Sajjanraj Mehta Vs ITO (ITAT Mumbai)
During the appellate proceedings, the appellant vide letter dated 03/04/2018 submitted that the AO has made addition ignoring the 1st and 2nd proviso to section 56(2)(vii)(b) inserted by Finance Act, 2013 w.e.f. 01.04.2014. The appellant was allotted flat no. 502 in the building Kamla Astral, Dadar for a total consideration of Rs. 70,00,000/- vide allotment letter dated 17.10.2011 by the builder M/s. Sai Dadguru Developers . The assessee registered the said flat vide agreement dated 23.07.2013. The text of 1st and 2nd proviso was reproduced and it was claimed that if the agreement(allotment letter) is executed then in that case the date of agreement would be taken for the purpose of section 56(2)(vii)(b). The appellant has paid substantial amount (70% approx) before registration of agreement through banking channel only. Fair market value at the time of allotment was Rs. 70,00,000/- as per ready reckoner sheet attached with the valuation report issued by B.L. Jain & Associates . In the assessment proceedings, allotment letter of flat no. 501 in the same building in the name of assessee’s wife Mrs. Majula Mehta was wrongly submitted. The allotment letter in the name of appellant for flat no. 502 was filed during the appellate proceedings. In case of assessment of wife for AY 2014-15, no such addition was made.
ITAT observed the payment made by the assessee to the developer on 17-102011 amounting to Rs 14 lacs vide cheque no 906740, Bank of Maharashtra to enter into an agreement cum acknowledgement of payment made and other terms and conditions about the property. This agreement between assessee and developer clearly confirms the amount of consideration along with other terms and conditions relating to levy of stamp duty, service tax and other charges to be paid by the assessee.
The finding of the A.O vide pg no-4, para-2.6 wherein he observed that assessee has deposited Rs 14 lacs with the developer to year mark the said premises for Rs 70 lacs. Even if for the time being it is assumed that this agreement is merely a letter of intent, still amount mentioned in this so called letter of intent can’t be changed by either of the party .At the max the parties involved may opt for exit from the transaction but amount of consideration can’t be changed. This transaction of the assessee has to be analysed in commercial parlance, without finalisation of consideration nobody will deposit 20% of the final consideration. The vitality of the agreement further found force from the behaviour of the assessee as confirmed by the A.O also that assessee paid further Rs 34.5 lacs till financial year 2012-13. Assessee also paid Rs 1,00,285/- as VAT, Rs 1,35,187/- as service tax, Rs 5,02,000/- as stamp duty and Rs 30,000/- as registration charges.
The chronology of the events confirms that the finding of the A.O treating the agreement of the assessee as letter of intent is not correct. In this matter treating the said agreement as letter of intent shows an over thinking and hyper technical interpretation at the end of the A.O. assessees case clearly falls in the proviso to Section 56(2)(vii)(b).
Similar property in the case of assessee’s wife with similar transactions has been accepted by the same A.O without any addition for the same A.Y. Here we would like to rely on the decision of Hon’ble Gauhati HC.
“Gulabrai Hanumanbox. vs. Commissioner of Wealth –tax [198 ITR 131 (Gauhati) (HC).]
Two different Assessees having similar/ identical facts w.r.t valuation of property cannot be assessed with different rates for the same property. Thereby, the order passed by the Assessing officer for co-sharer of property is arbitrary and unjustified in law”
Keeping in view the facts of the case, chronology of events and respectfully following the pronouncements of the co-ordinated benches of ITAT, we delete the addition made by A.O and confirms that assessee is entitled to the benefits of proviso to Section 56(2)(vii)(b).
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-33, Mumbai [hereinafter referred to as (‘CIT(A)’] dated 11.02.2020 for the Assessment Year (AY) 2014-15. The assessee has raised the following grounds of appeal:
