Stamp duty value on agreement date may be considered under Section 56(2)(x)

Javidbhai Ahemadbhai Mansuri Vs ITO (ITAT Ahmedabad)

According to ITAT, for property transactions, the stamp duty value on the date of the agreement may be considered under Section 56(2)(x) if part of the payment is made through banking channels at that time, preventing unnecessary tax on the difference between stamp duty and consideration.

The Income Tax Appellate Tribunal (ITAT), Ahmedabad, in the case of Javidbhai Ahemadbhai Mansuri Vs ITO, allowed the appeal of the assessee, effectively deleting an addition of Rs. 73,66,836 made by the Assessing Officer (AO) under Section 56(2)(x)(b) of the Income-tax Act, 1961 (the Act). The core issue revolved around the applicability of this section—which deals with the taxation of certain receipts of immovable property for inadequate consideration—when the agreement for property transfer and partial payment were made years before the final registration date.

Key Facts and Background

The case pertains to the Assessment Year 2020-21. The assessee, Mr. Javidbhai Ahemadbhai Mansuri, had his case selected for Limited Scrutiny to inquire into investments in properties.

The central transaction involved the purchase of a property for a declared consideration of Rs. 29,96,836. However, the property was registered on October 30, 2018, at a Stamp Duty Value (SDV) of Rs. 1,03,63,816. The significant difference between the declared consideration and the SDV amounted to Rs. 73,66,836.

The Assessing Officer (AO) viewed this difference as income chargeable to tax under Section 56(2)(x)(b) of the Act, which aims to tax the benefit received by an individual for acquiring immovable property at a value significantly lower than the SDV.

The Commissioner of Income-Tax (Appeals) [CIT(A)] sustained the addition, dismissing the assessee’s appeal. The CIT(A)’s decision was based on the finding that while an agreement was signed, the assessee had allegedly not provided details of the payments to the builder on or before the date of the agreement.

Assessee’s Contention and Supporting Evidence

In the appeal before the ITAT, the assessee contested the addition, submitting documents to demonstrate that the transaction was initiated much earlier than the registration date. The key evidence provided included:

1. An Allotment Letter dated June 20, 2013, detailing the sale of the flat for the consideration of Rs. 29,96,836.

2. A Schedule of Payments.

3. A Bank Statement reflecting advance payments made in the year 2013, specifically:

• • Rs. 5,00,000/- on June 13, 2013
  • Rs. 5,00,000/- on July 21, 2013
  • Rs. 5,00,000/- on July 22, 2013
  • Rs. 3,71,000/- on November 27, 2013

The total advance paid in 2013 was Rs. 18,71,000/-, and these payments were confirmed to have been made through a bank account (i.e., by account payee cheque or electronic clearing system).

The assessee also raised an additional legal ground concerning the AO’s jurisdiction, arguing that the AO wrongly enlarged the scope of the limited scrutiny to include an issue other than the specific investment matter for which the assessment was selected, without the necessary permission from the competent authority. However, the ITAT’s final decision focused predominantly on the substantive issue under Section 56(2)(x)(b).

Judicial Precedents and Statutory Analysis

The ITAT’s decision hinged on the interpretation and application of the provisos to Section 56(2)(x)(b) of the Act.

Section 56(2)(x)(b) stipulates that if immovable property is received for a consideration that is less than the Stamp Duty Value (SDV), and the excess amount is more than the specified tolerance limit (the higher of Rs. 50,000 or of the consideration), the excess shall be charged to tax as “Income from other sources.”

The Crucial Provisos:

1. First Proviso: “Provided that where the date of agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for the purposes of this sub-clause.”

2. Second Proviso: “Provided further that the provisions of the first proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account [or through such other electronic mode as may be prescribed], on or before the date of agreement for transfer of such immovable property.”

ITAT’s Holding

The ITAT, upon reviewing the evidence, found that the agreement fixing the consideration was made on June 20, 2013. Crucially, a part of the consideration (Rs. 18,71,000/-) was paid in the year 2013 through bank accounts. The ITAT noted that these payments were made before the date of the agreement (June 20, 2013) or shortly thereafter, with the first payment occurring on June 13, 2013. Since a part of the consideration was paid through a bank account on or before the date of the agreement, the condition set out in the Second Proviso was satisfied.

