Shri Vardhman Stanakwasi Shrawak Sangh Vs ITO (ITAT Mumbai)
Registration in 2018 Cannot Rewrite a Property Deal Concluded in 2001: Allotment Date & Cheque Payment Govern Section 56(2)(x)
The Mumbai Bench of the ITAT has held that where an immovable property was allotted and part of the purchase consideration was paid through banking channels in 2001, the subsequent registration of the conveyance deed in 2018 would not justify adopting the stamp-duty value prevailing on the date of registration for making an addition u/s 56(2)(x). The applicable stamp-duty value was the value prevailing on the date of the original allotment and payment. Since that value was lower than the agreed purchase consideration, the Tribunal deleted the addition of ₹1,42,89,204.
The assessee, Shri Vardhman Stanakwasi Shrawak Sangh, was a charitable and religious trust registered u/s 12A. It filed its return for AY 2018-19 declaring nil income. The case was selected for scrutiny because information available from the registered conveyance deed showed a substantial difference between the purchase consideration and the stamp-duty value of an immovable property.
The property involved was Flat No. 201, Building No. 65, Yogi Nagar, Borivali West, Mumbai. The conveyance deed was registered on 31-03-2018, recording a purchase consideration of ₹38,94,296. However, the assessee explained that the transaction had actually commenced and substantially concluded many years earlier.
According to the assessee, the flat was booked with the developer, Vijaynagar Corporation, in April 2001. An allotment letter dated 27-04-2001 was issued and an advance of ₹11 lakh was paid by cheque dated 24-04-2001 drawn on the assessee’s account with Dena Bank. The balance consideration was paid in instalments during the period from 2001 to 2005. Possession was also obtained long before registration, and the trust had been using the premises for its charitable activities. Electricity, water, gas and property-tax records were produced to substantiate its continuous possession and enjoyment of the property.
The AO rejected the explanation primarily on the ground that the assessee’s PAN showed its date of incorporation as 01-04-2002, while its registration u/s 12A was granted only in 2004. According to the AO, the trust could not have entered into the transaction or paid ₹11 lakh in April 2001, before the date of its supposed incorporation. He consequently treated the registration executed in March 2018 as the relevant transaction and added the difference of ₹1.42 crore between the 2018 stamp-duty value and the stated consideration u/s 56(2)(x)(b).
Before the CIT(A), the assessee explained that the trust was actually constituted through a resolution passed by its executive committee on 25-06-2000. Its bank account with Dena Bank had been opened in its own name on 28-09-2000. It also produced an affidavit of a trustee confirming these facts. Nevertheless, the CIT(A) held that an allotment letter could not be equated with an agreement for sale and that the utility bills did not conclusively answer the question of the trust’s existence in 2001. The addition was accordingly confirmed.
Before the ITAT, the assessee contended that the date mentioned in the PAN was not conclusive of its actual date of formation. The contemporaneous bank records, executive committee resolution, affidavit, allotment letter and cheque payment demonstrated that the trust was very much in existence in 2000-01.
The Tribunal accepted this contention. It observed that neither the AO nor the CIT(A) had found the trustee’s affidavit to be false or fictitious. No independent inquiry had been conducted to disprove its contents. More importantly, the Dena Bank passbook showed that an account had been opened in the assessee’s name on 28-09-2000. These contemporaneous records established the existence of the trust before 01-04-2002. The date subsequently entered in the PAN database could not, by itself, override the evidence on record.
The payment of ₹11 lakh through cheque in April 2001 was also confirmed by the developer. It was, therefore, an undisputed banking transaction made towards booking the property before its eventual registration.
The Tribunal then examined the two provisos to section 56(2)(x). The first proviso provides that where the date of the agreement fixing the consideration and the date of registration are different, the stamp-duty value prevailing on the date of agreement may be adopted. The second proviso makes this benefit available where the consideration, or a part thereof, was paid through the prescribed banking modes on or before the date of agreement.
