Invoking provisions of section 56(2)(vii)(b) unsustainable as civil suit filed before District Judge

D.S.N. Malleswara Rao Vs ITO (ITAT Visakhapatnam)

ITAT Visakhapatnam held that civil suit is filed before the Hon’ble District Judge accordingly the matter is squarely covered as exception as per proviso to section 56(2)(vii)(b) of the act and accordingly, we, hold that there is no case for invoking the provisions of section 56(2)(vii)(b).

Facts- During F.Y., the assessee has purchased the immovable property from Sri Balanagu Prasanna Kumar vide Doc.No.1465/2013 of Amaravathi SRO on 31.10.2013 for a consideration of Rs.50,00,000/-, but the market value of the said property was Rs.1,12,02,000/- as per SRO Amaravathi. Therefore, AO was of the view that the transaction attracts provisions of section 56(2)(vii)(b) of the Act since the purchase price of the property was less than the stamp duty value, hence, issued show cause notice to the assessee as to why the said difference amount of Rs.62.02 lakhs should not be treated as income from other sources. In response to the notice, the assessee filed objection stating that the property in question was purchased as per the agreement entered into by the assessee on 19.03.2007 and the part payment was made in 2009 by cheque.

Notably, the matter was settled by arbitration and by compromise agreement, thus argued that the provisions of section 56(2)(vii)(b) is not applicable in this case. However, AO did not convince with the explanation offered by the assessee, since, the sale deed was presented and executed on 31.10.2013 and possession of the land and poultry farm was handed over on 31.03.2013 relevant to the A.Y.2014-15. The AO also relied on the sale deed and held that the difference amount of Rs.62,02,000/-being the difference between the purchase consideration and the deemed consideration as per the stamp duty required to be brought to tax u/s 56(2)(vii)(b) of the Act and accordingly made the addition.
CIT(A) upheld the order of the AO. Being aggrieved, the present appeal is filed.

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