Applicability of section 56(2)(vii)(b)(ii): Not applicable to partnership firms; circle rate-purchase price differential not taxable.

Whether section 56(2)(vii)(b)(ii) applies to partnership firms was considered and the statutory text confines the provision to individuals and Hindu Undivided Families; applying purposive construction to the class of persons specified, the provision cannot be invoked to tax the difference between circle rate and purchase price in respect of a partnership firm, and the addition under that provision was therefore deleted with the appeal allowed in favour of the assessee; coordinate authority adopting similar reasoning may be followed.

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Issues: Whether section 56(2)(vii)(b)(ii) of the Income-tax Act, 1961 applies to a partnership firm so as to tax the difference between circle rate and purchase price as income.

Analysis: Section 56(2)(vii)(b)(ii) expressly refers to individuals and Hindu Undivided Families. The text of the provision does not extend its operation to partnership firms. Applying purposive construction to the statutory language and the class of persons specified, the provision cannot be invoked to assess a partnership firm for the differential between circle rate and consideration. Coordinate authority adopting similar reasoning is available and may be followed.

Conclusion: Section 56(2)(vii)(b)(ii) of the Income-tax Act, 1961 does not apply to a partnership firm; the addition made under that provision is deleted and the appeal is allowed in favour of the assessee.

Ratio Decidendi: A tax provision confined by its language to specified classes of taxpayers (individuals and HUFs) cannot be applied to a partnership firm; therefore section 56(2)(vii)(b)(ii) of the Income-tax Act, 1961 is not applicable to partnership firms. 

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