Land bought in individual's name claimed for charitable society; late MoU rejected, s.56(2)(vii)(b) tax addition upheld.

The dominant issue was whether land purchased in the assessee's name could be treated as having been acquired on behalf of a charitable society so as to negate addition under s.56(2)(vii)(b). The ITAT held that revenue records continued in the assessee's name, the MoU claiming purchase for the society was executed long after the sale deed and was treated as an afterthought, and there was no evidence that the property was reflected as the society's asset in its audited financial statements. On these facts, the authorities were justified in applying s.56(2)(vii)(b) to treat the differential value as taxable. The appeal was dismissed and the addition sustained.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the receipt of immovable property in the assessee's name, where the assessee did not pay the sale consideration, stamp duty, or registration charges, constituted receipt of "immovable property, without consideration" attracting addition under section 56(2)(vii)(b).

(ii) Whether the assessee's plea that the property was purchased "for and on behalf of" a society, supported primarily by a later Memorandum of Understanding, displaced the legal and factual inference that the assessee acquired the property in his individual capacity without consideration.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Applicability of section 56(2)(vii)(b) to the property registered in assessee's name

Legal framework: The Court proceeded on the basis that section 56(2)(vii)(b) applies where an individual receives an immovable property "without consideration" and its value exceeds the statutory threshold, in which case the relevant value is chargeable as income.

Interpretation and reasoning: The Court found it admitted that the assessee did not pay the sale consideration for the purchase and also did not pay stamp duty and registration fees. The registered sale deeds conveyed absolute right, title and interest in the property to the assessee in his personal capacity. The Court further noted that the revenue records continued to stand in the assessee's name. On these facts, the Court upheld the inference that the assessee received the immovable property without consideration within the meaning of section 56(2)(vii)(b).

Conclusion: The Court held that the lower authorities committed no error in invoking section 56(2)(vii)(b) and sustaining the addition of the property value as income.

Issue (ii): Effect of assessee's "on behalf of society" claim and the later MOU

Legal framework: The Court assessed whether the assessee produced reliable contemporaneous material to establish that the acquisition, though registered in his name, was truly on behalf of the society and not a receipt without consideration by the assessee.

Interpretation and reasoning: The Court verified the sale deeds and found that they did not mention that the purchase was on behalf of the society. The only principal supporting document relied upon by the assessee was an agreement/MOU executed about three and a half years after the sale deeds; the Court treated it as an afterthought. The Court also relied on the MOU's own recital that the property would be purchased in individuals' names and transferred later, but noted that even as of the hearing the property continued in the assessee's name. Further, the assessee failed to produce any document showing that the property was reflected as the society's property in its audited financial statements. In the absence of such corroboration, the Court found no basis to dislodge the finding that the assessee acquired the property in his individual capacity.

Conclusion: The Court rejected the "on behalf of society" defence as unsubstantiated and insufficient to negate the application of section 56(2)(vii)(b), and therefore affirmed the addition and dismissed the appeal.

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