The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has directed the Departmental Valuation Officer (DVO) to determine the Fair Market Value (FMV) holding that the two FMV reports could not be considered for the same property on a particular date.
The assessee, Imran Mohamed Ali Kapadia, along with his brother purchased a flat in a building known as Modern Enclave. Mahanagar Construction Pvt. Ltd. the developer of said residential building issued an allotment letter dated 29.03.2012 in the joint names of the assessee and his brother in respect of flat No. 1101 on 11th floor of the aforesaid building.
The allotment letter specifies total consideration i.e. Rs 80 lakhs. Out of the total consideration Rs 30 lacs were paid in two instalments by way of cheques on 28.02.2012 (20 lacs) and 22.03.2012 (10 lacs) before issuance of allotment letter. This fact had been mentioned in the allotment letter. The assessee and his brother had 50% each share in the flat. The flat was registered in the joint names of assessee and his brother vide Agreement for Sale dated 17.02.2018. By the time the Sale Agreement was registered, the stamp duty value of the flat had considerably increased.
In scrutiny assessment proceedings the AO invoked the provisions of Section 56(2)(x) of the Income Tax Act and made a difference between the stamp duty value and total consideration. Since, share of the assessee in flat is 50%, the AO made addition of 50% of total difference, under Section 56(2)(x) of the Income Tax Act in hands of the assessee
Pratik Mehta, on behalf of the assessee submitted that the allotment letter was issued in the name of assessee and his brother on 29.03.2012, the said allotment letter clearly mentioned the flat no. and the total consideration. The part consideration was laid by way of cheque and the same had been admitted by the builder in allotment letter, hence the date of allotment letter should be considered for the purpose of determination of Fair Market Value (FMA) of immovable property.
He further submitted that in the case of the assessee’s brother having 50% share in the flat, the AO had called for DVO’s report. The DVO had determined the FMV of said property and the said value should be accepted.
H.M. Bhatt, on behalf of the revenue submitted that a perusal of impugned order would show that the Commissioner of Income Tax Appeals CIT(A) had rejected DVO’s report, as there were flaws in the report. The DVO had determined the value as on 29.03.2012 instead of the date of registration of the Sale deed in February 2018.
Whether the total consideration as agreed between the assessee and developer as mentioned in the allotment letter should be considered or stamp duty value on the date of registration of the agreement should be considered as FMV under the Act.
The two member Bench of Vikas Awasthy, (Judicial Member) and S.Rifaur Rahman, (Accountant Member) observed that on pursuing first proviso to clause (x) would make it clear that where the date of agreement fixing the amount of consideration for the transfer of immovable properties and the date of registration are different, the stamp duty value on the date of agreement shall be taken into consideration for the purpose of section 56(2)(x) of the Income Tax Act. The second proviso to clause (x) further clarifies that the first proviso shall apply where the assessee had paid part consideration by way of cheque or bank draft or through electronic clearing system of on or before the date of agreement.
The Bench allowed the appeal filed by the assessee holding that the case of the assessee fell within the first provision to section 56(2)(x) of the Income Tax Act. The Bench further held that there could not be two FMV for the same property on a given date and directed the Assessing Officer to adopt the Fair Market Value of the property` determined by the DVO as in the case of assessee’s brother.
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