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

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 Rs.50,000, the excess is taxable as income from other sources. The assessee purchased 1/5th share in property along with four others. The tribunal ruled that addition should be restricted to 1/5th of the difference between agreed consideration and DVO valuation, proportionate to assessee's share. Ground challenging agricultural land valuation was dismissed as not pressed. Appeal was partly allowed with addition limited to assessee's proportionate share.

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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.

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