Arvind Apte Vs ITO (ITAT Mumbai)
Part Payment Through Bank Does the Trick: ITAT Deletes Section 56(2)(vii) Addition Despite 7-Year Gap in Registration
2011 Agreement Saves Buyer from Section 56(2)(vii): ITAT Deletes Addition Based on 2018 Stamp Duty Value
The Mumbai ITAT deleted an addition of ₹22.38 lakh made under Section 56(2)(vii), holding that where substantial payments towards purchase of immovable property were made through banking channels pursuant to an earlier agreement, the assessee was entitled to the benefit of the first and second provisos to Section 56(2)(vii) and the stamp duty value as on the agreement date had to be considered.
The assessee had entered into an agreement to sell on 29.01.2011 for purchase of a property jointly with a family member. Although the sale deed was ultimately registered on 23.02.2018 for a consideration of ₹1 crore, the Stamp Valuation Authority valued the property at about ₹1.44 crore on the date of registration. Based on the difference, the Assessing Officer made an addition of ₹22.38 lakh in the hands of the assessee under Section 56(2)(vii).
Before the Tribunal, the assessee demonstrated that substantial payments had been made through banking channels in 2011, 2012, 2013, 2014 and subsequent years pursuant to the original agreement. It was also pointed out that the stamp duty valuation on the date of the agreement in 2011 was only about ₹58.25 lakh, which was significantly lower than the agreed purchase consideration of ₹1 crore.
The ITAT observed that both the Assessing Officer and the CIT(A) had focused only on the initial cash payment of ₹5,000 and ignored the substantial payments subsequently made through account-payee instruments. Once part consideration had been paid through banking channels in pursuance of the agreement, the assessee became eligible for the protection provided under the provisos to Section 56(2)(vii).
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. This appeal by assessee is directed against the order of learned Commissioner (Appeals) dated 30 July 2025 for assessment year (AY) 2018- 19. Though, the assessee has raised multiple grounds of appeal, however, in our considered view, the substantial grounds of appeal relate to upholding addition under section 56(2)(vii) of Rs. 22,37,967/-.
