ITO Vs Pramod A. Thakur (ITAT Pune)
ITAT Pune held that addition u/s 56(2)(vii)(b) of Income Tax Act sustainable as assessee failed to prove that the developer had agreed to share its developed area; which in turn, had come to the assessee from his father by way of nomination.
Facts- The Revenue’s sole substantive ground raised in the instant appeal challenges correctness of the CIT(A)’s action deleting section 56(2)(vii)(b) addition of Rs.6,54,61,100/- made by the Assessing Officer in his assessment order dated 21.12.2017.
Conclusion- Held that section 56(2)(vii)(b)(i) is attracted only where any immovable property is received by the assessee, who is an individual or a HUF, without any consideration.
Held that learned counsel could not pin-point even a single stipulation in this clinching agreement that the developer had agreed to share its developed area; which in turn, had come to the assessee from his father by way of nomination. Further, the assessee failed to lead us to the clinching material inter alia indicating any arrangement between his father and developer wherein the former had parted with the land for getting developed area in lieu of consideration; which in turn, has been passed on to him as a gift from the father and covered under forgoing exemption clause. We thus conclude that the Assessing Officer had rightly made the impugned addition u/s. 56 (2)(vii)(b) of the act and therefore, the CIT(A) has erred in law and on facts in deleting the same.
FULL TEXT OF THE ORDER OF ITAT PUNE
1. This Revenue’s appeal for A.Y. 2015-16 arises against the CIT(A) – 2, Thane’s order dated 29/03/2019 passed in ITA No. 10433/2017-18 involving proceeding u/s. 143(3) of the Income Tax Act, 1961 ; in short “the Act”.
Heard both the parties. Case file perused.
2. The Revenue’s sole substantive ground raised in the instant appeal challenges correctness of the CIT(A)’s action deleting section 56(2)(vii)(b) addition of Rs.6,54,61,100/- made by the Assessing Officer in his assessment order dated 21.12.2017. The former’s lower appellate discussion to this effect reads as under.
“6. I have carefully considered the facts of the case, findings of the AO in the assessment order, submissions of the appellant and material placed on record. From the facts of the case it is noticed that during the year under consideration the appellant was allotted 13 flats at Tulsi Kamal, Kharghar, by M/s Metro Reality, for a consideration of Rs. NIL, as per development agreement dated 18.08.2008, as against the market value of the above flats was Rs. 6,54,61,100/-. The AO, therefore, required the appellant to show cause as to why Rs. 6,54,61,100/- should not be added to his income as per provisions of section 56(2)(vii)(b) of the Act. In compliance the appellant filed detailed written submissions stating that his father, Shri Arjun Gira Thakur, along with his brother and two sisters, had entered into a development agreement with M/s Metro Reality vide agreement dated 17.04.2009. upon the execution of the development agreement 33 flats accrued to the share of all the parties. Out of these 33 flats Shri Arjun Gira Thakur, father of the appellant was entitled for 13 flats and being aged, infirm and sick, he requested the developer to register the said 13 flats in the name of his son, i.e. the appellant. Therefore, these flats were allotted to the appellant as per the family agreement. The AO, however, did not accept the contention of the appellant and added Rs. 6,54,61,100/- to his income.
6.2 During the course of appellate proceedings the AR of the appellant submitted copies of development agreement dated 17.04.2019, memorandum of family settlement and confirmation letter from M/s Metro Reality that the appellant’s father had requested them to directly allot the flats in the name of the appellant. Considering the factual matrix I am of the view that the provisions of section 56(2)(vii)(b) were not attracted as the premises received by the appellant were for valuable consideration, being grant of development rights by the father & other family members of the appellant’s family. Provisions of section 56(2)(vii)(b) are hence not attracted as the flats received by the appellant were for valuable consideration & being development rights of the lease hold plot transferred by the appellant’s father & his siblings to the developer. Moreover, the allotment of the 13 flats was transferred from the father of the appellant to his son, the appellant. As per the explanation (e) to 56(2)(vii)(b) the son would be covered under (i) (E) “any lineal descendent of the individual.” Considering the above facts, addition of Rs.6,54,61,100/- made by the AO is hereby deleted and the grounds of appeal, raised as above, are allowed.”
3. Learned CIT-DR vehemently argued that the CIT(A) herein has erred in law and on facts in deleting the impugned addition. The assessee on the other hand has chosen to file a detailed note of his written submissions as follows :-
“Salient points
1. The respondent is an individual having income from house property, capital gains and other sources. The return of income for the year under appeal was filed by the appellant on 31.03.2017, declaring therein total income of Rs.7,78,000/-. Addition of Rs.6,54,61,100/- was made by the Id AO by relying upon the provisions of section 56(2)(vii)(b) of the I.T Act, 1961. The Hon. CIT(A) deleted the addition and the department has filed the present appeal.
2. Addition u/s 56(2)(vii)(b) of the I.T Act 1961 on account of 13 flats received by the appellant – Rs. 6,54,61,100/-
2.1 Facts in brief
The respondent is a member of the Thakur family of Kharghar, Navi Mumbai. The grandfather of the respondent, Late Shri Giraya (Gira) Thakur owned and possessed agricultural lands at Mouje Kharghar, Taluka Panvel, Dist. Raigad. The said lands were acquired by the Govt. of Maharashtra through the nodal agency CIDCO. As part consideration for such acquisition, CIDCO granted lease hold rights of certain plots of land at Sector 10, Kharghar Node, Taluka Panvel, Dist. Raigad, under the 12.50% scheme, to the children of Late Shri Giraya Thakur. Accordingly, the children of Late Shri Giraya Thakur became entitled for lease hold rights of plot of land bearing no. 233, having area of 1899.66 sq. mtrs at Sector 10, Kharghar Node, Taluka Panvel, Dist. Raigad. Shri Arjun Gira Thakur, the father of the respondent, alongwith his brother and two sisters, being children of Late Shri Giraya Thakur entered into development agreement with one, M/s Metro Reality for development of the said plot of land. The members of the Thakur family under the scheme of development became entitled to certain constructed residential flats. Shri Arjun Gira Thakur, father of the respondent under the said development agreement with M/s Metro Reality became entitled for 13 flats. Being aged, infirm and sick, he requested the developer to register the said 13 flats in the name of his son i.e the respondent. These facts are well documented, particularly in the Memorandum of Family Settlement dt.30.09.2012, whereby the allotment of the said 13 flats was transferred to the name of the respondent. Kindly refer to page no. 125 of paperbook for relevant discussion. All related documents were placed before the ld. AO in the course of asst, proceedings. Copies of the relevant agreements are enclosed in the paperbook filed as under.
