Rajesh Kumar Sharma Vs CIT(A)/NFAC (ITAT Delhi)
Rule of Lenity as a Boon for Assessees [CIT vs. Vegetable Products Ltd. (1973)]
– The appeal concerns an addition of ₹21,95,375 made by the tax authorities, representing the difference between Sharma’s actual purchase price of a flat (₹33,76,625) and the stamp duty valuation (₹55,72,000).
– The addition was made under Section 56(2)(vii) of the Income Tax Act, which is relevant for cases where the stamp duty value of property exceeds the actual transaction price, similar in nature to Section 50C which applies to capital gains on land and building.
Key Legal Findings
– The main controversy was whether Section 56(2)(vii) applies to lease rights or only to sale/purchase of capital assets like land and building.
– The Revenue argued that it applies to lease rights, relying on Vidarbha Veneere Industries Ltd. vs. ITO (2025 Bom.), while the assessee cited V.S. Chandrashekar vs. ACIT (2021 Kar.), which supports the assessee’s position[1].
– As there was no guidance from Delhi High Court (the jurisdictional court), the Tribunal followed the Supreme Court’s doctrine from CIT vs. Vegetable Products Ltd. (1973), stating that in case of conflicting decisions from non-jurisdictional High Courts, the view favoring the assessee should be adopted.
