Wrong Section 151 Approval Invalidates Reassessment Beyond Three Years: ITAT Mumbai

Vasantha Narayan Poojari Vs ITO (ITAT Mumbai)

Summary: ITAT Mumbai allowed the appeal of the assessee and quashed reassessment proceedings for Assessment Year 2017-18 because the Assessing Officer had obtained approval from the Principal Commissioner of Income Tax instead of the authority specified under Section 151(ii). The appeal arose from the order dated 12.12.2025 passed by the National Faceless Appeal Centre, Delhi. The assessee had challenged both the jurisdiction assumed under Section 147 and an addition of Rs.1,93,46,420/- under Section 56(2)(vii)(b). The Tribunal also examined the addition independently on merits and held that it could not be sustained.

The assessee had filed his return declaring income of Rs.6,16,450/-. Based on information concerning the difference between the declared consideration and stamp duty value of a property received upon redevelopment, the Assessing Officer initiated reassessment. A show cause notice under Section 148A(b) was issued on 21.05.2022, followed by an order under Section 148A(d) and notice under Section 148 on 25.07.2022. Since more than three years had elapsed from the end of AY 2017-18, the assessee argued that approval was required from the Principal Chief Commissioner or Chief Commissioner under Section 151(ii), whereas approval had been obtained from the Principal Commissioner.

The Tribunal accepted the jurisdictional challenge. It noted that three years from the end of AY 2017-18 expired on 31.03.2021 and that the Section 148A(d) order and Section 148 notice were issued on 25.07.2022. Following Ramesh Bachulal Mehta vs. Income Tax Officer, W.P. No.271 of 2023, which in turn considered Union of India vs. Rajeev Bansal, the Tribunal held that approval by the competent specified authority is a jurisdictional precondition. Since approval had been obtained from the PCIT rather than the authority contemplated by Section 151(ii), the order under Section 148A(d) and notice under Section 148 were void ab initio. Consequently, the assessment order could not survive.

For completeness, the Tribunal also decided the addition on merits. The assessee had owned premises in which he ran a motor garage. In redevelopment proceedings, he ultimately accepted the developer’s offer and vacated the premises in March 2012. A designated shop in the redeveloped property was subsequently allotted to him under an agreement executed in 2017. Although its agreement value was Rs.1,90,99,680/-, the stamp valuation authority determined its value at Rs.3,84,46,100/-, resulting in the disputed addition of Rs.1,93,46,420/-.

The Tribunal held that the material demonstrated that the assessee had accepted the redevelopment offer and handed over possession in 2012. Therefore, the relevant property value had to be considered with reference to the ready reckoner/market value prevailing in 2011 and 2012 rather than the value determined in 2017. It further held that under the provision applicable before the amendment effective from 01.04.2014, Section 56(2)(vii)(b) applied where immovable property was transferred without consideration. Here, the assessee had surrendered his existing property and received the redeveloped property in exchange; hence, it could not be treated as property received without consideration. Following Laxman Kaniyalal Dharmani vs. Income Tax Officer, [2025] 181 taxmann.com 415 (Mum-Trib), the Tribunal held that the addition was unsustainable even on merits and directed its deletion. The assessee’s appeal was accordingly allowed.

Cases Discussed

• Ramesh Bachulal Mehta vs. Income Tax Officer, W.P. No. 271/2023, judgment dated 11.08.2025 (Bombay High Court) — Followed on the jurisdictional requirement that where more than three years have elapsed, approval must be obtained from the authority specified under Section 151(ii); approval by the PCIT could not sustain the reassessment.
• Union of India vs. Rajeev Bansal, [2024] 167 taxmann.com 70 (SC)/[2024] 301 Taxman 238 (SC)/[2024] 469 ITR 46 (SC) — Applied through the Bombay High Court decision for the proposition that sanction from the appropriate specified authority is a precondition for assumption of jurisdiction under Section 148.
• Satish Harnamdas Sethi vs. NFAC, ITA No. 3091/Mum/2024, order dated 24.12.2024 (ITAT Mumbai) — Relied upon by the assessee in challenging the validity of reassessment for want of approval by the competent authority.
• Laxman Kaniyalal Dharmani vs. Income Tax Officer, [2025] 181 taxmann.com 415 (Mum-Trib) — Followed on merits for holding that property received upon surrender of an existing property in redevelopment cannot be treated as having been received without consideration for the purpose of the applicable Section 56(2)(vii) provisions.

