2024 (2) TMI 988 - AT - Income Tax

Individual taxed on property purchase below stamp duty value under Section 56(2)(vii)(b), addition limited to proportionate share

Prabhakar Gulabrao Sawant Versus Income Tax Officer, Ward 34 (2) (5), Mumbai

ITAT Mumbai held that under Section 56(2)(vii)(b), when an individual receives immovable property for consideration less than stamp duty valuation by over ... Addition u/s 56(2)(vii)(b) - Difference between the agreed consideration and Valuation adopted by the DVO - Assessee is one of the party who along with four others entered into a deed of conveyance for purchase of property being land - HELD THAT:- As in view of the provisions of Section 56(2)(vii), if an individual or a HUF receives from any person from 1st day of October, 2009 but before 1st day of October 2017 any immovable property for consideration which is less than the stamp duty valuation by an amount exceeding Rs.50,000/-, then the stamp duty of such property in excess of such consideration is the income chargeable under the head income from other sources. Where the value of the property is disputed, the Ld. AO may make the reference for value of such property to the district valuation officer and such valuation shall be final. In the present case, the Assessee received 1/5th share in the above property in excess of agreed consideration. Therefore, the addition in the hands of the Assessee can only be made at the rate of 1/5th of the above difference between agreed consideration and valuation made by the Ld. DVO. This is the only request of the AR before us. The ground No.1 challenging the valuation of the property as agricultural land was not pressed. The ground No.2 was only made with respect to the restriction of the addition to the extent of 1/5th of Difference between the agreed consideration and Valuation adopted by the ld DVO. . In view of the above facts, we dismiss ground No.1 and allow ground No.2 of the appeal. Argument of the AR that Shri Murarilal Surajmal Mody is also taxed on the identical amount, therefore addition could not have been made in the hands of the Assessee is devoid of any merit. This is so because Shri Mody have received the above property on the basis of release deed from the five joint owners including the Assessee. Assessee received the property by purchase deed. Therefore, this argument cannot be accepted. Appeal of the Assessee is partly allowed. Issues involved:The issues involved in the judgment are the addition made under section 56(2)(vii)(b) of the Income Tax Act, 1961 on account of the purchase of agricultural land and the valuation of the property for tax purposes.Issue 1: Addition under section 56(2)(vii)(b) of the Income Tax Act:The appellant challenged the addition of Rs.44,17,484/- under section 56(2)(vii)(b) of the Income Tax Act, 1961, related to the purchase of agricultural land. The appellant contended that the provisions of this section were not applicable to the transaction and the entire addition was unjustified. However, the Assessing Officer determined that a portion of the consideration was taxable in the hands of the appellant based on the stamp duty value of the property.Issue 2: Valuation of the property for tax purposes:The valuation of the property for tax purposes was a key aspect of the case. The appellant argued that the property acquired was agricultural land and that no consideration was paid by the appellant. The Assessing Officer, however, found that the property purchased was non-agricultural and calculated the taxable amount based on the stamp duty value. The District Valuation Officer also determined the fair market value of the property, leading to a specific amount being added to the appellant's income.In the judgment, it was noted that the appellant, along with four others, entered into an agreement for the purchase of property, which was later released in favor of another individual. The District Valuation Officer determined the fair market value of the property, leading to the addition of a specific amount in the appellant's income under section 56(2)(vii)(b) of the Act. The appellant's appeal was partly allowed, with the addition being restricted to 1/5th of the difference between the agreed consideration and the valuation adopted by the DVO.The argument that since another individual was taxed on the same amount, no addition should be made in the appellant's hands was dismissed by the tribunal. The judgment highlighted the distinction between the appellant receiving the property through a purchase deed and the other individual receiving it through a release deed. Consequently, the appeal was partly allowed, and the addition was restricted to 1/5th of the difference in valuation.