Both conditions were satisfied in the present case. The allotment letter fixed the property and its consideration, while ₹11 lakh was paid by account-payee cheque in April 2001. Therefore, the relevant date for comparison under section 56(2)(x) was the date of allotment and not the date on which the conveyance deed was formally registered seventeen years later.
The ITAT followed the principle laid down in Sajjan Raj Mehta v. ITO and Pinstripe Properties Pvt. Ltd. v. DCIT, wherein allotment letters coupled with payment through banking channels were treated as agreements for the purposes of the proviso to section 56(2)(x). Registration merely completed the conveyancing process; it did not create a fresh bargain at the market value prevailing on that later date.
The ready-reckoner value of the property as on 27-04-2001 was stated to be ₹32,94,198, whereas the assessee had agreed to pay ₹38,94,296. Since the actual consideration was higher than the contemporaneous stamp-duty value, there was no positive difference capable of being taxed u/s 56(2)(x).
The AO was accordingly directed to delete the addition of ₹1.42 crore. Since relief was granted on this ground, the alternative contention that section 56(2)(x) was inapplicable to a trust registered u/s 12A was left open and was not adjudicated.
Author’s Comments
The ruling correctly prevents taxation of an artificial difference created solely by delayed registration. Where the price was fixed, a substantial payment was made through banking channels and possession followed under an earlier allotment, the transaction cannot be valued as though it originated only on the date of the subsequent conveyance.
The decision is also useful on evidentiary principles. A date appearing in the PAN database is not necessarily conclusive of an association’s actual formation, particularly when earlier resolutions, bank records & third-party confirmations establish its existence. Above all, an allotment letter supported by contemporaneous banking payment can qualify as the relevant agreement for applying the provisos to section 56(2)(x). Registration may perfect the legal title, but it cannot erase the commercial transaction that had already taken place years earlier.
Cases Discussed
- Shri Sajjan Raj Mehta v. Income-tax Officer, ITA No. 56/Mum/2021 (ITAT Mumbai) — The Tribunal relied on this decision for the principle that advance payment through banking channels can qualify the assessee for the benefit of the proviso to section 56(2)(x).
- M/s. Pinstripe Properties Private Limited v. DCIT, ITA No. 3756/Mum/2024 (ITAT Mumbai) — The Tribunal followed this decision in holding that an allotment letter, supported by part payment through banking channels before registration, can be treated as the relevant agreement for applying the proviso to section 56(2)(x), making the stamp-duty value on the allotment/agreement date relevant.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal has been filed by the Assessee against the order under section 250 of the Income-tax Act, 1961 ( in short “the Act”) passed by the learned Commissioner of Income-tax (Appeals), dated 12th January, 2026, for the assessment year 2018-19, arising out of the assessment order under section 143(3) of the Act dated 01-02- 2021.
2. The assessee has raised the following grounds of appeal:
1. On facts and circumstances of the case and position in law, the learned Commissioner of Income-tax (Appeals) – NFAC, New Delhi („CIT(A)‟) erred in upholding the action of learned Faceless Assessing Officer – National Faceless Assessment Centre, New Delhi („AO‟) in making addition of Rs. 1,42,89,204/- to the total income under section 56(2)(x) of the Income-tax Act, 1961;
2. On facts and circumstances of the case and position in law, the learned CIT(A) failed to appreciate that in view of first and second proviso to section 56(2)(x), the relevant date for comparison of agreement value and stamp duty value was the date of allotment of the immoveable property and not the date of registration;
3. The appellant submits that the immoveable property was purchased on 27/04/2001 and that the appellant was already in possession of the property and therefore, there was no „receipt‟ of immoveable property during the year under consideration, therefore, the provisions of section 56(2)(x) had no application during the year under consideration;
4. The above grounds of appeal are without prejudice to one another and the appellant craves leave to add, alter, amend, delete or modify any of the above grounds of appeal.
