The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) quashed the confirmation of addition under Section 56(2)(vii)(b) of the Income Tax Act, done solely for payment made by other co-owner before registration.
Assessee had a return of income declaring total income at ₹ 5,93,520/- filed on 27.08.2015. The case was subject to limited scrutiny assessment and notice under Section 143(2) of the Income Tax Act was issued and served upon the assessee.
During the course of assessment the AO observed that the assessee has purchased immovable property for a consideration of ₹ 84,15,300/- as a co-owner jointly with her husband Ajay Kumar Singh.
The purchased consideration was paid by both the co-owner. The assessee was a co-owner of the property having 50% share. The AO noticed that purchased value of the property was of ₹
84,15,300/- whereas the value of the property determined by the Stamp Duty Authority was ₹1,32,82,000/-.
Since, the value determined by the Stamp Duty Authority was more than the agreement value of the property, therefore, the AO was of the view that provision of section 56(2)(vii)(b) of the Income Tax Act was to be applied.
The first payment of ₹1 lacs through banking channel has been made on 18.10.2010 by the husband of the assessee. However, the AO has not agreed with the submission of the assessee and stated that since the property was transferred for the consideration which was less than the stamp duty value, therefore, 50% of the total difference was assessable as income in the assessee’s hand.
The Counsel, Ramesh Iyer, for the assessee, submitted that the other co-owner of the property was the assessee’s husband and the property was purchased in their joint name and it is irrelevant as to who of them has made the payment before the date of registration.
The Counsel further submitted that since the agreement for the property was entered on 16.12.2010, therefore, the same should be taken for the purpose of Section 56(2)(vii)(v) of the Income Tax Act and not the date of registration being 28.12.2014.
The Counsel has also placed reliance on the decision of the co-ordinate bench, Mumbai in the case of Poonam Ramesh Shahjwan V/s ITO(IT) 4(2)(1) [A.Y. 2014-15] and the decision of ITAT, Pune in the case of Sanjay Dattatrya Dapodikar V/s ITO, Ward 6(2) (2019).
On the contrary, the revenue representative, Ajay Singh, supported the order of the CIT(A).
The Tribunal Bench of Judicial Member Kuldip Singh and Accountant Member Amarjit Singh observed that, “The registration of the purchased property was made on 29.12.1014. However, the property was allotted as per the letter of allotment filed dated 16.12.2010. The first cheque for payment towards the purchase of the property was made on 18.12.2010. The assessee has paid ₹ 27,73,980/- before registration of the agreement with the registrar of stamps, Maharashtra.”
Considering the decision in Sanjay Dattatraya Dapodikar wherein it was held that where date of agreement for fixing amount of consideration for purchase of a plot of land and date of registration of sale deed were different the bench noted that, assessee, prior to date of agreement, had paid a part of consideration by cheque, provisos to section 56(2)(vii)(b) being fulfilled, stamp value as on date of agreement should be applied for purpose of said section.
The tribunal bench found no merit in the decision of the Commissioner of Income Tax (Appeals) [CIT(A)], that before the registration of the flat only other co-owner i.e. Ajay Kumar Singh, husband of the assessee has made payment.
It was thus held that, since, it is joint property owned by assessee and her husband, that it is immaterial who had made payment before the date of registration of the property.
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