Naseem Ayub Shaikh Vs MUM-W-(201)(92) (ITAT Mumbai)
Summary: The Mumbai Bench of the Income Tax Appellate Tribunal allowed the assessee’s appeal for statistical purposes against the order dated 18.03.2026 of the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi, for Assessment Year 2017-18, which had sustained an addition of Rs.33,28,500/- under section 56(2)(vii)(b) of the Income-tax Act, 1961. The assessee and a co-owner purchased Flats Nos. 701 and 702 in Crescent Exotica, Marol, Andheri East, Mumbai, under registered agreements executed on 30.04.2016 for aggregate consideration of Rs.84,25,000/-, whereas the stamp-duty value was Rs.1,50,82,000/-. The Assessing Officer treated the difference of Rs.66,57,000/- as taxable and, considering equal ownership, brought 50%, i.e. Rs.33,28,500/-, to tax in the assessee’s hands. The assessee contended that the flats had been allotted on 30.03.2011 for Rs.36,50,000/- and Rs.47,75,000/– respectively and that substantial payments had been made through banking channels, and therefore the stamp-duty value prevailing on the date on which the consideration was agreed should be adopted under the proviso to section 56(2)(vii)(b). The Tribunal, relying upon Parth Dashrath Gandhi Vs Addl./Deputy/Asst. Commissioner of Income Tax (ITAT Mumbai), ITA No. 1990/Mum/2022, AY 2018-19, held that an allotment letter issued by a developer cannot be rejected merely because it is styled as an allotment letter, and that its substance must be examined to determine whether it constituted an agreement fixing consideration and whether the statutory conditions were fulfilled. Since the Assessing Officer had not examined the terms and contents of the allotment letters, whether the consideration was finally and unconditionally fixed, the actual payments and their banking modes and dates, or the stamp-duty value as on 30.03.2011, the Tribunal considered verification necessary. It therefore set aside the CIT(A)’s order and restored the issue to the Assessing Officer for fresh adjudication, directing that if the allotment letters constituted an agreement fixing consideration and the prescribed payment condition was satisfied, the stamp-duty value applicable on the date of such agreement should be considered and the taxable difference, if any, recomputed in accordance with law. The assessee was also to be afforded adequate opportunity to produce relevant evidence and be heard. The appeal was accordingly allowed for statistical purposes.
Allotment Letter Can Be “Agreement” for Section 56 Valuation: Mumbai ITAT Restores ₹33.28 Lakh Addition for Verification
The Mumbai ITAT held that a developer’s allotment letter can constitute an agreement fixing the sale consideration for applying the proviso to Section 56(2)(vii)(b). The assessee’s claim could not be rejected merely because the document was styled as an allotment letter and was not a registered agreement.
The assessee and a co-owner purchased Flats Nos. 701 and 702 in Crescent Exotica, Mumbai. Although the registered agreements were executed on 30 April 2016 for an aggregate consideration of ₹84.25 lakh, the stamp-duty value on that date was ₹1.51 crore. The AO taxed 50% of the difference, amounting to ₹33.28 lakh, in the assessee’s hands under Section 56(2)(vii)(b).
The assessee contended that the flats had already been allotted on 30 March 2011 for fixed consideration of ₹36.50 lakh and ₹47.75 lakh, respectively, and that substantial payments had been made through banking channels pursuant to the allotment. Therefore, the stamp-duty value prevailing on the allotment date should be adopted under the statutory proviso.
The CIT(A) rejected the contention, holding that the allotment letter was not a legally enforceable agreement and that only the registered agreements dated 30 April 2016 were relevant.
Following Parth Dashrath Gandhi v. Addl. CIT, the Tribunal held that an allotment letter issued by a developer may be treated as an agreement to sell for the purpose of Section 56. What matters is the substance of the document—whether it identifies the property, finally fixes the consideration and creates a concluded arrangement between the parties.
The allotment letters in the present case specifically identified the two flats and recorded their respective consideration. However, the AO had not examined the relevant bank records, dates and modes of payment, terms of allotment, or stamp-duty value prevailing on 30 March 2011.
The Tribunal therefore restored the matter to the AO to verify whether the allotment letters conclusively fixed the consideration and whether part or whole of the consideration was paid through the prescribed banking modes on or before the relevant date. If these conditions are satisfied, the AO must adopt the stamp-duty value as on 30 March 2011 and recompute the taxable difference, if any.
