The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) held that the extent that the date of allotment letter is relevant for determining FMV of asset/flat.
The assessee Imran Mohamed Ali Kapadia along with his brother purchased a flat in building known as Modern Enclave. Mahanagar Construction Pvt. Ltd. the developer of said residential building issued allotment letter in the joint names of the assessee and his brother Haji Ahmed Mohammed Ali Kapadia. The allotment letter specifies total consideration i.e. ₹ 80 lakhs. Out of the total consideration ₹ 30 lakhs were paid in two installments by way of cheques before issuance of allotment letter.
By the time Sale Agreement was registered, the stamp duty value of flat had considerably increased to ₹ 1,30,94,000/-. In scrutiny assessment proceedings the Assessing Officer (AO) invoked the provisions of Section 56(2)(x) of the Income Tax Act and made addition of 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, Section 56(2)(x) of the Income Tax Act in hands of the assessee.
Aggrieved by the order of AO, assesee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)].
The Authorised Representative of the assessee (AR) Pratik Mehta made two fold submissions. First, the allotment letter was issued in the name of assessee and his brother, the said allotment letter clearly mention the flat no. and the total consideration.
The part consideration was laid by way of cheque and the same has 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 referred to the proviso to Section 56(2)(x)(b) of the Income Tax Act.
The Departmental Representative (DR) H.M.Bhatt, submitted that a perusal of impugned order would show that the CIT(A) has rejected Departmental Valuation Officer’s (DVO) 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. The DR prayed for upholding the impugned order.
The Bench comprising of Vikas Awasthy, Judicial Member and S.Rifaur Rahman, Accountant Member observed that a bare perusal of first proviso to clause (x) of Section 56 of Income Tax Act 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.
In the instant case, the allotment letter clearly specifies the total consideration agreed between the parties and also the fact that out of total consideration of Rs.80 lakhs, Rs 30 lakhs has been paid by way of cheque (2 cheques) before the issuance of allotment letter.
Hence, the Tribunal is in agreement with the primary contention of the assessee to the extent that the date of allotment letter is relevant for determining FMV of asset/flat.
The DVO in report determined FMV of flat on the date of letter of allotment as ₹ 83,51,107/-. Although, in assessment proceedings the assessee has not asked for DVO’s report, nevertheless, in the case of brother of assessee DVO’s report was sought.
Therefore, the Tribunal directed the AO to adopt the Fair Market Value of the property`determined by the DVO as in the case of assessee’s brother.
Hence appeal of the assessee was allowed.
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