Assessee's appeal allowed for recomputation of tax under Section 56(2)(vii)(b)

The appeal of the assessee was allowed for statistical purposes, and the issue was restored back to the file of the AO for recomputation of tax chargeable under Section 56(2)(vii)(b) by considering the stamp duty value as on the date of the agreement. The assessee was to be given sufficient opportunity to submit necessary documents to substantiate their claim.

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Issues Involved:

1. Confirmation of addition by CIT(A).
2. Applicability of Section 56(2)(vii)(b) of the Income Tax Act.
3. Determination of date of agreement for the purpose of taxation.
4. Applicability of provisos to Section 56(2)(vii)(b).

Summary:

1. Confirmation of Addition by CIT(A):

The main grievance of the assessee was against the action of the Ld. CIT(A) in confirming the addition of Rs. 7,78,104/- as against the addition of Rs. 31,12,145/- made by the AO. The AO added the difference of Rs. 31,12,415/- based on the circle rate/stamp value adopted by the Stamp Valuation Authority, which was higher than the purchase value of the property. The CIT(A) granted partial relief by apportioning the difference among four co-owners, thus restricting the addition to Rs. 7,78,104/- in the hands of the assessee.

2. Applicability of Section 56(2)(vii)(b) of the Income Tax Act:

The AO noted that the difference between the purchase value and the stamp duty value should be added to the total income under Section 56(2)(vii)(b) of the Income Tax Act, 1961. The assessee's contention that the amended section would not be applicable was found to be incorrect. The section was attracted in the year the assessee received the immovable property.

3. Determination of Date of Agreement for the Purpose of Taxation:

The assessee argued that the property was allotted by a letter of allotment dated 25.11.2011, and part payment was made on 15.11.2011. The Tribunal referred to the decision of the Hon'ble Bombay High Court in the case of PCIT Vs. Vembu Vaidyanathan, which held that the date of allotment should be considered as the date of agreement for the purpose of computing capital gains. The Tribunal agreed with this view and took the allotment letter date as the date of agreement.

4. Applicability of Provisos to Section 56(2)(vii)(b):

The Tribunal noted that the first and second provisos to Section 56(2)(vii)(b) were applicable in this case. The date of agreement fixing the amount of consideration was 25.11.2011, and part payment was made by cheque. Therefore, the stamp duty value as on the date of the agreement should be taken for taxation purposes. The AO was directed to compute the tax chargeable by considering the stamp duty value of the flat as on 25.11.2011 and, if contested, seek a DVO report to find the fair market value of the property.

Conclusion:

The appeal of the assessee was allowed for statistical purposes, and the issue was restored back to the file of the AO for recomputation of tax chargeable under Section 56(2)(vii)(b) by considering the stamp duty value as on the date of the agreement. The assessee was to be given sufficient opportunity to submit necessary documents to substantiate their claim.

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