Consequently, as per the First Proviso, the Stamp Duty Value to be considered for the purpose of Section 56(2)(x)(b) should be the value as of the date of the agreement (June 20, 2013), and not the value on the date of registration (October 30, 2018).

The ITAT therefore allowed the appeal and deleted the addition of Rs. 73,66,836.

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD

This appeal has been filed by the Assessee against the order dated 31.03.2025 passed by the Ld. Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre, Delhi (“Ld. CIT(A)” for short), under Section 250 of the Income-tax Act, 1961 (“the Act” for short), relating to the Assessment Year 2020-21.

2. The Assessee has raised following grounds of appeal :-

“1. The learned CIT (A) has erred in law and on facts in holding that the addition of Rs.73,66,836/- made u/s. 56(2)(x)(b) of the Act is found to be on proper footing and in sustaining the same. The Id. CIT (A) has accordingly dismissed the appeal based on wrong statements that though the agreement was signed on 20-06-2013, appellant has not provided the details of payment to builder as on that date, and also the statement that the AO did not accept appellant’s contentions as required documents were not produced before him.

2. The learned CIT (A) has also erred in law and on facts in ignoring the specific ground No.1 contesting AO’s jurisdiction to take up issue other than the issue of investment for which the assessment was selected for limited scrutiny, without permission of competent authority, and wrongly stating that grounds No. 1 to 6 relate to addition made u/s. 56(2) (x) (b) of the Act.

3. On the facts and in the circumstances of the case and in law the learned CIT (A) ought to have cancelled the assessment being without jurisdiction/authorization of competent authority, and ought to have deleted the addition of Rs.73,66,836/-.

4. It is therefore prayed that the orders of the lower authorities making/upholding the addition Rs.73,66,836/- may be cancelled.”

3. Heard the arguments of both the parties and perused the material available on record.

3.1 The case was selected for Limited Scrutiny to enquire into the investment in properties. The Assessee has purchased a property for Rs.29,96,836/- which has been registered at a stamp duty value of Rs.1,03,63,816/- on 30.10.2018. Keeping in view the difference of Rs.73,66,836/- in the value of the property adopted by the assessee and the stamp duty authorities, the Assessing Officer has made an addition of Rs.73,66,836/- u/s 56(2)(x)(b) of the IT Act, 1961.

3.2 Before us, the assessee has submitted the advance paid in the year 2013 as under:-

3.3 The assessee has submitted allotment letter dated 20.06.2013 depicting sale of 2 BHK flat No.1203, in “B” Wing of 1148 Sq. Ft. for Rs.29,96,836/- and also the schedule of payments (Page No. 22 to 29 of the paper-book). On page No. 30 to 32 of the paper-book, the assessee has disclosed a bank statement reflecting the payments made through the bank account. These documents/evidences are well before the Ld. CIT(A).

3.4 In this background, the provisions of Section 56(2)(x)(b) of the Act are examined. The same reads as under:-

(x) where any person receives, in any previous year, from any person or persons on or after the 1st day of April, 2017,—

(a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;

(b) any immovable property,—

[A] without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;

[B] for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely:—

[i] the amount of fifty thousand rupees; and

[ii] the amount equal to [ten] per cent of the consideration:

Provided that where the date of agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for the purposes of this sub-clause :

Provided further that the provisions of the first proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account [or through such other electronic mode as may be prescribed], on or before the date of agreement for transfer of such immovable property:

Provided also that where the stamp duty value of immovable property is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of this sub-clause as they apply for valuation of capital asset under those sections:

[Provided also that in case of property being referred to in the second proviso to sub-section (1) of section 43CA, the provisions of sub-item (ii) of item (B) shall have effect as if for the words “ten per cent”, the words “twenty per cent” had been substituted;]

(c) any property, other than immovable property,—

(A) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;

(B) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration…

………”

3.5 Thus, on going through the provisions of the Act, since the assessee has entered into an agreement fixing the amount of consideration for the immovable property in 2013 and an amount of Rs.18,71,000/- have already been paid in the year 2013, i.e. a part has been paid by way of account payee cheques through a bank account, we have no hesitation to hold that the provisions of Section 56(2)(x)(b) of the Act are not attracted in the case of the assessee. Therefore, the addition made by the Assessing Officer is hereby deleted.

4. In the result, the appeal of the assessee is allowed.

The order is pronounced in the open Court on 25.09.2025.