FULL TEXT OF THE ITAT MUMBAI ORDER

This is an appeal by the assessee against order dated 12.12.2025 passed by National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year (AY) 2017-18.

2. Ground No.1, being a general ground, does not require adjudication. In Ground No.2, the assessee has challenged the validity of reopening of assessment under section (u/s.) 147 of the Income Tax Act, 1961 (in short the ‘Act’). Whereas, in Ground No.3, the assessee has contested the addition made of Rs. l,93,46,420/- u/s. 56(2)(vii)(b) of the Act.

3. In so far as the legal and jurisdictional issue raised in Ground No.2 is concerned, briefly the facts are, the assessee is a resident individual. For the assessment year under dispute, the assessee filed his return of income on 12.02.2018, declaring income of Rs. 6,16,450/-. The return of income so filed was initially processed u/s. 143(1) of the Act accepting the income returned. Subsequently, the Assessing Officer (AO), based on information available on record that the assessee had failed to offer an amount of Rs. l,93,46,420/-, being the difference between the declared sales consideration and the stamp duty value to tax, reopened the assessment u/s. 147 of the Act. In this context, the Assessing Officer issued a show cause notice in terms with Section 148A(b) of the Act on 21.05.2022. In response to the said show cause notice, the assessee filed his objection on 03.06.2022. After considering the submissions of the assessee, the Assessing Officer passed an order u/s. 148A(d) and issued notice u/s. 148 of the Act on 25.07.2022. Ultimately, the Assessing Officer completed the assessment on 26.05.2023.

4. Before us, the specific plea of learned counsel for the assessee is to the effect that though the notice u/s. 148 of the Act was issued after expiry of three years from the end of the relevant assessment year, however, the Assessing Officer has not taken approval of the authority specified u/s. 151(ii) of the Act. In this context, he drew our attention to copy of order passed u/s. 148A(d) and notice issued u/s. 148 of the Act placed in the paper book reflecting approval of Principal Commissioner of Income Tax-19, Mumbai. Thus, he submitted, the lack of approval by a competent authority is a jurisdictional error affecting the initiation of proceeding, hence cannot be cured. Therefore, he submitted, the assessment order has to be quashed. In support of such contention, learned counsel relied upon the decision of the Hon’ble Jurisdictional High Court in the case of ‘Ramesh Bachulal Mehta vs. ITO’ W.P. No. 271/2023 judgment dated 11.08.2025. He also relied upon the decision of Coordinate Bench in the case of ‘Satish Harnamdas Sethi vs. NFAC’ ITA No. 3091/Mum/2024 order dated 24.12.2024.

