TaxTMI 
TaxTMI 
2025 (11) TMI 1304
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....aw, the Honourable C.I.T.(A) has erred in confirming the addition of Rs. 64,49,214/- made by the Assessing Officer under section 56(2)(x) of Income Tax Act, 1961 on account of difference between purchase value and stamp duty value (50% share) of the property purchased by the Appellant, without appreciating the facts of the case and on the basis of statement on oath recorded under section 132(4) by Shri Amit Mahendra Ruparel, Director of Shree Sukhkarta Developers Pvt Ltd. 2. The central issue for adjudication pertains to the alleged difference between the sale consideration and the stamp duty valuation in respect of a flat purchased by the assessee and the consequent addition of Rs. 64,49,214/- as income from other sources. 2.1 Briefly stated, the facts are that the assessee, an individual, is engaged in the business of retail trading of gold ornaments under the proprietary concern M/s Shah Tarachand Chamnaji Porwal Jewellers. For the year under consideration, the assessee filed his return of income on 01.09.2021 declaring total income of Rs. 5,08,040/-. The return was selected for scrutiny, and necessary statutory notices under the Act were duly issued and complied with. Dur....
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....passed u/s 143(3) of the Act on 06/12/2022. 2.3. On further appeal, the Ld. CIT(A), concurred with the findings of the AO. After analyzing the submissions and the materials on record, the appellate authority observed that the assessee had not produced any credible or contemporaneous evidence, such as rent receipts, utility bills, municipal records, or legal documents, to establish his claim of occupation in the old premises. The Ld. CIT(A) held that mere reference to Point No. FF in the Agreement for Sale, describing the assessee as an "illegal occupant" of the erstwhile property, could not suffice to substantiate the claim of tenancy or possession. The authority further noted that in view of the search findings and the director's statement admitting under-valuation of flats, the transaction had the characteristics of an on-money component. Accordingly, the addition made by the AO under Section 56(2)(x) was upheld.The relevant finding of ld CIT(A) is reproduced as under: "6.1 On perusal of the submissions and the documents filed during appellate proceedings, it is observed that the appellant is a proprietor and engaged in the business of trading of Gold Ornaments on....
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.... to the difference between the stated consideration and the stamp duty valuation of Rs. 2,28,98,427/-. The Section 56(2)(x) of the Act provides that where a person receives any immovable property for a consideration less than the stamp duty value by an amount exceeding the prescribed threshold, the differential amount shall be chargeable to tax as "income from other sources."However, the provision presupposes that the transaction represents an outright transfer for inadequate consideration and not a settlement or exchange of rights arising from redevelopment, tenancy, or compensatory arrangements. The fundamental principle underlying Section 56(2)(x) is to curb tax avoidance through transactions structured below fair value, not to penalize genuine settlement arrangements involving pre-existing rights.In this context, the Coordinate Bench of the Tribunal in Anil Dattaram Pitale v. ITO (ITA No. 465/Mum/2025, A.Y. 2018-19) held that where a new flat is allotted in exchange for surrender of an old flat or tenancy rights under a redevelopment agreement, such transaction constitutes an exchange of capital assets rather than a purchase of property for inadequate consideration. Accordingly....
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....ein and accordingly the promoters has agreed to give him one premises admeasuring 804 sq. ft. carpet area for an additional compensation of Rs. 1,00,00,000/- (Rupees One crore only) and the purchaser has agreed for the down payment of Rs. 1,00,00,000/- (Rupees One crore only) ("Total Consideration")" 3.3 In our opinion, however, this recital, though indicative, by itself does not conclusively establish the factum of prior occupation. The burden of proof rests on the assessee to substantiate such claim with supporting evidence-such as electricity or water bills, property tax records, or any other correspondence with municipal or redevelopment authorities-showing that he was indeed in possession of the old premises. 3.4 The lower authorities have rightly observed that no such evidence was furnished. However, having regard to the peculiar nature of the claim and the equitable aspect that the assessee's assertion, if substantiated, would take the transaction outside the ambit of Section 56(2)(x), we consider it in the interest of substantial justice to afford one final opportunity to the assessee to establish his claim. 3.5. In case, the assessee fails in establishing the ....