The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has deleted an addition of ₹12.36 lakh made under Section 56(2)(x)(b) of the Income Tax Act, 1961, holding that the stamp duty value of a property must be considered as on the date of allotment where the consideration was fixed and part-payment had already been made through a banking channel.
The Bench of Amit Shukla (Judicial Member) and Arun Khodpia (Accountant Member) observed that an allotment letter can be treated as an agreement to sell for the purposes of Section 56(2)(x). Consequently, the value applicable on the date of the allotment letter—not the value prevailing when the subsequent sale agreement was registered—was relevant for determining whether any taxable difference existed.
The appeal arose from an assessment concerning Assessment Year 2018-19. The assessee had purchased a property for a consideration of ₹44 lakh, apart from development charges, advance maintenance and other taxes. The property was allotted through a letter dated December 11, 2010.
At the time of allotment, the assessee paid ₹8.80 lakh and subsequently made further payments on September 24, 2011. The property was jointly owned by the assessee and her husband.
However, disagreements between the tenants occupying the property and the builder resulted in a substantial delay in construction. The project was eventually completed in 2017, nearly seven years after the initial allotment.
Information available on the Income Tax Department’s Insight portal showed that the assessee purchased the property under an agreement dated November 3, 2017, for ₹46.50 lakh. Its stamp duty value on that date was ₹58.86 lakh.
The Assessing Officer consequently treated the difference of ₹12.36 lakh as income from other sources under Section 56(2)(x)(b). The provision taxes the difference between the consideration paid for an immovable property and its stamp duty value when the statutory conditions are satisfied.
On the basis of this information, the assessment was reopened under Section 147 and a notice was issued under Section 148. In response, the assessee filed a return declaring a total income of ₹3,48,570.
Before the Assessing Officer, the assessee argued that the property had effectively been purchased through the allotment letter dated December 11, 2010, under which the consideration was fixed and part-payment was made. Therefore, the stamp duty value applicable on the allotment date should be adopted instead of the value prevailing on the registration date.
The Assessing Officer rejected the explanation and adopted the stamp duty value as on November 3, 2017. The resulting difference of ₹12.36 lakh was added to the assessee’s income under Section 56(2)(x)(b).
The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, subsequently upheld the addition. The appellate authority was not convinced by the assessee’s reliance on the allotment letter and dismissed the appeal.
Before the Tribunal, the assessee contended that the dispute was covered by several earlier decisions of the Mumbai ITAT, including Pinstripe Properties (P.) Ltd. v. DCIT, Dharmesh Ramesh Jhaveri v. DCIT, Smt. Mohini Bharat Kumar Ludhani v. NFAC, Manjulaben Himmatlal Jain v. ITO and Sajjanraj Mehta v. ITO.
The department maintained that the relevant date for stamp duty valuation should be the date of the sale agreement and not the date of allotment. It also argued that the allotment letter could not be relied upon because it was not a registered document.
Rejecting the Revenue’s position, the Tribunal referred to the provisos to Section 56(2)(x). The first proviso permits the stamp duty value prevailing on the date of the agreement to be adopted when the agreement fixing the consideration and the registration occur on different dates.
The second proviso requires that the consideration, or a part of it, should have been paid through an account-payee cheque, account-payee bank draft, electronic clearing system or another prescribed electronic mode on or before the date of the agreement.
The Tribunal noted that the assessee had made part-payment through a proper banking channel under the terms of the allotment letter, well before the execution and registration of the sale agreement. Documentary evidence, including payment receipts, had been placed on record.
Following its earlier ruling in Pinstripe Properties, the Bench held that an allotment letter fixing the consideration can constitute an agreement to sell for the purposes of Section 56(2)(x). Registration of the allotment letter was not treated as a prerequisite for applying the beneficial proviso when the transaction and prior payment were supported by evidence.
The Tribunal concluded that December 11, 2010—the date of the allotment letter—was the relevant date for determining the stamp duty value. The stamp duty value prevailing on November 3, 2017, when the agreement was registered, could therefore not form the basis of the disputed addition.
Finding no contrary facts or judicial ruling placed on record by the Revenue, the ITAT directed the Assessing Officer to delete the ₹12.36 lakh addition and recompute the assessee’s income in accordance with its directions.
The Tribunal also condoned a delay of 231 days in filing the appeal. It accepted the explanation that the assessee, a senior citizen, had not received the appellate communications because they continued to be sent to her son’s email account despite a request to use her daughter’s email address. A technical storage issue affecting the son’s email account and prolonged medical exigencies faced by the family were also cited.
The Tribunal found that sufficient cause had been established for the delay.
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