3. The brief relevant facts of the case are; that the Assessee is a trust engaged in charitable/religious activities and registered under section 12A of the Act vide registration order dated 24.06.2004/24.03.2004 bearing Registration No.TR-38344, filed its return of income for the assessment year 2018-19 declaring total income at Rs. Nil. Subsequently, the case was selected for scrutiny assessment vide notice under section 143(2) of the Act dated 22nd September, 2019 for the issue of difference in stamp duty value and purchase consideration found from registered purchase deed of an immovable property took place on 29th March, 2018. The assessee has acquired an immovable property, flat No. 201, Building No. 65, Yogi Nagar, Borivali West, Mumbai, for purchase consideration of ₹38,94,296/- in the FY 2001-02 and registration of deed took place in current year. Before the Assessing Officer, it was submitted that the assessee trust had purchased the said immovable property for ₹38,94,296/- from the seller M/s Vijaynagar Corporation, Mumbai on 24-04-2001 through advance payment of ₹11,00,000/- by cheque No. 38281 drawn on Dena Bank account No. 18056 of the assessee, being booking amount and balance amount of purchase consideration was also during 2001-2005 period, taken the possession of property paid commenced utilization of that with electricity connection etc in its name.
4. The copy of the allotment letter dated 27th April, 2001, issued by the developer, Vijaynagar Corporation, Dena Bank pass book cover page, registered sale deed dated 31st March, 2018 containing the payment of ₹38,94,296/- placed before the Assessing Officer for examination and verification of facts.
5. The Assessing Officer rejected the contention of the Assessee regarding the advance payment of ₹11,00,000/- to the developer on 24th April, 2001, for the reason that, registration u/s 12A was granted in 2004, the date of incorporation of an institution appearing on the PAN card was 1st April, 2002, thus, it could not possible to made payments prior to incorporation and rejected the contention of purchase of property in FY 2001-02, accordingly, made an addition under section 56(2) (x)(b) of the Act of Rs. 1,42,89,204/- being difference between stamp duty value and purchase consideration paid for aforesaid purchase.
6. Aggrieved by the order of the Assessing Officer, the Assessee preferred an appeal before the Ld. Commissioner of Income-tax (Appeals) on 25th February, 2021, where contended that impugned property was purchased through booking on 27-04-2001, through the allotment letter with advance payments of Rs 11,00,000/- by cheque of bank account of assessee, with further installments upto 2005. It was also placed on record that formation of the trust carried out in executive committee meeting held on 25-06-2000 that was the date of existence of trust, following that bank account no. 091110011428 with the then Dena Bank, Yogi Nagar Branch, Boriwali, opened on 28-06-2000. The property was in continuous possession of assessee from 2001 and utilizing for charitable activities with Electricity, water connection etc in its name, the copy of bills of utility services were also produced. The Commissioner Income tax, appeals also doubted that how appellant trust entered into agreement for purchase of an immovable property before its incorporation, when there was no legal existence of trust. The mere date of incorporation mentioned in the PAN alone cannot be basis for denial of its existence, however, other material documents like bank statement, affidavit of the trust member etc also proved that it was in existence prior to that date. However, the CIT (appeals) did not endorse its contention, and observed that no agreement to sale between the seller and assessee was executed in 2001, allotment letter could not be treated as an agreement to sale of an impugned property and utility bills furnished by the Assessee to prove its continuous possession and enjoyment of property, were also not found in support to the foundational question of its existence in year 2001. Accordingly, confirmed addition under section 56(2) (x)(b) of Rs 1,42,89,204/- vide order dated 12th January, 2026.
7. Now, the Assessee before Tribunal and submitted various documents, namely, the allotment letter dated 27th April, 2001 issued by the developer, the bank account passbook containing the date of opening of the bank account i.e. 28-09-2000 with Dena Bank, in the name of the Assessee itself. Apart from that he also raised legal issue that in terms of first and second proviso to section 56(2)(x), the date of comparison for finding the difference between stamp duty value and purchase consideration, the date of allotment is relevant, not the date of registration of sale deed.
