No Addition can be made u/s 56(2)(x)(b) of IT Act if Allotment Letter issued for Purchase Property in Future: ITAT [Read Order]

The Mumbai bench of Income Tax Appellate Tribunal (ITAT) has recently held that no addition could be made under Section 56(2)(x)(b) of Income Tax Act 1961 if an allotment letter is issued for purchase of property in future.

Assessee Sulochana Saijan Modi is an individual who filed its return of income on 13.06.2018 declaring total income of Rs.3,54,980/-.

The case was selected for limited scrutiny for examining the reasons for stamp duty valuation of property being higher than the transaction value.

In the assessment completed under Section 143(3) of the Income Tax Act, the Assessing Officer (AO) added the difference in value of the property between the stamp duty valuation and the transaction value, in terms of Section 56(2)(x)(b) of the Income Tax Act, amounting to Rs.57,85,300/-

When the assessee filed an appeal before the Commissionet of Income Tax (Appeals) [CIT(A)] against the order of the AO ,CIT(A) upheld the decision of the AO. Thereafter the assesee filed a second appeal before the tribunal.

Shashi Tulsian , counsel for the assessee submitted that allotment letter issued by the seller, J.P. Infra (Mumbai) Pvt. Ltd. was duly accepted by the assessee and in acceptance, the assessee paid booking amount and therefore, said allotment letter fulfills all ingredients of contract agreement for purchase of flat.

Thus, Assessee fulfills the requirement of provision to Section 56(2)(x)(b) of the Income Tax Act as part of the consideration has already been paid by account payee cheuqe at the time of entering into the purchase agreement.

Ajay Singh, Counsel for the revenue, supported the decision of the assessing officer .

The tribunal relied upon the decision of the Parth Dasrath Gandhi vs Addl./Deputy/Asst. CIT held that “the allotment letter should be considered as agreement for sale.”

Further assessee fulfilled the requirement of proviso 1 & 2 of section 56(2)(x)(b) of the Income Tax Act Act .

Then the tribunal   restored this issue to the file of the AO for the limited purpose of comparing the stamp duty valuation as on the date of the allotment with the transaction value recorded in the registration document. Therefore the two member bench of Kuldip Singh, (Judicial Member) and  Om Prakash Kant, (Accountant Member)  allowed the appeal filed by the assessee.

To Read the full text of the Order CLICK HERE

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