Redevelopment flat exchange not taxable under section 56(2)(x); delay in appeal filing was also condoned.

Delay in filing the first appellate appeal was condoned because it was neither intentional nor deliberate and sufficient cause was shown, with the assessee intending to pursue the matter on merits. In a redevelopment arrangement, receipt of a new residential flat in exchange for surrender of an old flat was held not to be receipt of immovable property for inadequate consideration. On that reasoning, the deeming fiction in section 56(2)(x) did not apply, and the addition was deleted. The appeal was allowed and the assessment addition was set aside.

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Issues: (i) whether the delay in filing the appeal before the first appellate authority deserved condonation; (ii) whether receipt of a new residential flat in lieu of surrender of an old flat under a redevelopment arrangement attracted addition under section 56(2)(x).

Issue (i): Whether the delay in filing the appeal before the first appellate authority deserved condonation.

Analysis: The delay was found to be neither intentional nor deliberate, and the assessee had shown sufficient cause for not pursuing the appeal within time. The Tribunal also took note of the assessee's intention to pursue the matter on merits.

Conclusion: The delay in filing the appeal was condoned in favour of the assessee.

Issue (ii): Whether receipt of a new residential flat in lieu of surrender of an old flat under a redevelopment arrangement attracted addition under section 56(2)(x).

Analysis: The assessee received a new residential flat in exchange for surrender of the old flat. On similar facts, it was held that such a transaction is not one of receipt of immovable property for inadequate consideration within the scope of section 56(2)(x). The Tribunal applied that reasoning and held that the deeming provision did not cover the transaction.

Conclusion: The addition under section 56(2)(x) was deleted in favour of the assessee.

Final Conclusion: The appeal was allowed and the assessment addition was set aside, with the assessee obtaining relief both on limitation and on merits.

Ratio Decidendi: Receipt of a new residential flat in lieu of an old flat surrendered under a redevelopment arrangement does not, by itself, constitute receipt of immovable property for inadequate consideration so as to attract section 56(2)(x) of the Income-tax Act, 1961.

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