8. The Ld. AR further contented that date of allotment letter for purchase of property would be considered as date of acquisition, in support of that he relied upon judgments of the coordinate Benches of the ITAT, Mumbai, wherein, it is held that where an allotment letter is issued and consideration is paid through banking channels prior to the date of registration, for the purpose of the determination of deemed income under section 56(2)(x) of the Act, the stamp duty value of the property as on the date of allotment/agreement and payment of advance through banking channel, is relevant, not the subsequent date of registration of the conveyance deed. Here in the case advance payment of Rs. 11,00,000/- paid through cheque no. 18056 of the Dena Bank to seller in FY 2001-02 and as per the ready reckoner stamp duty value as on 27-04-2001 was Rs 32,94,198/-, which was lower than actual purchase consideration of Rs 38,94,296/- paid by assessee, resulting in no addition u/s 56(2)(x) of the Act on that account was warranted for computation of deemed income. The another ground of appeal being legal that, the 12A registered charitable institution are out of the applicability of provisions of section 56(2)(x) of the Act.
9. The AR placed reliance on the order of Co-ordinate Bench of the Tribunal dated 5th September, 2022, in the case of Shri Sajjan Raj Mehta v. Income-tax Officer, ITA No. 56/Mum/2021, wherein the Tribunal has held that in cases where assessee has made advance payments through banking channel, is entitled to the benefit of the proviso to section 56(2)(x)(b) of the Act.
10. It is further submitted that the trust was formed in pursuance of a General Body Resolution dated 25th June, 2000 and, in support thereof, placed on record an affidavit dated 23rd January, 2021 of the trustee, Shri Kishore Durlabhji Ghatani, affirming the said facts.
11. Apart from the above, assessee also submitted property tax payment receipts, water, electricity and gas bills relatable to the property since 2003 and a copy of the passbook containing the name of the account holder and showing that the bank account was opened on 28th September, 2000. Further, contended that the trust had taken possession of the property in 2003 and relied upon the contemporaneous documents in evidence to support its possession over the property from 2003-04.
12. The Ld. AR of the Assessee also raised legal ground the provisions of section 56(2)(x) are not applicable on trust registered under section 12A of the Act, in respect of acquisition of immovable property are not applicable. The assessee placed reliance on the ITAT, Indore Bench, order in the case of Shri Sai Samarpan Trust v. ITO, (2018)94 Taxmann.com 346 (ITAT Indore), and the judgment of the Hon’ble Karnataka High Court in the case of DIT (Exemption) v. Sri Belimatha Mahasamsthana Samsthana Mutt, for the proposition that the assets of a trust registered under section 12A cannot be brought to tax under section 56 of the Act.
13. Per contra, the Ld. DR heavily placed reliance on the orders of the lower authorities and stated that, as on the date of advance payment of ₹11,00,000/- by the Assessee, the Assessee could not have existed for the reason that its date of incorporation was 1st April, 2002, as appearing on the PAN.
14. The issues before us for the adjudication are; whether, on the date of advance payment of ₹11,00,000/- by the assessee to seller on 27-04-2001, the Assessee was in existence or not; whether the payments for purchase of the immovable property were made prior to the date of registration of the sale agreement/conveyance by the Assessee or not; and whether the provisions of section 56(2)(x) of the Act are applicable to a trust registered under section 12A of the Act.
15. We have considered the rival submissions, perused the material on record, considering the decisions relied upon by the Assessee, observed that assessee was formally constituted through passing of a resolution dated 25th June, 2000 by the executive committee members in their meeting, however, did not executed formal deed and obtained PAN at that time. In support to that a duly sworn affidavit dated 23rd January, 2021 of trustee, Shri Kishore Durlabhji Ghatani, placed before the Assessing Officer and CIT(Appeals). It is noticed that neither the Assessing Officer nor the CIT(A) has raised any doubt regarding the contents of the affidavit or found that fictitious. Contrary to that, date of incorporation 01-04-2002 as mentioned in the PAN is considered as its date of existence, however, the bank passbook containing the date of opening of bank account as 28-09-2000 proved otherwise with the existence prior to date mentioned in PAN, the name of the Assessee thereupon proves that it was in existence prior to the date of incorporation, i.e., 1st April, 2002. The date appearing on the PAN cannot, by itself, deny the existence of the trust prior thereto.