5. Without prejudice, learned counsel submitted, the assessee was owner of a plot where he has put up a structure to run a motor garage. He submitted, in November, 2011, a builder/developer named M/s. Kalpataru Enterprises approached the assessee for handing over the property for redevelopment in the terms that in lieu of the existing structure, the assessee would be provided a permanent alternate accommodation of commercial Shop No.8 located at Ground Gloor in C-Wing in proposed building with carpet area of 600.00 sq.ft. along with an area of 300.00 sq.ft. carpet area in the basement. Further, the assessee would be given an amount of Rs.50,000/- for shifting charges, monthly rent of Rs.50,000/- for temporary alternate accommodation with the condition of rent enhancement by 10% and corpus fund of Rs.10,00,000/-. As against the offer made by the builder and the society, the assessee through letter dated 25.11.2011 demanded 1500.00 sq.ft. carpet area in proposed building and corpus fund of Rs.3,00,00,000/-. The demand made by the assessee not being acceptable to the builder/developer, proceedings were initiated u/s. 95(A) of the Maharashtra Housing and Area Development Act, 1976 (MHAD). Vide order dated 14.03.2012, Executive Engineer, Housing, Bandra Division Mumbai Board passed an order directing the assessee to vacate the premises in his possession and seek alternate place as per offer of the society and the Developer. Assessee challenged the said order through writ application filed before the Bombay High Court which ultimately was dismissed vide order dated 22.03.2012. Upon dismissal of the writ petition, the assessee accepted the offer of the society and the builder/developer and vacated the premises. Thus, upon redevelopment, the assessee entered into an agreement on 14.03.2017 with the builder/developer receiving possession of the designated shop room as per the initial offer. As per the agreement, the value of the property was put at Rs.1,90,99,680/-. However, for stamp duty purpose, the stamp duty authority determined the value at Rs.3,84,46,100/-. Based on the stamp duty value, the Assessing Officer called upon the assessee to explain in terms of Section 56(2)(vii)(b) of the Act, why the difference between the declared value and stamp duty value should not be treated as income of the assessee. Alleging that the assessee did not furnish any reply to the show cause notice, the Assessing Officer added back the differential amount of Rs.1,93,46,420/- to the income of the assessee, invoking the provisions of Section 56(2)(vii)(5) of the Act. Though, the assessee contested the addition before the First Appellate Authority, however, it was sustained.

5. Before us, learned counsel submitted that upon dismissal of writ petition, the assessee had accepted the offer of the builder/developer and vacated the premises in the year 2012. Therefore, the stamp duty value as on the date of acceptance of the offer by the assessee in 2012 would apply and not the stamp duty value as on the date of agreement with the developer in 2017. Without prejudice, he submitted, since the assessee had vacated the premises in the year 2012 and handed over the possession to the developer/builder, transfer had taken place in 2012. He submitted, as per the provisions of Section 56(2)(vii)(b) prior to its amendment w.e.f. 01.04.2014, it will apply only in a case where immovable property exceeding value of Rs.50,000/- is transferred without consideration. He submitted, in case of the present assessee, the transfer of immovable property was not without consideration as the assessee has got the property in lieu of the existing property transferred to the developer/builder. Therefore, the provision would not apply. In support of such contention, learned counsel relied upon the decision of the Coordinate Bench in case of ‘Laxman Kaniyalal Dharmani vs. Income Tax Officer’ [2025] 181 taxmann.com 415 (Mum-Trib).

7. Per contra, learned Departmental Representative (DR) strongly relied upon the observations of the Assessing Officer and learned First Appellate Authority.

8. We have considered rival submissions and perused the materials on record. We have also applied our mind to the decisions relied upon. At the outset, we will address the legal issue raised in Ground No.2. Undisputedly, the assessment year under dispute is AY 2017-18. Therefore, three years from the end of the assessment year would expire on 31.03.2021. Whereas, the order u/s. 148A(d) and notice u/s. 148 of the Act were issued by the Assessing Officer on 25.07.2022. On perusal of these documents, it is evident that before issuing them, the Assessing Officer had taken approval of Pr. CIT instead of Pr. Chief Commissioner of Income Tax or Chief Commissioner of Income Tax. A careful reading of the provision contained u/s. 151(ii) of the Act makes it clear that after expiry of three years from the end of the relevant assessment year, the authority, who is competent to grant approval/sanction for initiation of proceeding u/s. 148A and 148 of the Act is Pr. Chief Commissioner of Income Tax or Chief Commissioner of Income Tax. Thus, it is amply clear ,in the case of the present assessee, the Assessing Officer has not obtained approval of the competent authority in terms with Section 151(ii) of the Act. In case of ‘Ramesh Bachulal Mehta vs. Income Tax Officer W.P. No. 271 of 2023 (supra), the Hon’ble Jurisdictional High Court while considering identical nature of dispute has held as under:-

