2021 (9) TMI 212 - AT - Income Tax

Interpretation of Income Tax Act Section 56(2)(vii)(b) clarified by ITAT in favor of assessee.

ITO-19 (2) (1), Mumbai Versus Jayanti lal Bherchand Gandhi (Vice-Versa)

The ITAT clarified the interpretation of Section 56(2)(vii)(b) of the Income Tax Act, 1961, ruling in favor of the assessee in a dispute regarding the ... Addition u/s. 56(2)(vii)(b) - difference between actual consideration paid and value determined by stamp valuation authority in respect of a residential flat purchased under construction - notional difference in the amount of stamp duty value and the actual consideration paid for purchasing the flat - HELD THAT:- The assessee has entered into an agreement and consequently assessee has been duly given allotment letter and assessee has also paid part of the consideration at that time, hence, there is no infirmity in the assessee’s request that the date of allotment should be considered as date of agreement. Hon'ble Supreme Court decision in the case of Sanjeev Lal Vs. CIT [2014 (7) TMI 99 - SUPREME COURT] in this regard supports the above proposition. Accordingly, we set aside the orders of the authorities below and decide the issue in favour of the assessee. Issues:1. Interpretation of Section 56(2)(vii)(b) of the Income Tax Act, 1961 regarding the addition made for the difference in property value.2. Determination of the date of agreement for the purpose of computation based on the allotment letter and payment of consideration.Analysis:Issue 1: Interpretation of Section 56(2)(vii)(b)The case involved cross-appeals by the assessee and Revenue concerning the addition made under Section 56(2)(vii)(b) of the Income Tax Act, 1961. The dispute arose from the difference between the actual consideration paid and the value determined by the stamp valuation authority for a residential flat purchased under construction. The assessee argued that the gap of more than 3 years between the date of allotment and registration should exempt them from the addition. However, the Assessing Officer (AO) added the difference to the assessee's income under the head of income from other sources. The CIT(A) upheld the AO's decision, stating that the proviso to Section 56(2)(vii)(b) was not applicable. The ITAT, in its judgment, disagreed with the lower authorities and ruled in favor of the assessee. The ITAT held that the date of allotment should be considered as the date of agreement, supported by relevant case laws and the Supreme Court decision in the case of Sanjeev Lal Vs. CIT. Consequently, the Revenue's appeal was dismissed, and the assessee's appeal was allowed.Issue 2: Determination of Date of AgreementThe second issue revolved around determining the date of agreement for computation purposes based on the allotment letter and payment of consideration. The assessee contended that the allotment letter, along with the payment made at the time of allotment, should be considered as sufficient compliance for taking the date of allotment as the date of agreement. The Departmental Representative, on the other hand, supported the decisions of the lower authorities. The ITAT, after considering the arguments, agreed with the assessee's position. The ITAT emphasized that the assessee had entered into an agreement, received an allotment letter, and paid part of the consideration at that time, thus supporting the date of allotment as the date of agreement. Citing the Supreme Court decision in the case of Sanjeev Lal Vs. CIT, the ITAT set aside the orders of the lower authorities and decided the issue in favor of the assessee.In conclusion, the ITAT's judgment in this case clarified the interpretation of Section 56(2)(vii)(b) and emphasized the significance of the date of agreement for computation purposes based on the allotment letter and payment of consideration. The decision provided a nuanced understanding of the legal provisions and relevant case laws, ultimately ruling in favor of the assessee and dismissing the Revenue's appeal.