ITAT Mumbai Partially Allows Appeal in Rekha Singh’s Case Regarding Section 56(2)(vii)(b) of the Income Tax Act

Case Name:

Rekha Singh vs. ITO 29(3)(2) - ITA No. 2406/Mum/2023 (A.Y. 2015-16)

Key Takeaways:

1. The ITAT directed the Assessing Officer to consider the stamp duty value on the date of allotment for the purpose of section 56(2)(vii)(b) and not the stamp value as on the date of registration.
2. It was held that the identity of the person making the payment before the date of registration is immaterial in cases of jointly owned property.
3. The decision provides clarity on the treatment of stamp duty value and the date of agreement in cases of immovable property transactions under section 56(2)(vii)(b) of the Income Tax Act.

Case Synopsis:

The case involves an appeal filed by Rekha Singh against the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2015-16. The appeal is related to the addition made by the Assessing Officer (AO) under section 56(2)(vii)(b) of the Income Tax Act, 1961.

Here’s a breakdown of the key points in the document:

1. Parties Involved:

Appellant: Rekha Singh

Respondent: Income Tax Officer (ITO) 29(3)(2)

2. Case Summary:

Rekha Singh, the appellant, jointly purchased an immovable property with her husband for a consideration of ₹ 84,15,300.

The Stamp Duty Authority determined the value of the property to be ₹ 1,32,82,000, which was higher than the agreement value.

The AO applied section 56(2)(vii)(b) of the IT Act, as the value determined by the Stamp Duty Authority exceeded the agreement value.

The AO made an addition of ₹ 24,33,350 under section 56(2)(vii)(b) of the Act.

3. Grounds of Appeal:

The appellant raised several grounds of appeal related to the addition made by the AO under section 56(2)(vii)(b) of the Act.

4. Proceedings: The appellant filed an appeal before the Commissioner of Income Tax (Appeals) (CIT(A)), who confirmed the addition made by the AO.

During the appellate proceedings before the ITAT, the appellant’s counsel argued that the date of agreement should be considered for the purpose of section 56(2)(vii)(b) and not the date of registration.

The appellant’s counsel also cited relevant decisions of the ITAT Mumbai and ITAT Pune in support of their arguments.

5. Decision:

After considering the facts, provisions of section 56(2)(vii)(b), and relevant case laws, the ITAT directed the AO to consider the stamp duty value on the date of allotment (16.10.2010) for the purpose of section 56(2)(vii)(b) and not the stamp value as on the date of registration.

The ITAT also held that it is immaterial who made the payment before the date of registration, as the property was jointly owned by the appellant and her husband.

As a result, the appeal of the appellant was partly allowed.

The decision of the ITAT provides clarity on the treatment of stamp duty value and the date of agreement in cases of immovable property transactions.

FAQ:

Q1: What was the subject of the appeal in Rekha Singh’s case?

A1: The appeal was related to the addition made by the Assessing Officer under section 56(2)(vii)(b) of the Income Tax Act, 1961, concerning the purchase of immovable property jointly with her husband.

Q2: What was the decision of the ITAT regarding the treatment of stamp duty value?

A2: The ITAT directed the Assessing Officer to consider the stamp duty value on the date of allotment for the purpose of section 56(2)(vii)(b) and not the stamp value as on the date of registration.

Q3: Why was the identity of the person making the payment before the date of registration considered immaterial?

A3: The ITAT held that in cases of jointly owned property, the identity of the person making the payment before the date of registration is immaterial.