7. The Petitioner has drawn our attention to the decision of the Hon’ble Supreme Court in the case of Union of India vs. Rajeev Bansal [2024] 167 taxmann.com 70 (SC)/[2024] 301 Taxman 238 (SC)/[2024] 469 ITR 46 (SC) and we deem it appropriate to refer to the said judgment where the Hon’ble Supreme Court has, while dealing with the issue of approval from the specified authority in terms of Section 151 of the Act, made the following observations:

“iii. Sanction of the specified authority

73. Section 151 imposes a check upon the power of the Revenue to reopen assessments. The provision imposes a responsibility on the Revenue to ensure that it obtains the sanction of the specified authority before issuing a notice under section 148. The purpose behind this procedural check is to save the assesses from harassment resulting from the mechanical reopening of assessments Sri krishna (P.) Ltd. v. ITO [1996] 87 Τaxman 315/221 ITR 538 (SC)/[1996] 9 SCC 534. A table representing the prescription under the old and new regime is set out below:

74. The above table indicates that the specified authority is directly co-related to the time when the notice is issued. This plays out as follows under the old regime:

(i) If income escaping assessment was less than Rupees one lakh: (a) a reassessment notice could be issued under section 148 within four years after obtaining the approval of the Joint Commissioner; and (b) no notice could be issued after the expiry of four years; and

(ii) If income escaping was more than Rupees one lakh: (a) a reassessment notice could be issued within four years after obtaining the approval of the Joint Commissioner; and (b) after four years but within six years after obtaining the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.

75. After 1 April 2021, the new regime has specified different authorities for granting sanctions under section 151. The new regime is beneficial to the assessee because it specifies a higher level of authority for the grant of sanctions in comparison to the old regime. Therefore, in terms of Ashish Agarwal (supra), after 1 April 2021, the prior approval must be obtained from the appropriate authorities specified under section 151 of the new regime. The effect of Section 151 of the new regime is thus:

(i) If income escaping assessment is less than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and

(ii) If income escaping assessment is more than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) after three years after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.

76. Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under section 148 to issue a reassessment notice. Section 151 of the new regime does not prescribe a time limit within which a specified authority has to grant sanction. Rather, it links up the time limits with the jurisdiction of the authority to grant sanction. Section 151(ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non-compliance by the assessing officer with the strict time limits prescribed under section 151 affects their jurisdiction to issue a notice under section 148.

77. Parliament enacted TOLA to ensure that the interests of the Revenue are not defeated because the assessing officer could not comply with the pre conditions due to the difficulties that arose during the COVID-19 pandemic. Section 3(1) of TOLA relaxes the time limit for compliance with actions that fall for completion from 20th March 2020 to 31st March 2021. TOLA will accordingly extend the time limit for the grant of sanction by the authority specified under section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20th March 2020 and 31st March 2021, then the specified authority under section 151(i) has an extended time till 30 th June 2021 to grant approval. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20th March 2020 and 31st March 2021, then the specified authority under section 151(2) has time till 31st March 2021 to grant approval. The time limit for Section 151 of the old regime expires on 31 st March 2021 because the new regime comes into effect on 1st April 2021.

78. For example, the three year time limit for assessment year 2017-2018 falls for completion on 31st March 2021. It falls during the time period of 20th March 2020 and 31st March 2021, contemplated under section 3(1) of TOLA. Resultantly, the authority specified under section 151(i) of the new regime can grant sanction till 30th June 2021.

79. Under Finance Act 2021, the assessing officer was required to obtain prior approval or sanction of the specified authorities at four stages:

a. Section 148A(a)- to conduct any enquiry, if required, with respect to the information which suggests that the income chargeable to tax has escaped assessment;

b. Section 148A(b)- to provide an opportunity of hearing to the assessee by serving upon them a show cause notice as to why a notice under section 148 should not be issued based on the information that suggests that income chargeable to tax has escaped assessment. It must be noted that this requirement has been deleted by the Finance Act 2022;

c. Section 148A(d)- to pass an order deciding whether or not it is a fit case for issuing a notice under section 148; and d. Section 148-to issue a reassessment notice.

