ITAT Mumbai Rules in Favour of Assessee on Stamp Duty Valuation and Allotment Date

Background of the Dispute

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) in the case of ABBAS Fakhruddin Vs ITO examined whether stamp duty valuation as on the registration date could be used to make addition under Section 69 and Section 56(2)(vii)(b)/(x) when a residential flat had been allotted several years earlier and the full consideration had already been paid before the relevant Assessment Year.

The Assessing Officer (AO) had treated the difference between the stamp duty value and the stated consideration as unexplained investment, but the Tribunal ultimately deleted the entire addition, holding that the date of allotment is decisive for applying the proviso to Section 56(2)(x).

Facts Leading to Reopening of Assessment

Information Triggering Reassessment

For A.Y. 2017-18, the AO received information that:

  • The assessee had not filed any return of income for the year.
  • An immovable property was registered on 16.02.2017 for a declared consideration of Rs. 36,00,000/-.
  • The stamp duty valuation as per the Sub-Registrar/SRO for that property was Rs. 67,56,275/-.
  • Based on this discrepancy, the AO believed that Section 56(2)(vii)(b) / Section 56(2)(x) was attracted and that the assessee may have made unexplained investment in the property.

On this basis, proceedings were reopened under Section 147 by issuing notice under Section 148.

Proceedings Under Section 148A and Best Judgment Assessment

  1. A notice under Section 148A(b) was issued, giving the assessee an opportunity to explain.
  2. An order under Section 148A(d) was passed, and a fresh notice under Section 148 was issued on 28.07.2022.
  3. The assessee did not respond or participate during the reassessment proceedings.

Due to this non-compliance, the AO completed the assessment under best judgment provisions of Section 144 and:

  • Treated the difference between stamp duty value (Rs. 67,56,275/-) and consideration as unexplained investment under Section 69.
  • Effectively made an addition of Rs. 67,56,275/- in the hands of the assessee.

First Appellate Proceedings Before NFAC

The assessee challenged the assessment order before the National Faceless Appeal Centre (NFAC), Delhi / Ld. Commissioner of Income Tax (Appeals) under Section 250.

However, the Ld. Commissioner upheld the AO’s action and confirmed the addition, leading the assessee to file a further appeal before the ITAT Mumbai.

Core Facts Presented Before the ITAT

Booking and Allotment of Flat

Before the Tribunal, the assessee’s counsel laid out the complete chronology supported by documentary evidence:

  • The assessee had booked a flat bearing No. 1402, admeasuring approximately 39.95 sq. meters carpet area on the 14th floor of the building Qamar Enclave, situated at Plot CS.No.639 of Mazgaon Division, 309 and 319, Ram Bhau Bhogle Marg, Mumbai – 400010.
  • An allotment letter dated 20.07.2008 was issued by the builder confirming the allotment of the said flat.
  • At the time of allotment, the assessee paid a down payment of Rs. 10,00,000/- through bank cheque.

The allotment letter clearly specified the total sale consideration of the flat as Rs. 36,00,000/-.

Payment Schedule and Mode of Payment

The balance amount was paid over several years through banking channels. The payment trail, as placed before the Tribunal, was as follows: