Sulochana Saijan Modi Vs ITO (ITAT Mumbai)
ITAT Mumbai held that allotment letters issued for purchase of flat should be considered as ‘Agreement to sell’ for the purpose of section 56(2)(x) of the Income Tax Act.
Facts- The case was selected for limited scrutiny for examining the reasons for stamp duty valuation of property being higher than the transaction value. The statutory notices under the Income Tax Act, 1961 (“the Act”), were issued to the assessee and complied with. In the assessment completed u/s 143(3) of the Act, the Assessing Officer (“AO”) added the difference in value of the property between the stamp duty valuation and the transaction value, in terms of section 56(2)(x)(b) of the Act, amounting to Rs.57,85,300/-.
Ld.CIT(A) upheld the addition made by the AO. Being aggrieved, the present appeal is filed.
Conclusion- Under the proviso if prior to registration of the property , the assessee has entered into purchase agreement fixing the amount of consideration and also partly paid the amount of consideration by way of account payee cheque/draft etc, then for the purpose of section 56(2)(x) of the Act, the stamp duty value as on the date of the agreement may be taken for the purpose of the working out deemed sale consideration.
According to the AO and Ld.CIT(A), the allotment letter is not in the nature of the agreement for sale. However, we find that the Tribunal in the case of Parth Dasrath Gandhi vs Addl./Deputy/Asst. CIT order dated 31.01.2023 for AY 2018-19 held that “the allotment letter should be considered as agreement for sale.”
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal filed by the assessee is directed against the order dated 19.01.2023 passed by CIT(A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)” ] for Assessment Year (“AY”) 2018-19.
2. The grounds raised by the assessee are reproduced as under: –
1. “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs. 28,92,650/- u/s 56(2)(x) while doing so, the provisions of the proviso to section 56(2)(x)(b) have been ignored.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in relying on the judgement of Apex Court in case of Balbir Singh Maina in as much as
* The relied decision relates to Income from Capital Gain and the case of the appellant falls under Income from Other Sources.
* In the said decision, the mentioned argument is at best an obiter dicta and not a ratio decidendi, therefore, not enforceable.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs. 28,92,650 w/s 56(2)(x) completely disregarding the following facts:
* The appellant is a joint owner and the contention of the appellant’s co-owner in regards to the same addition has been accepted and no addition has been made by the Assessing Officer.
* The Appellant has submitted the allotment letter and the copy of the cheque during the course of assessment proceedings which reflects that the payment was made before the agreement date. Thus, satisfying both the conditions under the proviso to section 56(2)(x)(b) of the Act. The provision does not prescribe quantum of payment to be made.”
3. Briefly stated facts are that the assessee, an individual, filed its return of income on 13.06.2018 declaring total income of Rs.3,54,980/-. The case was selected for limited scrutiny for examining the reasons for stamp duty valuation of property being higher than the transaction value. The statutory notices under the Income Tax Act, 1961 (“the Act”), were issued to the assessee and complied with. In the assessment completed u/s 143(3) of the Act, the Assessing Officer (“AO”) added the difference in value of the property between the stamp duty valuation and the transaction value, in terms of section 56(2)(x)(b) of the Act, amounting to Rs.57,85,300/-. Further, Ld.CIT(A) upheld the addition made by the AO.
4. Aggrieved, the assessee is in appeal before the Tribunal by way of raising grounds as reproduced above.
5. Before us, Ld. Counsel for the assessee has filed a Paper Book containing pages 1 o 93.
6. Before us, Ld. Counsel for the assessee submitted that the assessee is one of the joint holders of the property alongwith her son, Shri Ashish Modi, who had booked an under construction residential house as on 22.11.2010 at agreed cost of Rs.83,20,500/-. He referred to the copy of the allotment letter, which is available at page 7 to 10 of the Paper Book. He further submitted that at the time of booking, an amount of Rs.2,00,000/-was paid vide cheque dated 11.11.2010. The property was got registered on 29.07.2017 at a stamp duty valuation of Rs.1,45,55,800/- as against the transaction value of Rs.87,70,500/-. According to the AO, the assessee was only issued an allotment letter, which was according to him, not an agreement and therefore, no benefit of the 2nd proviso to section 56(2)(x)(b) of the Act, can be extended to the assessee. According to the said proviso, if prior to registration of the property, the assessee has entered into an agreement for purchase of the property, then for the purpose of section 56(2)(x)(b) of the Act , the stamp duty valuation as on the date of the agreement shall be taken as sale consideration of the property if substantial amount of consideration has already been paid at the time of the agreement. The AO accordingly, denied the benefit of the proviso to section 56(2)(x)(b) of the Act and made the addition observing as under:-
“Thus, In view of the provisions of section 56(2)(x)(b) of the Act and facts of the case the argument of the assessee is not accepted for the following reasons:
1. “In the registered deed dated 29.07.2017, it is nowhere mentioned that the assessee is only co-owner of the property. In fact, the property is jointly purchased by the assessee with her son. It doesn’t matter that who has contributed how much.
2. The assessee failed to furnish the copy of notarized agreement with M/s. JP Infra and merely furnished the copy of allotment letter dated 22.11.2010 vide her submission dated 31.12.2020 and after being asked for notarized copy of agreement, furnished the same letter simply getting attested from a Notary on 16.02.2021.
3. Another condition of second proviso to the section 56(2)(x)(b) that payment of sale consideration or part thereof on or before the date of agreement is also not satisfied as the first payment has been made only on 23.11.2020 this doesn’t mean that the assessing officer is accepting the allotment letter as an agreement among the buyers and seller of the property.
4. The assessee was specifically requested to furnish the copies of receipts of payments made to M/s. JP Infra during the FY 2010-11 and thereafter but she failed to provide the same, 5. Further, on perusal of the bank passbook of the assessee it is noticed that the following payment were made to M/s. JP Infra during the year 2015 by her:
