TaxTMI 
TaxTMI 
2026 (8) TMI 820
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....tition of facts. 2. The principal dispute in the quantum appeal relates to the deletion of an addition of Rs. 1,81,95,300/- made by the Assessing Officer under section 56(2)(x)(b) of the Act on account of the alleged difference between the purchase consideration of an immovable property and its stamp duty valuation. The connected penalty appeal arises from the deletion of penalty levied under section 270A of the Act, which was imposed solely on the basis of the aforesaid quantum addition. Thus, the outcome of the penalty appeal is intrinsically dependent upon the decision rendered in the quantum proceedings. 3. Briefly stated, the facts borne out from the record are that the assessee is an individual deriving income from salary, house property, share of profit from partnership firm and income from other sources. The return of income for the year under consideration was filed on 06.02.2019 declaring total income of Rs. 7,23,320/-. The case was selected for limited scrutiny under the E-Assessment Scheme on the specific issue that the purchase value of an immovable property, along with the income disclosed under section 56(2)(x), was substantially lower than the value adopted by....
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.... that the property had, in substance, been acquired nearly two decades earlier and that only registration of the earlier transaction had taken place during the previous year relevant to Assessment Year 2018-19. The Ld. CIT(A) further observed that even otherwise, if section 56(2)(x) were assumed to be applicable, the statutory provisos required adoption of the stamp duty valuation prevailing on the date of the original agreement and not on the date of registration. On these findings, the addition made under section 56(2)(x)(b) was deleted. Consequentially, the penalty levied under section 270A was also deleted on the ground that once the quantum addition itself did not survive, the foundation of the penalty ceased to exist. 7. Aggrieved by the aforesaid findings, the Revenue is in appeal before us. The grievance of the Revenue, in substance, is that the Ld. CIT(A) erred in holding that section 56(2)(x) was not applicable merely because the original agreement was executed in the year 1998, ignoring the fact that the property stood registered during the relevant previous year. It is further contended that the assessee had failed to establish payment of consideration through the pr....
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....y, the rental income from the very same property had been offered to tax by the assessee in several preceding assessment years. None of these foundational facts have been disputed by the Revenue. The only event which admittedly occurred during the previous year relevant to Assessment Year 2018-19 was the registration of the agreement on 07.02.2018, stated to have been necessitated because the original agreement had become untraceable. 11. The entire basis of the assessment is that since the agreement came to be registered on 07.02.2018, the assessee must be regarded as having received the immovable property during the relevant previous year and, therefore, the stamp duty valuation prevailing on the date of registration was liable to be compared with the original consideration for invoking section 56(2)(x)(b). In our considered opinion, such an approach proceeds on a fundamentally erroneous understanding of both the factual position and the statutory scheme. The Assessing Officer has treated the date of registration as synonymous with the date of acquisition without first examining whether any fresh rights in the immovable property were, in fact, created or transferred in favour ....
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....al distinction. 14. We are unable to persuade ourselves to accept the aforesaid submissions of the Revenue. The expression "receives" occurring in section 56(2)(x) cannot be interpreted in isolation divorced from the surrounding facts and the true nature of the transaction. The provision contemplates taxation of a benefit arising on receipt of an immovable property during the relevant previous year. Where the substantive transaction of purchase had already been completed, possession had been delivered, consideration had been paid and ownership rights had effectively vested in the purchaser long before the relevant previous year, mere registration of an earlier transaction cannot, by itself, be elevated to the status of a fresh receipt of property so as to trigger the charging provisions of section 56(2)(x). Registration, in such circumstances, is merely a legal formality completing an already existing transaction and cannot alter the real character or timing of the acquisition. The Income-tax Act taxes real transactions and real income; it does not authorise taxation merely because a ministerial or procedural formality is completed at a later point of time. 15. We also find c....
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....s" employed in section 56(2)(x). The emphasis under the Act is always on the substance and real character of the transaction rather than on the mere completion of procedural formalities. 17. We also find that the Assessing Officer has proceeded on the assumption that the assessee had failed to establish payment of consideration through prescribed banking channels and, therefore, the benefit of the provisos to section 56(2)(x) could not be granted. In our considered opinion, this objection, in the peculiar facts of the present case, loses much of its significance. The primary finding recorded by the Ld. CIT(A), which we have independently affirmed, is that there was no receipt of any immovable property during the previous year relevant to Assessment Year 2018-19 and that the registration undertaken on 07.02.2018 merely formalised a transaction which had attained finality nearly twenty years earlier. Once this foundational finding is accepted, the question of invoking section 56(2)(x) itself does not arise. Nevertheless, even otherwise, the contemporaneous documentary evidence placed on record, namely the original agreement, the subsequent registered agreement acknowledging the ea....
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....n happened to be substantially higher than the original consideration. Such an approach, in our opinion, disregards the true nature of the transaction and results in taxation of a notional benefit without there being any corresponding receipt of property during the relevant previous year. 20. In view of the foregoing discussion, we are in agreement with the ultimate conclusion reached by the Ld. CIT(A) that the provisions of section 56(2)(x) are not attracted to the facts of the present case. The property in question was neither purchased nor received by the assessee during the previous year relevant to Assessment Year 2018-19; what transpired during the year was merely registration of an earlier transaction under which the assessee had already acquired possession and substantial rights nearly two decades ago. Consequently, the addition of Rs. 1,81,95,300/- made under section 56(2)(x)(b) has rightly been deleted by the Ld. CIT(A). We, therefore, find no infirmity in the impugned appellate order warranting our interference. Accordingly, all the substantive grounds raised by the Revenue in the quantum appeal are dismissed. 21. We shall now advert to the Revenue's appeal challen....