Siraj Ahmed Jamalbhai Bora Vs ITO (ITAT Mumbai)
Issue in dispute had been directly addressed by the Co-ordinate Bench decision of Ranchi Tribunal which had been rightly relied upon by the ld. AR before us in the case of Bajrang Lal Naredi vs ITO in ITA No. 327/Ran/2018 for A.Y.2014-15 dated 20/01/2020, wherein the stamp duty value on the date of registration of the property on 17/06/2013 for Rs.22,60,000/-, whereas the stamp duty value at the time of agreement entered into in FY 2011-12 was Rs.18,89,350/- as against the actual consideration paid of Rs.9,10,000/-. The ld. AO in that case made an addition u/s. 56(2)(vii)(b) of the Act in the hands of that assessee being a purchaser to the extent of Rs.9,79,350/- (18,89,350 – Rs.9,10,000/-) by applying the proviso to section 56(2)(vii)(b) of the Act. When the matter travelled to Ranchi Tribunal, the Tribunal held as under:-
“6. We have carefully considered the rival submissions on the issue. In the instant appeal, the applicability of Section 56(2)(vii)(b) of the Act as amended by Finance Act, 2013 and applicable to AY 2014-15 in question. On a perusal of pre-amended provisions of Section 56(2)(vii)(b) of the Act, we gather that where an individual or HUF receives from any person any immovable property without consideration, the provisions of pre- amended Section 56(2)(vii)(b) of the Act would apply. The aforesaid provisions was however substituted by Finance Act, 2013 and made applicable to AY 2014-15 onwards. As per the amended provisions, the scope of substituted provision was expanded to cover purchase of immovable property for inadequate consideration as well. It is alleged on behalf of the Revenue that the amended provision will apply in view of the fact that registration has been carried out during the FY 2013-14 concerning AY 2014-15 where the amended law came into force. The assessee, on the other hand, seeks to claim that his case would be covered by pre-amended provision in view of the fact that agreement for purchase of the property was entered into with the prospective seller in FY 2011-12 relevant to AY 2012-13 at which time the new law did not come into play. It was claimed that the purchase consideration was duly paid at the time of agreement in FY 2011-12 and the purchase was de facto completed except for the formality of registration. It was thus submitted that the transactions entered prior to the FY 2013-14 would be governed by the pre-amended provision which triggers the applicability of such provision only where there is a total lack of consideration and does not cover a case of inadequacy in purchase consideration.
7. We find merit in such plea advanced on behalf of the assessee. It is not in dispute that purchase transactions of immovable property were carried out in FY 2011-12 for which full consideration was also parted with the seller. Mere registration at later date would not cover a transaction already executed in the earlier years and substantial obligations have already been discharged and a substantive right has accrued to the assessee therefrom. The pre-amended provisions will thus apply and therefore the Revenue is debarred to cover the transactions where inadequacy in purchase consideration is alleged. We thus find merit in the issue raised on behalf of the assessee. The order of the CIT(A) is accordingly set aside and the AO is directed to delete the additions made under s. 56(2)(vii)(b) of the Act and restore the position claimed by the assessee.”
We find that this Ranchi Tribunal’s decision was confronted with the ld. DR, he could not rebut the same and could not provide any other contrary decision before us at the time of hearing. We find that the facts prevailing in Ranchi’s Tribunal’s case are exactly the same with that of the facts of the instant appeal before us. Hence, the decision rendered thereon would apply mutatis mutandis to the issue in dispute before us. Hence, we have no hesitation to hold that provisions of Section 56(2)(vii)(b) of the Act could not be made applicable in the hands of the assessee for the assessment year under appeal in the peculiar facts and circumstances of the case before us.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal in ITA No.1886/Mum/2019 for A.Y.2014-15 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-55, Mumbai in appeal No.CIT(A)-55/IT-31/ITO(IT) 1(3)(1)/17-18 dated 05/03/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 29/12/2016 by the ld. Income Tax Officer (IT)-1(3)(1), Mumbai (hereinafter referred to as ld. AO).
2. The only issue to be decided in this appeal is that whether the ld. CIT(A) was justified in restricting the addition made u/s.56(2)(vii)(b) of the Act to the extent of 7,06,720/- as against Rs.1,83,87,700/- made by the ld. AO in the facts and circumstances of the case.
3. We have considered rival submissions and perused the materials available on record. We find that assessee is a non-resident individual deriving income from house property, capital gains and other sources. The return of income for the A.Y.2014-15 was filed by the assessee on 02/03/2015 declaring total income of Rs.12,13,800/-. We find that the ld. AO had observed that the assessee had entered into agreements for purchase of two flats viz., 702 & 703 vide agreements dated 28/02/2014 and 07/03/2014 for consideration of Rs.80 lakhs and Rs.42,99,600/-respectively, the value of which adopted by the stamp duty authority was Rs.177,27,800/- and Rs.129,39,500/- respectively. Accordingly, the ld. AO raised a query as to why the provisions of Section 56(2)(vii)(b) of the Act be not invoked in the hands of the assessee for taxing the differential sums thereon.
3.1. We find that the assessee had replied that the agreement for purchase of flats was entered in F.Y.2007-08 for which the properties were registered in A.Y.2014-15. It was also submitted by the assessee that during the F.Y.2007-08 relevant to A.Y.2008-09, the provisions of Section 56(2)(vii)(b) were not in the statute and hence, no addition could be made for the year under appeal applying such provision as the agreement was entered earlier. We find that the ld. AO completely disregarded this primary contention of the assessee and proceeded to tax the differential sum of consideration of Rs.183,87,100/- u/s.56(2)(vii)(b) in the assessment. We find that the assessee had actually paid an amount of Rs.42,99,600/- and Rs.80 lakhs for flat No.702 & 703 respectively to M/s. Perfect Constructions (Builder) for flats at ground height building, near new link road, Lokhandwala, Andheri (W), Mumbai – 400 053. It was also submitted that originally the assessee proposed to buy flat Nos.1101 and 1102 in the same property which was later changed to flat Nos. 702 & 703 as per the letter submitted by M/s. Perfect Construction dated 17/12/2016. The assessee had submitted stamped receipts for first payment made to M/s. Perfect Construction for flat No.1101 dated 05/02/2008 and flat No.1102 dated 24/03/2007 for Rs.10,04,128/- and Rs.2,63,808/- respectively. The ld. AO issued summons u/s.131 of the Act dated 15/12/2016 to M/s. Perfect Constructions (builder) to produce copy of agreement for flat No.1101 and 1102. M/s. Perfect Construction (builder) vide their reply dated 17/12/2016 did not submit copy of the agreement but stated that in F.Y.2007-08, the assessee had shown his interest in booking Flat No.1101 and 1102 which was later changed to Flat No.702 & 703 respectively. The ld. AO again issued one more summon u/s.131 of the Act to M/s. Perfect Constructions on 26/12/2016 to produce the receipt of payments against the flats, copy of registration and allotment letter.
3.2. In response to the said summons, M.s Perfect Constructions filed a letter dated 26/12/2016 confirming the transactions made with the assessee. The copy of the said letter is reproduced herein for the sake of convenience:-
“With reference to above, we have to submit as under:
We hereby confirm that Mr. Sirajahmed Jamalbhai Bora has looked two flats no.1101 and 1102 which were subsequently changed to flat no,703 and 702 as follows:
