TaxTMI 
TaxTMI 
2026 (9) TMI 693
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....7-18, date of order 17.03.2026. The impugned order emanated from the order of the Assessment Unit Income Tax Department (for brevity 'Ld. AO'), order passed under Section 147 r.w.s. 144B of the Act, date of order 23.05.2023. 2. The brief facts of the case are that the assessee is an individual engaged in the retail business of stationery. For the year under consideration, the assessee had not originally filed the return of income as his income was below the taxable threshold. Subsequently, proceedings under Section 147 of the Act were initiated on the basis of information that the assessee had entered into a transaction relating to immovable property during F.Y. 2016-17 wherein the consideration reflected was lower than the stamp duty va....
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....asoning that no documentary evidence or valuation report was produced to establish the market value of the tenancy rights surrendered and that the registered agreement conferred enforceable rights upon the assessee notwithstanding that possession of the proposed property was to be delivered subsequently. The Ld. CIT(A), accordingly, sustained the addition of Rs. 33,41,818/-. 3. The Ld. AR submitted that the authorities below fundamentally misconstrued the nature of the transaction. The assessee had not acquired the PAA gratuitously. The assessee possessed valuable sub-tenancy/occupancy rights, and the PAA was agreed to be provided by the developer precisely in exchange for relinquishment and surrender of those rights. Thus, the transacti....
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....t previous year. 6. The Ld. AR further relied upon the decision of the Coordinate Bench of ITAT, Mumbai in ITO v. Varun Jaisingh Asher reported in [2026] 184 taxmann.com 174 (Mumbai-Trib.), wherein the Tribunal held that tenancy rights constitute a capital asset within Section 2(14); surrender thereof constitutes transfer under Section 2(47); and allotment of a residential flat by the developer in exchange for surrender of tenancy rights represents consideration for such transfer. Consequently, such transaction falls within the ambit of capital gains and cannot be brought to tax under the residuary provisions of Section 56. 7. The Ld. AR also relied upon the judgment of the Hon'ble Supreme Court in CIT v. D.P. Sandu Bros. Chembur ....
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....re us essentially revolves around the character of the transaction arising from the redevelopment arrangement and whether the assessee's entitlement to PAA can be regarded as receipt of immovable property without consideration for the purpose of Section 56(2)(vii)(b) of the Act. 11. At the outset, we find that the transaction cannot be examined by isolating the proposed PAA from the pre-existing sub-tenancy/occupancy rights surrendered by the assessee. The record indicates that the assessee was a sub-tenant/occupant in the existing premises along with his father and, upon redevelopment, the developer agreed to provide alternate accommodation against relinquishment of those existing rights. The assessee's entitlement was specifica....
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....against surrender of tenancy rights, has applied the same principle. The Coordinate Bench held that tenancy rights constitute a capital asset under Section 2(14), surrender thereof amounts to transfer within Section 2(47), and the residential premises allotted by the developer represent consideration received in exchange for surrender of those rights. It was consequently held that such consideration cannot be subjected to tax under the residuary provisions of Section 56. 15. The same decision also refers to Vasant Nagorao Barabde v. Dy. CIT reported in [2025] 174 taxmann.com 1015 (Mumbai-Trib.), wherein the Coordinate Bench considered surrender of tenancy rights against allotment of a PAA flat and held that once the source falls under th....