ITAT Mumbai Deletes Rs. 18,53,457/- Addition Under Section 56(2)(vii)(b)(ii): Agreement Date Prevails Over Registration Date
Overview of the Case
In a significant ruling that clarifies the temporal applicability of amended provisions under the Income Tax Act, 1961, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) rendered its decision on 21/02/2022 in Rajib Rathindra Saha Vs ITO(IT)-4(2)(1) [ITA No. 7352/MUM/2019], pertaining to Assessment Year 2014-15. The Tribunal partly allowed the assessee's appeal and directed deletion of an addition of Rs. 18,53,457/- that had been made under Section 56(2)(vii)(b)(ii) of the Income Tax Act, 1961.
The core legal question before the Tribunal was straightforward yet consequential: when an agreement for purchase of immovable property is executed prior to the effective date of a statutory amendment, can the amended provision be invoked merely because the formal registration of that agreement takes place after the amendment comes into force?
Background and Factual Matrix
The Property Transaction
The assessee, Rajib Rathindra Saha, purchased Flat No. 1104 in Zircon Building, a project developed by Nirmal LifeStyle, for a total consideration of Rs. 68,45,550/-. The sequence of events surrounding this transaction is central to the legal controversy and can be laid out chronologically as follows:
| Date | Event |
|---|---|
| 16/04/2010 | Earnest money paid by the assessee for purchase of the flat |
| 18/03/2013 | Stamp duty paid by the assessee |
| 31/03/2013 | Agreement executed between the assessee and Nirmal Lifestyle Ltd. |
| 02/04/2014 | Agreement registered under the Registration Act, 1908 |
At the time of registration on 02/04/2014, the stamp duty value of the property stood at Rs. 87,02,007/-. This created a difference of Rs. 18,53,457/- between the actual consideration paid by the assessee and the stamp duty value as on the date of registration.
The Assessing Officer's Position
The Assessing Officer, during assessment proceedings for Assessment Year 2014-15, took the position that since the agreement was registered during the period relevant to Assessment Year 2014-15, the provisions of Section 56(2)(vii)(b)(ii) as amended by the Finance Act, 2013 with effect from 01/04/2014 were squarely applicable. On this reasoning, the Assessing Officer made an addition of Rs. 18,53,457/-, representing the shortfall between the stamp duty value and the actual consideration paid.
Notably, the assessee had during the course of assessment proceedings, vide letter dated 22/12/2016, requested that the matter be referred to the District Valuation Officer (DVO). However, the Assessing Officer proceeded to make the addition without referring the matter to the DVO.
First Appellate Proceedings Before CIT(A)
Aggrieved by the assessment order dated 31/12/2016, the assessee filed an appeal before the Commissioner of Income Tax (Appeals)-58, Mumbai. The CIT(A), in an order dated 23/10/2019, directed the Assessing Officer to refer the matter to the DVO for determining the value as on 31/03/2013, i.e., the date of execution of the agreement, and to recompute the addition based on the DVO's determination. This direction by the CIT(A) gave rise to the present appeal before the ITAT.