Deepakkumar Chandulal Shah Vs ITO (ITAT Ahmedabad)
Income Tax Appellate Tribunal (ITAT) Ahmedabad Bench has ruled in favor of Deepakkumar Chandulal Shah, deleting an addition of Rs. 16,12,245 made by tax authorities under Section 56(2)(x) of the Income Tax Act, 1961. The dispute centered on the sale value of a property purchased by the assessee, which was less than the prevailing stamp duty valuation. The Assessing Officer (AO) and the Commissioner of Income-Tax (Appeals) had previously upheld the addition, citing the difference between the registered sale deed value and the circle rate.
The assessee presented two primary arguments before the ITAT. Firstly, it was contended that the difference between the sale consideration and the stamp duty value was less than 5%. Under Section 56(2)(x)(B)(ii) of the Act, an addition for differential amounts is warranted only if the difference exceeds 5% of the consideration mentioned in the sale deed. The ITAT noted that, in this case, the difference was indeed below this threshold, rendering the addition unwarranted on this ground alone.
Secondly, and crucially, the assessee argued that the property in question was subject to a title dispute at the time of the sale. This dispute, involving a third party in possession and a complex history of agreements to sell, justified the property being sold at a rate lower than the prevailing circle rate or market rate. The assessee provided evidence, including an order from the Gujarat High Court dated June 21, 2018, in R/First Appeal No. 2119 of 2016. This order confirmed that a prior agreement to sell, executed by a power of attorney holder, could not be legally enforced as the original owner had passed away before its execution. The Gujarat High Court had upheld the Trial Court’s decision, rejecting the civil suit related to the property’s title.
