ITAT instructs AO to take stamp duty value into account for Section 56(2)(vii)(b) addition on the allocation date

Rekha Singh Vs ITO (ITAT Mumbai)

Facts:

1. Appellant Appeal: The taxpayer appealed against an order by the Commissioner of Income Tax (Appeals) for the Assessment Year 2015-16.
2. Grounds of Appeal: Assessee challenged:
   • The addition made by the Assessing Officer (AO) under Section 56(2)(vii)(b) amounting to Rs. 24,33,350/-
   • Denial of benefit under Section 56(2)(vii)(b) due to the non-registration of the sale deed.
   • Confirmation of addition based on payments made by the co-owner before registration.
3. Assessment: The AO observed a property purchase for Rs. 84,15,300/- jointly by the taxpayer and spouse. Stamp Duty value was higher.
4. Dispute: AO applied Section 56(2)(vii)(b) due to the property’s higher Stamp Duty value than the agreement value. Only the spouse made payments before registration.
5. Appeal to CIT(A): CIT(A) upheld the addition due to payments made by the spouse before registration.
6. Arguments: Assessee argued joint ownership and the relevance of the agreement date over the registration date, citing legal precedents and providing documents.
7. Decision: The Tribunal directed the AO to consider the Stamp Duty value on the agreement date, not the registration date. Ownership share and payment before registration were considered irrelevant in a joint ownership scenario.

Observations:

1. Property Purchase: Taxpayer and spouse jointly bought property; Stamp Duty value was higher than the purchase amount.
2. Application of Section 56(2)(vii)(b): Dispute arose due to differing values between agreement and Stamp Duty; AO applied the section for taxation.
3. Legal References: Assessee presented legal judgments supporting their argument of considering the agreement date for valuation.

Conclusion:

1. Section Application: Tribunal directed to consider Stamp Duty value on the agreement date for taxation.
2. Ownership and Payments: Tribunal deemed joint ownership as crucial, dismissing the relevance of payments made before registration when property is jointly owned.

In essence, the Tribunal sided with the taxpayer, emphasizing the importance of the agreement date for valuation in cases of joint property ownership, disregarding payments made before registration as the decisive factor.

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