Unregistered Agreement Not Valid for Capital Gains: ITAT Deletes Rs. 30.5 Lakh and Rs. 2.3 Cr Additions for Property Transaction [Read Order]
The tribunal deleted additions of Rs. 30.5 lakh and Rs. 2.3 crore and ruled that an unregistered agreement does not constitute a valid sale for capital gains purposes
![Unregistered Agreement Not Valid for Capital Gains: ITAT Deletes Rs. 30.5 Lakh and Rs. 2.3 Cr Additions for Property Transaction [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/05/agreement.jpg "Unregistered Agreement Not Valid for Capital Gains: ITAT Deletes Rs. 30.5 Lakh and Rs. 2.3 Cr Additions for Property Transaction [Read Order]")
The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has set aside additions of Rs. 30.5 lakh under Section 56(vii)(b) and Rs. 2.3 crore as short-term capital gains, holding that an unregistered agreement on a Rs. 100 stamp paper does not constitute a valid property transfer under the Income Tax Act, 1961. Vikas Bhagoji Shinde (assessee), an individual, faced scrutiny for the...
The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has set aside additions of Rs. 30.5 lakh under Section 56(vii)(b) and Rs. 2.3 crore as short-term capital gains, holding that an unregistered agreement on a Rs. 100 stamp paper does not constitute a valid property transfer under the Income Tax Act, 1961.
Vikas Bhagoji Shinde (assessee), an individual, faced scrutiny for the Assessment Year (AY) 2014-15. The Assessing Officer (AO) made two additions to the assessee’s income. The addition of Rs. 30.5 lakh was made under Section 56(vii)(b), alleging that the assessee purchased a property for Rs. 4.15 crore, which was below its market value of Rs. 4.74 crore.
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The addition of Rs. 2.3 crore was made as short-term capital gains, based on an unregistered agreement dated 28.09.2013 for the alleged sale of the same property for Rs. 10 crore, of which the assessee received Rs. 4.5 crore as his share.
Aggrieved by the AO’s order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) upheld the AO’s findings but reduced the addition under Section 56(vii)(b) to Rs. 29.5 lakh. The CIT(A) confirmed an addition of Rs. 2.3 crore as short-term capital gains.
Aggrieved by the CIT(A)’s order, the assessee filed an appeal to the ITAT. The assessee’s counsel argued that the addition under Section 56(vii)(b) was unjustified, as the total amount paid for the property, including Rs. 4.84 crore to consenting parties for deed cancellation, exceeded the market value of Rs. 4.74 crore.
The counsel further contended that the alleged sale agreement was unregistered, made on a Rs. 100 stamp paper, and no stamp duty was paid. The counsel submitted that no possession was transferred to the buyer, rendering the agreement invalid for capital gains purposes.
The two-member bench comprising R.K. Panda (Vice President) and Vinay Bhamore (Judicial Member) observed that the assessee had paid over Rs. 5 crore for the property, including payments to consenting parties for deed cancellation, which exceeded the market value of Rs. 4.74 crore.
The tribunal observed that the agreement was unregistered, no stamp duty was paid, and no evidence suggested that possession was transferred to the buyer. The tribunal ruled that an unregistered agreement on a Rs. 100 stamp paper does not constitute a valid transfer under Section 2(47) of the Income Tax Act.
The tribunal set aside the CIT(A)’s order and directed the AO to delete both additions Rs. 30.5 lakh under Section 56(vii)(b) and Rs. 2.3 crore as short-term capital gains. The appeal of the assessee was allowed.
To Read the full text of the Order CLICK HERE
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