Case Law Details
Sri Ashok Kumar Muraka Vs ITO (ITAT Chennai)
The assessee appealed against the order dated 27.01.2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, arising from the reassessment order passed under Section 147 read with Section 144B of the Income-tax Act, 1961 on 31.03.2022 for Assessment Year 2016-17.
The assessee had filed the return of income on 12.03.2017, declaring total income of ₹5,30,500.
The assessment was reopened on the ground that there was a difference of ₹33,11,285 between the registered value and the market value of an immovable property purchased by the assessee, which, according to the Assessing Officer, was liable to tax under Section 56(2)(vii)(b) of the Act.
The record showed that the assessee made a payment of ₹1,00,000 through an account payee cheque on 08.10.2009 and subsequently entered into an agreement for sale dated 20.10.2011, in which the sale consideration was fixed and the property to be conveyed was identified. The sale deed was later registered for a consideration of ₹9,73,215, whereas the market value on the date of registration was ₹42,84,500. Based on this difference, the Assessing Officer invoked Section 56(2)(vii)(b) and made an addition of ₹16,55,642, which was confirmed by the CIT(A).
Before the Tribunal, the assessee contended that since part consideration had been paid through an account payee cheque before execution of the agreement and the sale consideration had been fixed in the agreement dated 20.10.2011, the stamp duty value prevailing on the date of the agreement should have been adopted while applying Section 56(2)(vii)(b). Reliance was placed on the decisions in R. Hemalatha vs. Kasthuri, Shyamkumar Madhavdas Chugh vs. ACIT, and Sanjay Dattatraya Dapodikar vs. ITO.
The Department submitted that the agreement dated 20.10.2011 was not a registered document and, therefore, the stamp duty value as on the date of registration of the property on 17.07.2015 was required to be adopted for the purposes of Section 56(2)(vii)(b).
The Tribunal examined the first proviso to Section 56(2)(vii)(b) and observed that where the date of the agreement fixing the consideration and the date of registration are different, the stamp duty value as on the date of the agreement may be adopted, provided part of the consideration has been paid through banking channels before the date of the agreement.
The Tribunal noted that, in the present case, the assessee had made part payment through an account payee cheque before the date of the agreement. Referring to the decision of the Delhi Bench of the Tribunal in Shyamkumar Madhavdas Chugh vs. ACIT, the Tribunal observed that where the agreement fixing the consideration precedes registration and part consideration has been paid through banking channels before the agreement date, the stamp duty value as on the agreement date is to be considered for the purposes of Section 56(2)(vii)(b).
Accordingly, the Tribunal held that the Assessing Officer was not justified in adopting the stamp duty value as on the date of registration. It restored the matter to the file of the Assessing Officer with a direction to verify the stamp duty value as on 20.10.2011 and recompute the addition, if any, under Section 56(2)(vii)(b) in accordance with law.
The appeal was allowed for statistical purposes.
Cases Discussed
- R. Hemalatha vs. Kasthuri (SC), Civil Appeal No.2535/2023
- Shyamkumar Madhavdas Chugh vs. ACIT (ITAT Delhi), 158 taxmann.com 513 (ITAT-Del.)
- Sanjay Dattatraya Dapodikar vs. ITO (ITAT Pune), 107 taxmann.com 219 (ITAT-Pune.)
FULL TEXT OF THE ORDER OF ITAT CHENNAI
Aforesaid appeal filed by the assessee for Assessment Year (AY) 2016-17 arises out of the order of Learned Commissioner of Income Tax (NFAC), Delhi [hereinafter “CIT(A)”] dated 27.01.2025 in the matter of assessment framed by the Assessing Officer [AO] u/s. 147 r.w.s 144B of the Income-tax Act,1961 (hereinafter “the Act”) on 31.03.2022.
2. The assessee has filed return of income on 12.03.2017 declaring total income of Rs. 5,30,500/-. The A.O has reopened the assessment for the reason that there was difference between the registered value and market value of the property purchased of Rs. 33,11,285/- which needs to be brought to tax u/s. 56(2)(vii)(b) of the Act. The assessee had booked a Row House and paid by way of account payee cheque on 08.10.2009. The assessee has entered into agreement for sale. The deed of sale was registered for sale consideration was fixed and also property which is to be convened through the agreement for sale. The deed of sale was registered for consideration of Rs. 9,73,215/-and the market value of property as on the date of registration was Rs. 42,84,500/-. Therefore, the A.O invoked Section 56(20(vii)(b) of the Act and made addition of Rs. 16,55,642/-. On appeal, the Ld. CIT(A) confirmed the addition.
3. Before us, the Ld. Authorized Representative (A.R) of the assessee has submitted that the assessee has paid of Rs. 1 Lakh by way account payee cheque on 08.10.2009 and has entered into agreement on 20.10.2011, whereby sale consideration was fixed, therefore the A.O was required to check value as on 20.10.2011 while invoking the provisions of Section 56(2)(vii)(b) of the Act. The Ld. AR has relied on the decisions of Hon’ble Supreme Court in the case of R. Hemalatha vs. Kasthuri in Civil Appeal No.2535/2023 (SC), Shyamkumar Madhavdas Chugh vs. ACIT 158 taxmann.com 513 (ITAT-Del.), Sanjay Dattatraya Dapodikar vs. ITO 107 taxmann.com 219 (ITAT-Pune.).
4. The Ld. Departmental Representative has argued that the sale agreement as on 20.10.2011 is not a registered document and therefore, the market value as on the date of registration of property on 17.07.2015 is to be considered for the purpose of Section 56(2)(vii)(b) of the Act.
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) categorically 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 maybe 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.O 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.
7. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced on 24th day of June, 2025 at Chennai.
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