Allotment Letter Qualifies as Agreement Under Section 56(2)(x): ITAT Mumbai Rules in Favour of Assessee, Caps Addition at 50% Share
Case Overview
Case: Anand Radhesham Vs Assessing Officer
Forum: Income Tax Appellate Tribunal, Mumbai
Assessment Year: 2018-19
Sections Involved: Section 56(2)(x), Section 143(1), Section 143(2), Section 143(3), Section 50C, Section 43CA, Section 2(47)(v) of the Income Tax Act, 1961
In a significant ruling delivered on 30.03.2026, the ITAT Mumbai resolved two critical questions arising from a property transaction — first, whether an allotment letter can be treated as an "agreement" for the purpose of the proviso to Section 56(2)(x) of the Income Tax Act, 1961, and second, whether an addition made on account of stamp duty differential can be imposed entirely on one co-owner when the property is held jointly. The Tribunal answered both questions in favour of the assessee, providing important guidance on substance-over-form principles in property taxation.
Background and Facts of the Case
The assessee, an individual, filed his return of income for A.Y. 2018-19 declaring a total income of Rs. 1,61,590/-. The return was initially processed under Section 143(1) of the Income Tax Act, 1961. Subsequently, the case was selected for limited scrutiny under CASS for verification of investment in immovable property, and notices under Section 143(2) and Section 142(1) of the Act were duly issued and served.
During the course of assessment, the Assessing Officer noted that the assessee had purchased an immovable property for a stated consideration of Rs. 1,02,72,000/-. However, the stamp duty value of the said property was determined by the Assessing Officer at Rs. 2,34,10,500/-. After considering the assessee's submissions, the Assessing Officer passed the assessment order dated 08.04.2021 under Section 143(3) read with Section 143(3A) and Section 143(3B) of the Act, determining the total income at Rs. 1,33,90,000/- by making an addition of Rs. 1,31,38,500/- — representing the difference between the purchase consideration and the stamp duty value — as income from other sources under Section 56(2)(x) of the Income Tax Act, 1961.
The Property Transaction — Key Timeline
The property in question was a flat promoted by Omkar Realtors and Developers Pvt. Ltd., allotted jointly to the assessee and his wife, Smt. Rekha Anand Kanodia, pursuant to an allotment letter dated 08.05.2013. The sale consideration was fixed at Rs. 1,02,72,000/-, payable through a structured instalment schedule linked to various stages of construction completion.
The payment schedule prescribed under the allotment letter was as follows:
| Stage of Construction | Instalment (%) |
|---|---|
| On initiation of plinth | 19% |
| On completion of Lower Ground Plinth | 11% |
| On completion of 4th Lower Ground Slab | 5% |
| On completion of 3rd Podium Floor Slab | 5% |
| On completion of 2nd Floor Slab | 5.50% |
| On completion of 6th Floor Slab | 5.50% |
| On completion of 10th Floor Slab | 5.50% |
| On completion of 14th Floor Slab | 5.50% |
| On completion of 18th Floor Slab | 5.50% |
| On completion of 22nd Floor Slab | 5.50% |
| On completion of 26th Floor Slab | 5.50% |
| On completion of 30th Floor Slab | 5.50% |
| On completion of 34th Floor Slab | 5.50% |
| On completion of 34th Floor Slab | 5.50% |
| On Possession | 5% |
Following the allotment, the assessee made substantial payments through banking channels from F.Y. 2013-14 onwards, up to F.Y. 2017-18. The property was formally registered only upon completion of construction during F.Y. 2017-18, corresponding to A.Y. 2018-19.
MOU Chain and Prior Transactions
The Authorized Representative brought to the Tribunal's attention an MOU dated 20.03.2013 between Good Value Financial Services Pvt. Ltd. (the transferor) and the assessee. Good Value Financial Services Pvt. Ltd. had itself entered into a prior MOU dated 25.06.2010 with Omkar Realtors and Developers Pvt. Ltd. for investment in approximately 50,000 sq. ft. of saleable area in the Crescent Bay, Tower 1 project, under which it had already paid a part consideration of Rs. 45,54,480/-.