2021 (8) TMI 160 - AT - Income Tax

Tribunal rules in favor of assessee on Income Tax Act Section 56(2)(vii)(b) applicability

The Tribunal ruled in favor of the assessee, holding that the provisions of Section 56(2)(vii)(b) of the Income Tax Act were not applicable as the ... Addition u/s 56(2)(vii)(b) - stamp duty value consideration - stamp duty value on the date of registration of the property different from the stamp duty value at the time of agreement entered into during financial year - assessee argued that agreements with respect to purchase of properties were entered into earlier years. - HELD THAT:- The undisputed position that emerges is that the assessee initially booked two flats during financial year 2007-08 and paid booking amount to the builders. The booking was duly supported by the allotment letters and the booking amount was paid through banking channels at the time of booking. Later on during financial year 2011-12, after visiting the site, the assessee requested for change of location of flats having same area and same consideration which was acceded to by the builder. Accordingly, new allotment letters were issued by the builders which bear the requisite particulars viz. flat nos. consideration, area, fact of possession etc. These facts have been confirmed by the builder also in reply to summons issued by Ld. AO. It was not a case of new booking but a case wherein the assessee had merely exchanged the flats at the same site to have better location. The area as well as sale consideration was the same and the new flats got substituted from the date of initial booking which is evident from the conduct of the parties.This being the case, the provisions of Sec. 56(2)(vii)(b) as applicable from 01/04/2014 could not have been applied by Ld. AO Proviso to this sub-section provides that where the date of agreement fixing the amount of consideration for the transfer of immoveable property and the date of registration are not the same then the stamp duty value prevailing on the date of agreement may be taken for the purpose of this sub-clause. The said proviso would, alternatively, be applicable to the fact of the case since the consideration has been paid by the assessee though banking channels in terms of requirements of second proviso. Nevertheless, since the provisions of Sec. 56(2)(vii)(b) has been held to be not applicable, the additions made by Ld. AO invoking the said provisions would be unsustainable in law as held by Ranchi Tribunal in Bajrang Lal Naredi [2020 (1) TMI 1359 - ITAT, RANCHI] Thus the additions as made by Ld. AO could not be sustained in law. By deleting the entire addition, we allow ground nos.1 & 2 of assessee’s appeal Issues Involved:1. Applicability of Section 56(2)(vii)(b) of the Income Tax Act.2. Consideration of the date of agreement versus the date of registration for stamp duty value.3. Validity of the assessment and remand proceedings.Issue-wise Detailed Analysis:1. Applicability of Section 56(2)(vii)(b) of the Income Tax Act:The primary issue in the cross-appeals was whether the provisions of Section 56(2)(vii)(b) of the Income Tax Act were applicable to the assessee's case. The assessee argued that these provisions should not apply as the agreements for purchasing the properties were entered into during the financial year 2007-08, a period before the provisions came into effect on 01/04/2014. The Tribunal previously ruled in favor of the assessee, relying on a similar decision by the Ranchi Tribunal in Bajrang Lal Naredi V/s ITO, which held that the provisions of Section 56(2)(vii)(b) would not apply if the agreements were entered into before the provisions were enacted.2. Consideration of the Date of Agreement Versus the Date of Registration for Stamp Duty Value:The assessee contended that the stamp duty value should be considered as of the date of the agreement, not the date of registration. The initial payments for the flats were made in 2007-08, and the properties were registered in the assessee's name in the Assessment Year 2014-15. The assessee argued that since the agreements were made before the provisions of Section 56(2)(vii)(b) were enacted, the stamp duty value at the time of the agreement should be considered. The Tribunal agreed with this argument, noting that the proviso to Section 56(2)(vii)(b) allows for the stamp duty value on the date of the agreement to be adopted if the consideration is paid by account payee cheque or demand draft.3. Validity of the Assessment and Remand Proceedings:The assessee argued that the Ld. AO did not consider all the documentary evidence provided by the builder, including the original and new allotment letters and payment receipts. The Ld. CIT(A) noted that the Ld. AO had conducted cross-verification with the builder at the end of the assessment proceedings, which left insufficient time to consider the builder's reply. The Ld. CIT(A) sought a remand report, which the Ld. AO opposed, maintaining the original assessment position. However, the Ld. CIT(A) found that the assessee had booked the flats in 2007-08, supported by allotment letters and payment receipts, and that the provisions of Section 56(2)(vii)(b) should not apply.Findings and Adjudication:The Tribunal concluded that the assessee had initially booked the flats in 2007-08 and later changed the flat numbers while keeping the area and consideration the same. This change was not a new booking but an exchange for better location. The Tribunal held that the provisions of Section 56(2)(vii)(b) could not be applied as they were not in effect at the time of the initial agreement. The Tribunal also referenced the Ranchi Tribunal's decision in Bajrang Lal Naredi Vs ITO, which supported the assessee's position. Consequently, the Tribunal deleted the additions made by the Ld. AO under Section 56(2)(vii)(b) and dismissed the revenue's appeal while partly allowing the assessee's appeal.Conclusion:The Tribunal's judgment emphasized that the provisions of Section 56(2)(vii)(b) are not applicable if the agreement for purchasing the property was entered into before the provisions came into effect. The stamp duty value should be considered as of the date of the agreement, and any subsequent changes in flat numbers do not constitute a new booking. The Tribunal's decision resulted in the deletion of the additions made by the Ld. AO and the dismissal of the revenue's appeal.