List of Cases Discussed / Relied Upon
- Parth Dashrath Gandhi Vs Addl./Deputy/Asst. Commissioner of Income Tax, ITA No. 1990/Mum/2022, AY 2018-19 — relied upon for holding that an allotment letter issued by a developer may be considered an agreement for applying the proviso to section 56(2)(vii)(b), subject to fulfilment of the statutory conditions.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against the order dated 18.03.2026 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [in short, “the learned CIT(A)”] for Assessment Year 2017-18, whereby the addition of Rs.33,28,500/- made under section 56(2)(vii)(b) of the Income-tax Act, 1961 [in short, “the Act”] has been sustained. The grounds raised are reproduced as under:
1. The learned CIT(A) erred in confirming the addition of 33,28,500 without appreciating the facts and evidence on record.
2. Failure to Apply Statutory Proviso: The learned CIT(A) erred in upholding the action of the Assessing Officer in invoking section 56(2)(vii)(b). The Ld, CIT(A) failed to appreciate that the provisos to Section 56(2)(vii)(b) are mandatory in nature, having satisfied the condition of payment via barking channels on or before the date of allotment, the Appellant was entitled by law to the valuation as of the agreement date.
3. Wrongful Rejection of Allotment Letter: The learned CIT(A) erred in holding that the allotment letter dated 30.03.2011 does not constitute an agreement fixing consideration and is not an “agreement,” As per settled law, a document fixing price and unit number, supported by around 50% payment, is a binding contract.
4. Ignorance of Banking Evidence: The learned CIT(A) failed to appreciate that substantial payments were made through banking channels prior to and around the agreement date. The Ld. CIT(A) erred in claiming a lack of cogent evidence” despite the Appellant providing Saraswat Bank pass books and also State Bank of India, Pass Book along with coples of Receipt issued by Swift Developers towards payment made confirming the 2011 transactions.
5. Equitable Ground (Non-Possession): The Appellant lacks possession and is in litigation pending in Bombay High Court. Taxing a “perceived benefit” in 2016 for a property not delivered even in 2026 which please take note of this fact.”
2. Briefly stated, facts of the case are that the assessee filed original return of income for the year under consideration declaring total income at Rs. 4,84,130/-. The assessee, along with a co-owner, purchased Flats Nos. 701 and 702, Crescent Exotica, Marol, Andheri East, Mumbai, under registered agreements executed on 30.04.2016, for aggregate consideration of Rs.84,25,000/-, whereas the stamp-duty value was determined at Rs.1,50,82,000/-. The Assessing Officer accordingly computed the difference at Rs.66,57,000/- and, having regard to the equal ownership, brought 50% thereof, i.e. Rs.33,28,500/-, to tax in the hands of the assessee under section 56(2)(vii)(b) of the Act.
2.1 Before the Assessing officer the assessee submitted that the flats had been allotted on 30.03.2011 at the agreed consideration of Rs.36,50,000/- and Rs.47,75,000/– respectively and that substantial payments had already been made through banking channels pursuant thereto. It was, therefore, contended that, in terms of the proviso to section 56(2)(vii)(b), the stamp-duty value prevailing on the date on which the consideration was agreed should be adopted. The Assessing Officer, however, did not accept the allotment letter as an agreement for this purpose and adopted the stamp-duty value applicable to the registered agreements.
3. The learned CIT(A) affirmed the action of the Assessing Officer principally on the reasoning that the allotment letter dated 30.03.2011 did not constitute a legally enforceable agreement and that the assessee had not established compliance with the conditions prescribed in the proviso to section 56(2)(vii)(b). The relevant finding of the learned CIT(A) is reproduced as under:
7. I have carefully considered the assessment order, the grounds of appeal, the written submissions of the appellant and the material available on record. The sole issue involved in the present appeal relates to the addition of 33,28,500/- made by the Ld. Assessing Officer under section 56(2)(vii)(b) of the Act on account of the difference between the stamp duty value and the consideration paid for the purchase of two flats.
8. It is observed that the appellant along with another co-owner had purchased two flats bearing No.701 and 702 in Crescent Exotica, Andheri (East), Mumbai during the relevant previous year for a total consideration of 84,25,000/-. However, the stamp duty valuation of the said properties as adopted by the Stamp Valuation Authority was 1,50,82,000/-. Thus, the difference between the stamp duty value and the actual consideration amounted to 66,57,000/-. Since the properties were jointly owned, the Ld. Assessing Officer brought to tax 50% of the difference, i.e., 33,28,500/- in the hands of the appellant under section 56(2)(vii)(b) of the Act.
9. The appellant has contended that the flats were originally booked on the basis of allotment letters dated 30.03.2011 and therefore the value prevailing as on that date should be considered for the purposes of section 56(2) (vii) (b). However, it is noted from the records that the registered agreements for the flats were executed only on 30.04.2016 and the transfer of the immovable properties was completed during the year relevant to the assessment year under consideration. The allotment letter relied upon by the appellant does not constitute a legally enforceable agreement transferring rights in the immovable property and therefore cannot substitute the registered agreement for the purposes of determining the date of transfer or valuation.