80. In Ashish Agarwal (supra), this Court directed that Section 148 notices which were challenged before various High Courts “shall be deemed to have been issued under section 148-A of the Income-tax Act as substituted by the Finance Act, 2021 and construed or treated to be show- cause notices in terms of Section 148-A(b).” Further, this Court dispensed with the requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(a). Under Section 148A(b), an assessing officer was required to obtain prior approval from the specified authority before issuing a show cause notice. When this Court deemed the Section 148 notices under the old regime as Section 148A(b) notices under the new regime, it impliedly waived the requirement of obtaining prior approval from the specified authorities under section 151 for Section 148A(b). It is well established that this Court while exercising its jurisdiction under Article 142, is not bound by the procedural requirements of law High Court Bar Association v. State of UP [2024] 160 taxmann.com 32/299 Taxman 21 (SC)/[2024] 6 SCC 267,

81. This Court in Ashish Agarwal (supra) directed the assessing officers to “pass orders in terms of Section 148-A(d) in respect of each of the assesses concerned.” Further, it directed the assessing officers to issue a notice under Section 148 of the new regime “after following the procedure as required under section 148-A.” Although this Court waived off the requirement of obtaining prior approval under section 148A(a) and Section 148A(b), it did not waive the requirement for Section 148A(d) and Section 148. Therefore, the assessing officer was required to obtain prior approval of the specified authority according to Section 151 of the new regime before passing an order under section 148A(d) or issuing a notice under section 148. These notices ought to have been issued following the time limits specified under section 151 of the new regime read with TOLA, where applicable.

8. On bare reading of the above extract of the judgment of Hon’ble Supreme Court in the case of Rajeev Bansal (supra), we find that the Hon’ble Supreme Court had clarified as under:

8.1 Under the substituted provisions of re-assessment as introduced by the Finance Act, 2021, the Assessing Officer is required to obtain prior approval or sanction of the ‘Specified Authority’ at four stages:

(i) at first stage under Section 148A(a);

(ii) at second stage under Section 148A(b);

(iii) at third stage under Section 148A(d); and

(iv) at fourth stage under Section 148. In the case of Ashish Agarwal (supra) the Hon’ble Supreme Court waived off the requirement of obtaining prior approval under section 148A(a) and Section 148A(b) of the Act only. Therefore, the Assessing Officer was required to obtain prior approval of the ‘Specified Authority’ according to Section 151 of the new regime before passing an order under Section 148A(d) or for issuing a notice under Section 148.

8.2 Under new regime, if income escaping assessment is more than Rupees 50 lakhs, a reassessment notice could be issued after the expiry of three years from the end of the relevant assessment year only after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.

8.3 Section 151(ii) of the substituted provisions prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non-compliance with the provisions of section 151 vitiates the jurisdiction of the Assessing Officer to issue a notice under section 148.

8.4 Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under section 148 to issue a reassessment notice.

9. In the present case the period of three years from the end of the Assessment Year 2016-17 fell for completion on 31 st March 2020. Since the expiry date fell during the time period of 20 th March 2020 and 31st March 2021 contemplated under Section 3(1) of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (for short “TOLA”), the authority specified under Section 151(i) of the new regime could have granted sanction till 30 th June 2021. On perusal of the order, dated 13.07.2022, passed under Section 148A(d) of the Act, we find that the aforesaid order was passed after taking approval from Principal Commissioner of Income Tax (Respondent No.2). Since the aforesaid order was passed after the expiry of three years from the end of the Assessment Year 2016-17, as per the substituted provisions of re-assessment, the authority specified under Section 151(ii) of the Act (i.e. Principal Chief Commissioner or Chief Commissioner) was required to grant approval. Accordingly, we conclude that in the present case the approval has been obtained from the authority specified under Section 151(i) of the new regime instead of the authority specified under Section 151(ii) of the new regime.

