ITAT Ruling: Allotment Letter Deemed as Agreement to Sell for Stamp Duty Valuation under Section 56(2)(x)

In a significant relief to real estate investors and homebuyers, the Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has clarified the applicability of stamp duty valuation dates in cases where there is a significant time gap between the booking of a property and its final registration. In the case of Pramod Salvi Vs ITO, the Tribunal held that an allotment letter can be treated as an "Agreement to Sell." Consequently, the stamp duty value prevailing on the date of the allotment letter—rather than the date of the final registration deed—should be utilized for computing additions under Section 56(2)(x) of the Income Tax Act 1961, provided specific payment conditions are met.

Case Background and Facts

The dispute arose during the assessment proceedings for the assessment year 2018-19. The assessee, an individual, had filed a return of income declaring a total income of Rs. 6,440. Upon scrutiny, the Revenue Department identified a discrepancy based on the Statement of Financial Transactions (SFT).

The facts revealed that the assessee had purchased two residential units (Flat Nos. 5002 and 5003) in "Orchid Enclave," Mumbai. The purchase consideration recorded for each flat was Rs. 2,04,50,000. However, the Sub-Registrar valued each property at Rs. 2,27,01,500 for stamp duty purposes at the time of registration in 2018.

The Assessing Officer (AO) noted a difference of Rs. 22,51,500 per flat between the transaction value and the stamp duty value. Consequently, the AO invoked Section 56(2)(x) and added the aggregate difference of Rs. 45.03 lakh to the assessee's income under the head "Income from Other Sources."