreement was executed in the period relevant to the assessment under appeal provisions of section 56(2)(vii)(b)(ii) of the Act as amended by the Finance Act 2013 w.e.f. 01/04/2014 would be applicable and hence, made addition of the difference between the consideration paid by the assessee and stamp duty value i.e. 18,53,457/-. During the assessment proceedings the assessee vide letter dated 22/12/2016 requested to refer the matter to DVO. The Assessing Officer without referring the matter to DVO made addition of Rs.18,53,457/-.
Aggrieved against the assessment order dated 31/12/2016 the assessee filed appeal before the CIT(A) . In first appellate proceedings, the CIT(A) referred the matter to DVO for adopting the value as on 31/03/2013. The CIT(A) further directed the Assessing Officer to recomputed addition on the basis of value determined by DVO. Hence, present appeal by the assessee.
The ld. Authorized Representative for the assessee vehemently controverting the findings of the authorities below submitted that since the assessee had paid stamp duty on 18/03/2013 and had executed the agreement on 31/03/2013 i.e. the period relevant to the Assessment Year 2013-14, the amended provisions of section 56(2)(vii)(b)(ii) would not apply. Merely for the reason that the agreement was registered on 02/04/2014 i.e. during the period relevant to the assessment year under appeal, the amended provisions would not get attracted. In support of his contention the ld. Authorized Representative for the assessee placed reliance on the decision rendered in the case of Bajrang Lal Naredi vs. ITO in ITA No.327/RAN/2018 decided on 20/01/2020.
3.1 The ld. Authorized Representative for the assessee made an alternate submission that the CIT(A) while referring matter for valuation to DVO has erred in seeking valuation as on 31/03/2013 instead of 16/04/2010. The ld. Authorized Representative submitted that the assessee had paid earnest money on 16/04/2010, therefore, the CIT(A) should have sought valuation from DVO as on 16/04/2010 and not as on 31/03/2013. The ld. Authorized Representative for the assessee thus submitted that the addition made by the Assessing Officer and confirmed by the CIT(A) is liable to be deleted.
4. On the other hand, Shri R.A. Dhyani representing the Department vehemently defended the impugned order. The ld. Departmental Representative submitted that the agreement was registered on 02/04/2013, therefore, amended provision of section 56(2)(vii)(b)(ii) would apply. The ld. Departmental Representative further contended that as per the request of assessee the CIT(A) had directed the Assessing Officer to seek valuation report from the DVO. The CIT(A) in a fair and justified manner directed the Assessing Officer to adopt the value determined by DVO as on 31/03/2013i.e. the date of execution of agreement. The ld. Departmental Representative prayed for upholding the impugned order and dismissing appeal of the assessee.
5. Submissions made by rival sides heard and the orders of authorities below examined.. In so far as the facts of the case are concerned they are not in dispute, however, before proceeding further to decide issue raised in appeal, the relevant dates to decide controversy are tabulated herein below:
| Date | Events |
|---|---|
| 16/04/2010 | Earnest money paid by the assessee for purchase of flat |
| 18/03/2013 | Stamp duty paid |
| 31/03/2013 | Date of execution of agreement |
| 02/04/2014 | Date of registration of agreement. |
The primary objection raised by the assessee against addition made u/s. 56(2)(vii)(b)(ii) of the Act is that since the assessee had paid stamp duty and had executed the agreement on or before 31/03/2013, amended provisions of section 56(2)(vii)(b)(ii) of the Act would not get attracted. The sub clause (b) to section 56(2)(vii) was amended by the Finance Act, 2013 w.e.f. 01/04/2014 i.e. from Assessment Year 2014-15. As per the amended provisions, where an individual or HUF receives in any previous year any immovable property for a consideration which is less than stamp duty value of such property, the Assessing Officer can made addition of the difference between the stamp duty value and the consideration paid. Prior to amendment by the Finance Act, 2013 there was no provision u/s.56(2)(vii)(b) of the Act to make addition in respect of consideration less than the stamp duty value. The scope of section 56(2)(vii) has been enlarged after amendment w.e.f. 01/04/2014. Since, in the present case agreement was executed on 31/03/2013 i.e. during the Assessment Year 2013-14, the provisions of section 56(2)(vii)(b) of the Act as applicable to the assessment year 2013-14 would apply. Registration of agreement on the subsequent date would not alter the situation. The registration of agreement is a compliance of a legal requirement under the Registration Act, 1908. Thus, in the facts of case we are of considered view that the authorities below have erred in invoking the provisions of section 56(2)(vii)(b)(ii) as amended by the Finance Act, 2013. Ergo, ground No.2 of the appeal is allowed.
6. Since, the assessee gets relief on the primary prayer made in ground No.2 of the appeal, the alternate plea raised by way of ground No.3 has become academic and hence, not deliberated upon at this stage.
7. In ground No.4 of appeal, the assessee has assailed charging of interest u/s. 234A,234B and 234C of the Act. Levy of interest u/s 234A,234B and 234C of the Act is mandatory and consequential, hence, I find no merit in ground No.4 and the same is dismissed as such.
8. In ground No.5 of appeal, the assessee has assailed initiation of penalty proceedings u/s.271(1)(c) of the Act. Challenge to penalty proceedings u/s. 271(1)(c) at this stage is premature. The ground No.5 of the appeal is dismissed, accordingly.
9. In ground No.1 of appeal, the assessee has challenged validity of assessment order on the ground that the assessment order is unsigned. The ld. Authorized Representative for the assessee submitted that he is not pressing this ground at this stage. Accordingly, the issue is left open and is not deliberated upon.
10. In the result, appeal of the assessee is partly allowed in the terms aforesaid.
Order pronounced in the open Court on Monday the 21st day of February, 2022.