10. The Hon’ble Supreme Court in the above case has drawn an illustration in paragraph 78 of it’s order in the context of Assessment Year 2017-18, wherein it is categorically held that the authority specified under section 151(i) can accord sanction only upto 30.06.2021. This illustration makes it absolutely clear that when the period of three years from end of relevant Assessment Year expired between 20.03.2020 and 31.03.2021, the extension by virtue of TOLA was upto 30.06.2021 and not beyond. Thus, it can be said that the period of three years from the end of the relevant Assessment Year (here AY 2016-17) expired on 30.06.2021, whereas the Respondent No.1, despite passing the order on 13.07.2022 in repsect of Assessment Year 2016-17, has obtained approval of Respondent No.2 who is not the authority as prescribed under section 151(ii).

11. Non-compliance by Respondent No.1 with the provisions contained in Section 148A(d) read with Section 151(ii) vitiates the jurisdiction of the Respondent No. 1 to issue a notice under Section 148 of the Act.

12. We are clearly of the view that the present matter stands covered by the decision of Hon’ble Supreme Court in the case of UPI vs. Rajeev Bansal (supra). We accordingly hold that the order dated 13.07.2022 passed under Section 148A(d) of the Act and the consequential notice issued under section 148 dated 15.07.2022 are bad in law for being violative of the provisions of Section 151(ii) of the Act. Hence they are required to be quashed and set aside.

13. We, accordingly, set aside the impugned order dated 13.07.2022 passed under section 148A(d), the Notice issued under Section 148 and all other proceedings/orders emanating therefrom and allow the writ Petition in terms of Prayer Clause (a) of the petition.”

9. The ratio laid down by the Hon’ble Jurisdictional High Court, as above, clearly applies to the facts of the present case. That being the case, the order passed u/s. 148A(d) and notice issued u/s. 148 of the Act having been passed/issued in violation of Section 151(ii) of the Act, are void-ab-initio, hence deserve to be quashed. Accordingly, we do so. Consequentially, the assessment order passed in pursuance thereof cannot survive.

10. Having held so, for the sake of completeness, we deem it appropriate to deal with the merits of the addition made. Undisputedly, assessee was the owner of an immovable property in a society, wherein, he was running a motor garage. In November, 2011, the society desired to redevelop the property hence approached a builder. The builder made an offer to the assessee to vacate the premises, in lieu of which, he would be given permanent ownership of a shop with additional monetary benefits. Initially, there was dispute between the assessee on one hand and the society and the builder on the other. Ultimately, the competent authority, while resolving the dispute between the parties, directed the assessee to vacate the premises and handover the possession to the builder for redevelopment on the same terms and conditions of the offer made by the builder/developer. Though, the assessee challenged the decision of the competent authority before the Hon’ble Bombay High Court through a writ application, however he was unsuccessful. Hence, in the March, 2012, the assessee accepted the offer of the builder/developer and vacated the premises, in lieu of which, in the year 2017, the assessee received the designated shop in the redeveloped building. As per the agreement, value of the premises given to the assessee was less than the stamp duty value determined by the Stamp Valuation Authority. Therefore, invoking the provisions of Section 56(2)(vii)(b), the Assessing Officer has made the disputed addition.

11. In this context, reference can be made to the agreement between the builder/developer and the assessee executed on 14.04.2017, copy of which is placed at page 41 of the paper book, whereunder, the assessee was allotted the designated shop room in the redeveloped property. The terms of the agreement clearly demonstrate that after disposal of the writ application, the assessee not only accepted the offer of the builder/developer but vacated the premises in March, 2012 handing over possession to the building. Thus, it is borne out on record that the assessee transferred the premises to the builder/developer in the year 2012 in terms with the offer letter dated 17.11.2011 of the builder. That being the case, in terms withthe first proviso to Section 56(2)(vii)(5) of the Act, the value of the property has to be determined on the basis of the ready reckoner/market value prevailing in the years 2011 and 2012 and not as per the value determined in the year 2017. Even, otherwise also, since the assessee had handed over the vacant possession of the premises in the year 2012 to the developer/builder and in lieu of which, he was to receive the designated shop room in the redeveloped property, the provision existing prior to the amendment on 01.04.2014 would apply. As per the said provision existing then, only in a case the immovable property is transferred without consideration then the provision can be invoked. In the facts of the present case, admittedly, the property was not transferred without consideration as the assessee received a redeveloped property in lieu of the property held by him earlier. Therefore, it cannot be said that the assessee received the property without any consideration. While dealing with an identical issue in case of ‘Laxman Kaniyalal Dharmani’ (Supra) the Coordinate Bench has held as under:-

“7. We heard the parties and perused the material on record. The building where the assessee owns a flat went for redevelopment and as per the terms of the agreement dated 23.10.2010 the assessee received 135% of the area of his flat. A supplementary agreement was entered into on 01.03.2013 whereby the assessee received additional 120 sq.ft. The assessee also bought additional space of 159 sq.ft for a consideration of Rs.34,71,750 and the said consideration was paid by Laxman Kanaiyalal Dharmani adjusting the hardship allowance due from the builder as per the redevelopment agreement. The redevelopment was completed and builder executed a final agreement with the assessee on 31.03.2017 (page 291 of PB) and in the said agreement the consideration towards purchase of the additional space is mentioned. We in this regard notice that for the purpose stamp duty the value of the entire flat has been considered to arrive at an amount of Rs.84,55,500/- (page 293 of PB). We further notice that the AO has treated this stamp duty value as addition u/s.56(2)(x)(b) of the Act stating that the assessee has received entire flat free of cost, completely ignoring the fact that the assessee has surrendered his existing flat and in exchange received the new flat after redevelopment. Though the CIT(A) has considered this fact, yet proceeded to direct the AO to make an addition u/s.56(2)(x)(b) to the extent of 961 sq.ft (refer the relevant findings of the CIT(A) as extracted in the earlier part of this order). The provisions of section 56(2)(vii) as applicable to the AY 2011-12 i.e. year in which the redevelopment agreement was entered into, provided for addition under the said section only in cases where no consideration is paid for acquiring an immovable property. The amendment to include inadequate consideration was introduced only from AY 2014-15 and cannot be applied to earlier years as has been held by the coordinate bench in the case of Sashi Jain (supra). In the present case, the assessee has entered into redevelopment agreement whereby he surrendered the right in the property admeasuring 623 sq.ft vide agreement dated 23.10.2010 i.e. AY 2011-12 and in exchange received 961 sq.ft. Therefore it cannot be said that the assessee has received the 961 sq.ft without consideration since the assessee has given up 623 sq.ft of his old flat as a consideration for acquiring the 961 sq.ft. When the ratio laid down by the coordinate Bench on the applicability of the amended provisions of section 56(2)(vii) is applied to the present facts, we see merit in the contention that no addition can be made u/s.56(2)(vii) in assessee’s case even if the consideration Laxman Kanaiyalal Dharmani paid by way of surrender of the old flat measuring 623 sq.ft is less than the value of new area of 961 sq.ft acquired by the assessee. Accordingly we hold that no addition can be made u/s.56(2)(vii)/(x) towards 961 sq.ft of the new flat which the assessee has received in exchange of 623 sq,ft in the old flat. Now coming to the acquisition of 159 sq.ft, from the perusal of the stamp duty value computation as per the ready reckoner value (refer table in the earlier part of this order) we notice that the consideration paid by the assessee is more than the stamp duty value. Therefore for the balance 159 sq.ft also we hold that no addition can be made u/s.56(2)(vii)/(x). We hold that the directions of the CIT(A) to the AO to consider the stamp duty value for the purpose of making addition u/s.56(2)(x) is not sustainable and we set aside the order of the CIT(A) accordingly.”

12. The ratio of the aforesaid decision squarely applies to the facts of the present appeal. Thus, on merits also the addition cannot be sustained. Accordingly, the Assessing Officer is directed to delete the addition.

13. In the result, appeal is allowed.

Order pronounced in the open court on 18/03/2026.