16. That there is an undisputed fact that advance payment of ₹11,00,000/- for booking of the flat at Mumbai on 24th April, 2001, further, confirmed by the seller, Vijaynagar Corporation. As the assessing officer has neither rejected that fact nor carried out any independent enquiry for verification of averment of the affidavit to prove otherwise.
17. In view of these undisputed facts of existence of trust prior to 01-04-2002, banking transactions carried out prior to that date, we are of the opinion that it was in existence.
As we are satisfied about its existence prior to 1st April, 2002, the advance payment of ₹11,00,000/- transferred through banking channel to the seller, Vijaynagar Corporation, also satisfies the condition of the proviso to section 56(2)(x) for the purpose of adoption of the stamp duty value of FY 2001-2002 of the flat for determination of difference in value for computation of deemed income. The proviso to section 56(2)(x) of the Act is mentioned hereunder:
Where any person receives, in any previous year from any person or persons on or after the 1st day of April, 2017
(a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum,
(b) any immovable property
(A) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property, (4) for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely
(i) the amount of fifty thousand rupees, and
(ii) the amount equal to ten per cent of the consideration:
Provided 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 agreement may be taken for the purposes of this sub-clause: Provided further that the provisions of the first proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed28, on or before the date of agreement for transfer of such immovable property.”
18. The first proviso to section 56(2)(x) of the Act provides that where the date of the 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 may be taken. However, the second proviso contemplates that the stamp duty value on the date of agreement may be taken only in a case where the payment or advance payment was paid by the purchaser through an account payee cheque or bank draft or through electronic clearing system.
19. In the present case, the Assessee made advance payment of ₹11,00,000/- on 24th April, 2001 through cheque No. 38281 of Dena Bank, Account No. 18056. The Assessee has demonstrated the payment through the bank by way of confirmation of receipt issued by the seller, Vijaynagar Corporation.
20. The assessee placed reliance on the order of the ITAT, Mumbai Bench, in the case of M/s. Pinstripe Properties Private Limited v. DCIT, ITA No. 3756/Mum/2024, wherein, held that where the assessee had paid part of the purchase consideration for acquisition of a flat as per the terms of allotment and the payment was made through banking channels prior to execution of the sale agreement, the proviso to section 56(2)(x) should apply and no addition could be made to the assessee’s income by adopting the stamp duty value of the property on the date of registration of the sale deed. The relevant findings of the Tribunal are extracted hereunder:
“5. Heard both the sides and perused the material on record. During the course of assessment, the assessing officer noticed that assessee had purchased flat no. 204, B-Wing, “Insignia” building situated at Kalina, Santacruz (E), Mumbai for a consideration of Rs. 1,79,94,452/-. However, the value of the said property as per the stamp duty was determined at Rs. 2,73,41,000/-. Therefore, the assessing officer has added difference of Rs. 93,46,548/- in the total income of the assessee after applying the provisions of section 56(2)(x) of the Act. The assessee has submitted the copies of allotment letter of flat no. 1601 & 1701 dated 18.03.2011 wherein it is categorically stated that said flat has been allotted to the assessee and the assessee had paid Rs. 25,00,000/-. The assessee has also referred the allotment letter issued on 26.04.2016 placed in the paper book filed before us. We have perused the said allotment letter wherein it is specifically incorporated that due to change in Development Control Regulation for Greater Mumbai the builder was constrained to alter/amend the building plans. In view of the same assessee has been allotted another flat no. 204 on the 2nd floor in “Insignia” building in place of the flat no. 1601 & 1701 which was earlier allotted in A-Wing in “Insignia” building on 16th floor for a total consideration of Rs. 1,78,91,327/-. It is also mentioned in the allotment letter that acknowledgement of advance payment already made shall be considered and be treated to have been issued in respect of flat no. 204 in place of the earlier allotment. The assessee has also referred the copy of agreement for sale dated 11.09.2017 placed in the paper book. He also referred copy of bank statement showing that part of the sale consideration has been paid through banking channel on 08.02.2011. After perusal of the copies of material placed on record, it is evident that assessee has brought before the lower authority that due to change in Development Control Regulation for Greater Mumbai, 1991, the builder was constrained to alter/amend the building plans and in view of the same the builder allotted another flat on a lower floor. We find that this fact was not disproved by the assessing officer neither by making any enquiry from the builder nor brought any material on record to controvert the claim of the assessee. The allotment letter issued to the assessee dated 26.04.2016 substantiate that booking of old flat no. 1601 and 1701 was replaced by flat no. 204 because of the circumstances of change in Development Control Regulation as discussed (supra) in this order. We have also perused the provision of section 56(2)(x) of the Act applicable from A.Y. 2017-18, the relevant extract of the provision of section 56(2)(x) is reproduced as under:
“Section 56(2)(x)
Where any person receives, in any previous year from any person or persons on or after the 1st day of April, 2017
(a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum,
(b) any immovable property
(A) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property,
(4) for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely
(i) the amount of fifty thousand rupees, and
(ii) the amount equal to ten per cent of the consideration: Provided 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 agreement may be taken for the purposes of this sub-clause: Provided further that the provisions of the first proviso shall apply only in a case where the amount of consideration referred to therein, or a part
thereof, has been paid by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed28, on or before the date of agreement for transfer of such immovable property.”
6. The First Proviso to section 56(2)(x) of the Act as above 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 agreement may be taken. However, the Second Proviso provides that the provisions of first proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account on or before the date of agreement for transfer of such immovable property. In the case of the assessee it has already made part payment of Rs. 25,00,000/- vide RTGS dated 08.02.2011 through banking channel as discussed (supra) in this order. Apart of this even it is settled issue as per the various decisions of ITAT, Mumbai that Stamp Duty Valuation as on date of allotment letter should be considered for purposes of section 56(2)(vii)(b) of the Act. We consider that the respective allotment letters issued to the assessee should be considered as “Agreement to sell” for the purpose of section 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 therefore, we consider that proviso to section 56(2)(x) should apply to the facts of the present case. Therefore, as per the proviso to section 56(2)(x) as discussed the date of agreement in the case of the assessee will be taken to 18.03.2011 and not 26.04.2016 since it is clearly demonstrated from the relevant supporting material that allotment of the new flat has been made to the assessee in continuation of the replacing of the earlier allotment which was changed because of the unavoidable circumstances of change in the Development Control Regulation. Therefore, we consider that decision of ld. CIT(A) in sustaining the addition made by the assessing officer is not justified. Accordingly, the ground of appeal of the assessee is allowed.
7. In the result, the appeal of the assessee is allowed.”
21. In terms of the above observations of the Tribunal and the decisions relied upon, we find substance in the contentions raised by the assessee. We, therefore, respectfully following the aforesaid decisions, in the light of the facts of the instant case, and are of the considered view that, for the purpose of application of section 56(2)(x), the stamp duty value for the financial year 2017-18 does not have any relevance. In terms of the above, the stamp duty value of the property for the financial year 2001-02 is relevant, however, the Stamp duty value of that period is less than the purchase consideration, so, there would be no positive difference for making an addition u/s 56(2)(x) of the Act.
22. Accordingly, we direct the Assessing Officer to delete the addition based on the stamp duty value adopted from the registered sale deed dated 31st March, 2018. Under the circumstances, the appeal of the assessee is allowed.
23. Since, we have already directed for deletion of addition u/s 56(2)(x) of the Act, we do not find any reason to adjudicate other grounds, which have become academic and are left open.
24. In the result, Assessee’s appeal is allowed.
Order pronounced in the open court on 15.09.2026.
