S.56(2)(vii) cannot be Invoked if Property is Purchased for more than Circle Rate: ITAT [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that Section 56(2)(vii) of the Income Tax Act, 1961 could not be invoked if the property was purchased more than the circle rate.

The appeals had been filed by two assessees Vinit Kumar and Vijay Kumar. Since the issues were common and connected, they were heard together. The assessee had purchased four properties at circle rates with his brothers and had 1/4th share in all four properties.

The AO referred the valuation of the property purchased by the assessee to the Department Valuation Officer and assessed the difference between the purchase price , circle rate/stamp duty value and the value determined by the DVO had treated as income of the assessee under Section 56(2)(vii) read with Section 69 of the Income Tax Act.

The additional ground raised by the assessee stated that the purchase had been done at circle rate and there was no understatement whatsoever. Ajay Wadhwa on behalf of the assessee submitted that Section 56(2)(vii) of the Income Tax Act  triggered only of the property was purchased at less than the circle rate

Section 56(2)(vii) of the Income Tax Act can be invoked only if the consideration at which the property is purchased is less than the stamp duty value of such property. Further, this section can be invoked only if the circle rate of the property was more than the price at which the property was purchased and the property can be referred to DVO only if the assessee disputes the stamp duty value of the property.

T. Kipgen appeared on behalf of the revenue.

The appeal filed by the assessee was granted by the two-member Bench of Shamim Yahaya, (accountant member) and Anubhav Sharma,(accountant member) holding that “We find ourselves in agreement with the proposition that the sanguine provision of the concerned section duly mandates that the value of property purchased has to be less than the circle rate for the difference to be added.”

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