10. Further, the proviso to section 56(2)(vii) (b) applies only where the date of agreement fixing the amount of consideration and the date of registration are different and part or whole of the consideration has been paid by account payee cheque, bank draft or through electronic clearing system on or before the date of agreement. In the present case, the appellant has not been able to establish through cogent documentary evidence that the conditions prescribed under the proviso were satisfied so as to adopt the stamp duty value as on the alleged date of allotment. The Ld. Assessing Officer has therefore rightly considered the stamp duty valuation as on the date of registration of the agreement.
11. The judicial precedents relied upon by the appellant have been considered. However, the facts of the present case are distinguishable as the appellant has not demonstrated that a binding agreement fixing the consideration existed on the earlier date with adequate documentary support satisfying the statutory conditions. Accordingly, the reliance placed on the said decisions does not advance the case of the appellant.
12. In view of the above facts and circumstances, it is held that the Ld. Assessing Officer has correctly invoked the provisions of section 56(2)(vii)(b) of the Act and brought to tax the difference between the stamp duty value and the actual consideration in the hands of the appellant in proportion to his ownership. No infirmity is found in the order of the Ld. Assessing Officer in making the addition of 33,28,500/-.”
4. We have heard the rival submissions and perused the material available on record. The controversy before us is confined to the date relevant for determining the stamp-duty value under the proviso to section 56(2)(vii)(b). The assessee relies upon the allotment letters dated 30.03.2011, whereas the Revenue proceeds on the basis of the registered agreements dated 30.04.2016.
4.1 For this purpose, reference is invited to the decision of the Co-ordinate Bench of the Mumbai Tribunal in the case of Parth Dashrath Gandhi Vs Addl CIT in ITA No. 1990/Mum/2022 for AY 2018-19, wherein it has been clearly held that the allotment letter issued by the developer has to be considered as an agreement as far as proviso to Section 56(2)(vii)(b) of the Act is concerned. The relevant finding of the Tribunal is reproduced as under:
Accordingly, following the above said decision, we hold that the respective allotment letters issued to the assessee should be considered as “Agreement to sell” for the purposes of sec.56(2)(x) of the Act. Since the assessee has paid the parts of consideration as per the terms and conditions of allotment through banking channels prior to the execution of Sale agreement, we are of the view that the provisos to sec.56(2)(x) shall apply to the facts of the present case. Accordingly, the stamp duty valuation as on the date of respective Allotment letters should be considered for the purposes of sec.56(2)(x) of the Act. Hence the AO was not justified in considering the stamp duty valuation as on the date of execution of agreement to sell.
4.2 Thus, an allotment letter issued by a developer is sufficient evidence of an agreement fixing the consideration for purposes of the proviso to section 56(2)(vii)(b). We find that the assessee’s claim cannot be rejected merely on the ground that the document relied upon is styled as an “allotment letter”. What is material is its substance, namely, whether on 30.03.2011 there was a concluded arrangement between the parties fixing the consideration for the identified flats and whether the statutory conditions attached to the proviso were fulfilled.
4.3 In the present case, the allotment letters dated 30.03.2011 admittedly identify Flats Nos. 701 and 702 and record the respective consideration of Rs.36,50,000/- and Rs.47,75,000/-. The assessee has also claimed that substantial payments were made to the developer through banking channels on or before and around the said date. The Assessing Officer, however, has not examined the claim with reference to the relevant bank records and the stamp-duty value prevailing on 30.03.2011. Instead, the claim has been rejected principally on the ground that there was no registered agreement on that date.
4.4 In our considered view, the question whether the conditions prescribed therein stand satisfied, requires examination with reference to the documents forming part of the record. In particular, the Assessing Officer is required to verify: (i) the terms and contents of the allotment letters dated 30.03.2011; (ii) whether the consideration for each flat stood finally and unconditionally fixed on that date; (iii) the actual payments made by the assessee/co-owner to the developer and the mode and dates thereof; and (iv) the stamp-duty value of the respective properties as on 30.03.2011.
4.5 If, upon such verification, it is found that the allotment letters constituted an agreement fixing the consideration and that the prescribed payment condition was satisfied, the stamp-duty value as applicable on the date of such agreement shall be considered in accordance with the proviso to section 56(2)(vii)(b). The Assessing Officer shall thereafter recompute the taxable difference, if any, in accordance with law. Needless to say, the assessee shall be afforded adequate opportunity of producing the relevant evidence and of being heard.
4.6 In view of the foregoing, the order of the learned CIT(A) is set aside and the issue is restored to the file of the Assessing Officer for fresh adjudication in the above terms. The grounds raised by the assessee are allowed for statistical purposes.
5. In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 24/08/2026.
