Stamp Duty Value on Agreement Date vs Registration Date: ITAT Surat Remand in Pratish Shah (HUF) Vs ITO

Background of the Dispute

In Pratish Shah(HUF) Vs ITO (ITAT Surat), the Surat Bench of the Income Tax Appellate Tribunal examined whether, for the purpose of Section 56(2)(vii)(b) of the Income Tax Act 1961, the correct stamp duty valuation should be taken as on the date of the purchase agreement or as on the date of registration, where the two dates are different.

The assessee, a HUF, had purchased an immovable property during Assessment Year 2018-19. The price actually paid was lower than the stamp duty value adopted by the registering authority at the time of registration. The Assessing Officer invoked Section 56(2)(vii)(b) and taxed the difference as “income from other sources”.

The core issue before the Tribunal was:

When the agreement to purchase and the registration occur on different dates, should the stamp duty value for Section 56(2)(vii)(b) be taken as on the date of agreement or the date of registration?

The Tribunal concluded that, in light of the proviso to Section 56(2)(vii)(b), the stamp duty value as on the date of the agreement must be considered, provided the assessee can establish that:

  • Consideration was fixed on or before the agreement date, and
  • Part of the consideration was paid by banking channels before the date of registration.

Since there was a factual dispute regarding the very existence and proof of the earlier agreement date and the corresponding payment, the Tribunal remanded the matter back to the Assessing Officer (AO) for fresh verification.

Brief Facts of the Case

Return Filing and Scrutiny

  • The assessee filed return of income for AY 2018-19 on 31.08.2018 declaring total income of Rs. 2,81,870/-.
  • The case was selected for scrutiny under CASS.
  • During the assessment proceedings, the AO observed that the assessee had purchased an immovable property in the relevant previous year.

Property Transaction and Valuation Difference

  • Purchase consideration actually paid: Rs. 63,24,500/-.
  • Stamp duty value as per registering authority: Rs. 87,81,709/-.
  • Difference between stamp duty value and purchase price: Rs. 24,57,209/-.

The AO treated this differential amount of Rs. 24,57,209/- as “other income” taxable under Section 56(2)(vii)(b) and completed the assessment under Section 143(3) on 19.02.2021 determining total income at Rs. 27,39,075/-.

First Appeal Before CIT(A)

The assessee challenged the addition before the National Faceless Appeal Centre, Delhi (CIT(A)). The key plank of the assessee’s argument was that the first payment for purchase of the property had been made much earlier, on 18.02.2013, and therefore, in terms of the proviso to Section 56(2)(vii)(b), the stamp duty valuation as on 18.02.2013 should be used.

However, the CIT(A) upheld the AO’s order and sustained the addition, effectively negating the assessee’s contention about the earlier agreement date and corresponding payment.

Grounds Raised Before ITAT

In the second appeal before the ITAT Surat, the assessee put forth several grounds, of which the following were material: