Case Law Details
Aroumougam Pragalanadane Vs DCIT (ITAT Chennai)
Chennai ITAT: Unregistered Agreement to Sell Does Not Bar Benefit of Section 50C Proviso
Summary: The Chennai ITAT allowed the assessee’s appeal and deleted the addition of ₹99,06,125 made under Section 50C. The assessment had been reopened due to a difference between the sale consideration of ₹94,00,000 and the guideline value of ₹1,93,06,125 on the date of registration. The assessee submitted that the property was sold pursuant to an agreement to sell dated 11.07.2013, under which the sale consideration had been fixed and received through RTGS before execution of the registered sale deed on 07.03.2017. The AO and the CIT(A) denied the benefit of the proviso to Section 50C on the ground that the agreement to sell was unregistered. The Tribunal held that the statutory conditions under the proviso to Section 50C were satisfied as the consideration was fixed under the earlier agreement and received through banking channels. It observed that the proviso does not require the agreement to sell to be registered and found that the registered sale deed itself recorded receipt of consideration through RTGS. Accordingly, the Tribunal held that adoption of the stamp duty value as on the date of registration could not be sustained and deleted the addition.
The Chennai ITAT deleted an addition of ₹99.06 lakh made u/s 50C, holding that the benefit of the provisos to section 50C cannot be denied merely because the agreement to sell was unregistered. The assessee had entered into an agreement to sell the property in July 2013 for ₹94 lakh and received the entire sale consideration through RTGS before execution of the registered sale deed in March 2017. However, the Assessing Officer adopted the stamp duty value of ₹1.93 crore prevailing on the date of registration and taxed the differential amount under section 50C. The CIT(A) upheld the addition on the ground that the agreement to sell was unregistered and the advance received had initially been reflected as an unsecured loan.
The Tribunal held that the first and second provisos to section 50C merely require that the sale consideration be fixed under an earlier agreement and that part or whole of the consideration should have been received through banking channels before the date of the agreement. Nowhere does the statute require the agreement to sell to be registered. It observed that an agreement to sell merely records contractual obligations and does not itself convey title. Therefore, courts cannot import a condition into the statute that the legislature has consciously omitted. Since the registered sale deed itself acknowledged receipt of the consideration through RTGS in terms of the earlier agreement, the statutory conditions stood fully satisfied.
The Tribunal further relied on the Madras High Court’s decision in CIT v. Vummudi Amarendran, which held that the provisos to section 50C are curative and retrospective, and its earlier decision in Ashok Kumar Muraka v. ITO. It also rejected the Revenue’s objection regarding the amount being initially reflected as an unsecured loan, observing that the true nature of the transaction must be gathered from the overall documentary evidence rather than the accounting nomenclature. Accordingly, it held that the stamp duty value as on the date of the agreement, and not the date of registration, was relevant for section 50C, deleted the addition of ₹99.06 lakh, and allowed the assessee’s appeal.
Cases Discussed:
- Ashok Kumar Muraka Vs. ITO [2025] 176 taxmann.com 189 (Chennai-Trib.)
- CIT v. Vummudi Amarendran [2020] 120 taxmann.com 171 (Madras)
FULL TEXT OF THE ORDER OF ITAT CHENNAI
The present appeal has been preferred by the Assessee against the order dated 20.11.2025 passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “the Ld. CIT(A)”], arising from the assessment order dated 21.02.2022 passed by the Assessing Officer, Assessment Unit, National Faceless Assessment Centre [hereinafter referred to as “the AO”], u/s.147 r.w.s. 144 r.w.s. 144B of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for the Assessment Year 2017-18.
2. The brief facts of the case emanating from the records are that the assessee an individual had filed his return of income on 28.03.2018 declaring total income of Rs.28,54,570/-. The AO has reopened the assessment for the reason that there was a difference between the sale consideration and guideline value of the property sold which needs to be brought to tax u/s.50C of the Act. The AO has held that the ‘deed of sale’ was registered for consideration of Rs.94,00,000/-but the stamp duty was paid on guideline value of the property as on the date of registration which was valued at Rs.1,93,06,125/-. The AO invoked Section 50C of the Act and made an addition of the differential value between the sale consideration and guideline value i.e. Rs.99,06,125/- and brought to tax. During the course of reassessment, the Assessee has submitted that the Assessee has received consideration through banking channel and the sale deed was registered in pursuance of the prior ‘Agreement to sell’. However, the AO did not agree with contention of the Assessee as according to him the agreement for sale is not registered and as such it does not have legal sanctity. On appeal, the Ld. CIT(A) confirmed the addition u/s.50C of the Act on the same reasoning that since the ‘agreement to sell’ was not registered, the same cannot be relied upon. Further, the Id.CIT(A) has held that the change of unsecured loan to sale destroys the credibility of the transaction. Therefore, Id.CIT(A) was of the view that the consideration received through banking channel cannot be considered as an advance of sale consideration.
3. Aggrieved by the order of the Id.CIT(A) the assessee is in appeal before us. The Ld.AR for the assessee submitted that the Assessee is carrying business in real estate in the name and style ‘Vaibav Foundation’ and the Assessee launched a new lay out in Vaibav Nagar. On 11.07.2013, the Assessee has entered into an ‘Agreement to Sell’ plots in Vaibav Nagar to one Mr.Ravi for a total consideration of Rs.94,00,000/-. The Assessee received consideration of Rs.48,50,000/- through RTGS on 11.07.2013 and Rs.45,00,000/- through RTGS on 23.03.2015. Later, the Assessee has executed a pakka sale deed on 07.03.2017. Before us, the Ld. AR of the assessee relied on the decisions of this Tribunal decision in the case of Ashok Kumar Muraka Vs. ITO [2025] 176 taxmann.com 189 (Chennai-Trib) and Hon’ble Madras High Court decision in the case of [2020] 120 taxmann.com 171 (Madras).
4. Per contra the Ld.DR has argued that the sale agreement entered on 11.07.2013 is not a registered document and therefore, the market value as on the date of registration of property i.e. 07.03.2017 is to be considered for the purpose of Section 50C of the Act. Hence, there is mistake or error in the order of the Id.CIT(A) and prayed for confirming the same by dismissing the appeal of the assessee.
5. We have heard the rival submissions and perused the materials available on record and gone through the orders of authorities along with the judicial precedents relied on. The sole issue arising for our consideration is whether the Assessing Officer was justified in invoking the provisions of section 50C of the Act by adopting the stamp duty value prevailing on the date of registration of the sale deed, despite the fact that the sale consideration had already been fixed under an earlier agreement to sell and the entire sale consideration had been received through banking channels prior to the execution of the registered sale deed.
6. The undisputed facts emerging from the record reveal that the assessee, who is engaged in the business of real estate under the proprietary concern “Vaibav Foundation”, entered into an agreement to sell on 11.07.2013 in respect of the subject property for a total consideration of Rs.94,00,000/-. It is also an admitted position that a sum of Rs.48,50,000/- was received by the assessee through RTGS on the very date of the agreement, i.e., 11.07.2013, and the balance amount of Rs.45,00,000/- was subsequently received through RTGS on 23.03.2015. Thereafter, pursuant to the said agreement, the registered sale deed came to be executed on 07.03.2017.
7. The AO invoked section 50C by adopting the guideline value as on the date of registration amounting to Rs.1,93,06,125/- and consequently made an addition of Rs.99,06,125/- being the difference between the stamp duty value and the actual sale consideration. The Id.CIT(A) confirmed the addition primarily on the reasoning that the agreement to sell was not registered and, therefore, could not be relied upon for extending the benefit of the proviso to section 50C. The appellate authority has further doubted the genuineness of the transaction by observing that the amount initially reflected as unsecured loan was subsequently treated as sale consideration.
8. We are unable to persuade ourselves to concur with the reasoning adopted by the authorities below. The first proviso to section 50C specifically contemplates a situation where the date of the agreement fixing the amount of consideration and the date of registration of the transfer are different. The second proviso prescribes the condition that a part or whole of the consideration should have been received by way of account payee cheque, account payee bank draft or through an electronic clearing system or such other prescribed electronic mode on or before the date of the agreement.
9. In the present case, there is no dispute whatsoever that the consideration was fixed under the agreement dated 11.07.2013. Equally, there is no dispute that substantial consideration was received through RTGS on the very date of the agreement and the remaining consideration was also received through RTGS prior to the execution of the sale deed. Significantly, the registered sale deed itself records that the sale consideration had been paid through RTGS from the purchaser’s Bank of Baroda account to the assessee’s State Bank of India account. Thus, the statutory condition prescribed under the proviso to section 50C stands fully satisfied.
10. The objection of the Revenue that the agreement to sell was not registered, in our considered opinion, is legally untenable. An agreement to sell merely records the contractual obligations between the parties and by itself does not convey title in the immovable property. Unlike a conveyance deed, registration of an agreement to sell is not an indispensable statutory requirement for all purposes under the Transfer of Property Act or the Registration Act. The proviso to section 50C nowhere mandates that the agreement fixing the consideration should necessarily be a registered document. Had the legislature intended to impose such a condition, it would have expressly incorporated the same in the statutory provision. Courts cannot read into the provision a condition which the legislature has consciously omitted.
11. Once the execution of the agreement, the fixation of sale consideration and the receipt of consideration through banking channels stand established from the contemporaneous documentary evidence, the benefit conferred under the proviso cannot be denied merely because the agreement was not registered. The observation of the Id. CIT(A) regarding the amount initially being reflected as an unsecured loan also does not advance the Revenue’s case. The registered sale deed itself acknowledges that the amounts earlier received through banking channels constituted the sale consideration payable under the agreement. The true nature of a transaction has to be gathered from the cumulative documentary evidence and the surrounding circumstances rather than from the nomenclature employed in the books of account at an earlier point of time. In the absence of any material demonstrating that the agreement was sham, fabricated or subsequently created, mere accounting classification cannot override the substantive evidence available on record.
12. Therefore, the assessee has satisfied the condition in the Proviso which mandates that part payment should be made through banking channel. In so far as the allegation of both the lower authorities is concerned that the ‘Agreement to sell’ is unregistered, we note that since the ‘Agreement to sell’ is only an agreement between parties, it is not mandatory to register the same unlike a sale deed which legally conveys the title of the immovable property transferred and therefore a sale deed needs to be registered to transfer the title in favor of the prospective buyer whereas there is no strict legal mandate to register an agreement to sell. Further, we also note that the registered sale deed also records the fact that the consideration was received through RTGS which is as per the Agreement to sell in the earlier date 11.07.2013. Accordingly, in the absence of legal mandate to register an agreement to sell, the action of the lower authorities to deny the benefit of Proviso to Section 50C of the Act because the agreement to sell was unregistered, cannot be sustained.
13. We further find that an identical issue has recently been considered by the Chennai Bench of this Tribunal in the case of Ashok Kumar Muraka /TO [2025] 176 taxmann.com 189 (Chennai-Trib.). Though that decision arose under section 56(2)(vii)(b), the provisos to section 56(2)(vii)(b) and section 50C are identically worded and operate in the same field. It has been categorically held therein that where the consideration was fixed under an earlier agreement and part payment had been received through banking channels before registration, the stamp duty value prevailing on the date of the agreement alone should be adopted for the purpose of the deeming provisions. Since the statutory language in both provisions is pari materia, the ratio laid down therein squarely governs the controversy before us.
“5. We have heard the rival submissions, and perused the materials available on record. The assessee entered into an agreement for sale on 20.10.2011, after having made payment by account payee cheque on 08.10.2009. The consideration was fixed in the agreement dated 20.10.2011. As per the proviso to section 56(2)(vii)(b) of the Act, where the date of the agreement fixing the amount of consideration and the date of registration are not the same, the stamp duty value on the date of the agreement may be considered, provided part of the consideration has been paid by banking channels before the agreement date.
6. In the present case, the assessee has made part payment before the date of the agreement through account payee cheque. This issue has been considered by the ITAT Delhi Bench in the case of Shyamkumar Madhavdas Chugh vs. ACIT (supra), wherein it was held that if the agreement fixing the consideration is prior to the date of registration and part payment has been made through banking channels before the agreement date, then the stamp duty value as on the agreement date must be taken for the purpose of section 56(2)(vii)(b). The relevant observation of the Tribunal in that case is as under:
“10. First proviso to section 56(2)(vii) (b) categorical provides 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 the agreement may be taken for the purpose of this provision. Admittedly, the agreement fixing the consideration was entered into on 21-6-2022 fixing the value of Rs. 1.82 crores and the sale deed was registered on 13-8-2013. Prescription of the second proviso is admittedly fulfilled in the instant case inasmuch as the assessee paid a sum of Rs. 26 lakhs in FY 2010-11 (ie. on 17-6-2010 Le. even before the date of the agreement to sell being 21-6-2022) as part payment through banking channel. In view of the foregoing discussion, the provisions of s. 56(2)(vii)(b) do not apply to the facts of the instant case as it is covered by the first and second provisos inasmuch as the assessee entered into an agreement fixing the amount of consideration for the purchase of the immovable property in the year 2010 but the actual registration took place in 2013 and, further, the assessee paid a part of the consideration by cheque in the year 2010 before the date of the agreement. In such circumstances, we hold that, it is the stamp value on the date of agreement in the year 2010, has to be considered.”
In light of the above discussion, we are of the considered opinion that the A.0 was not justified in adopting the stamp duty value as on the date of registration. We accordingly restore the matter to the file of the Assessing Officer with a direction to verify the stamp duty value as on 20.10.2011 and compute the addition, if any, under section 56(2)(vii)(b) of the Act, in accordance with law. In view of the above, the appeal filed by the assessee is allowed for statistical purposes only.”
14. Apart from the above, another important legal issue arises in the peculiar facts of the present case. The agreement to sell was executed on 11.07.2013, whereas the provisos to section 50C were inserted by the Finance Act, 2016 with effect from 01.04.2017. Thus, the question arises whether the benefit of the provisos can be extended to agreements entered into prior to their insertion where the registered transfer has taken place during the relevant assessment year.
15. This issue is no longer res integra. The Hon’ble jurisdictional High Court in CIT v. Vummudi Amarendran reported in [2020] 120 com 171 (Madras) has categorically held that the provisos to section 50C are curative and beneficial in nature, having been introduced to remove genuine hardship caused to taxpayers due to escalation in guideline values between the date of agreement and the date of registration. Being remedial in character, the benefit of the provisos has been held to apply retrospectively. Respectfully following the binding judgment of the Hon’ble jurisdictional High Court, we hold that the assessee is entitled to invoke the benefit of the provisos notwithstanding the fact that the agreement to sell was entered into prior to the statutory insertion of the provisos.
16. In view of the foregoing discussion and respectfully following the decision of the Chennai Bench of the Tribunal in the case of Ashok Kumar Muraka /TO as well as the binding judgment of the Hon’ble Madras High Court in CIT v. Vummudi Amarendran, we hold that the assessee is entitled to the benefit of the provisos to section 50C of the Act. We further hold that the authorities below were not justified in rejecting the agreement to sell merely on the ground that it was unregistered, particularly when the fixation of sale consideration and receipt of the consideration through banking channels stood duly established by the contemporaneous documentary evidence, including the recitals contained in the registered sale deed itself. Consequently, the adoption of the stamp duty value as on the date of registration for the purpose of section 50C cannot be sustained.
Accordingly, the addition made by the AO u/s.50C of the Act and sustained by the Id.CIT(A) is hereby deleted by allowing the grounds raised by the assessee.
17. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 08th July, 2026 at Chennai.
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