What if stamp value is different in sale agreement and sale deed?

In case of a difference between the sale agreement value and the sale deed stamp duty value, the former will be considered for the applicability of Section 56(2)(vii) of the Income Tax Act, the Delhi Bench of the Income Tax Appellate Tribunal has ruled.

The order by the tribunal came on an appeal where the appellant, a non-resident individual, who bought an immovable property for Rs 2,22,45,000 in Mumbai.

The agreement to sell in respect of the said flat was entered into on June 21, 2010, and the registration of the flat was done on August 13, 2013. The buyer did not file return of income for the assessment year 2014-15 on the premise that his total income did not exceed the exemption limit.

However, the AO initiated reassessment proceedings under Section 147 of the income tax law for escaping assessment. Under the section, assessing officers have been empowered to assess or reassess any income that is chargeable to tax but has escaped assessment for any assessment year.

During the assessment proceedings, the AO invoked provisions of Section 56(2)(vii)(b) on the premise that the stamp value on the date of registration being Rs 2,22,45,000 shall be taken into consideration while the assesse argued that the stamp valuation on the date of agreement was to be taken into consideration.

Section 56(2)(vii) says that any money or property received by an individual or entity without any consideration is taxable under the head ‘Income from Other Sources’ if its aggregate value exceeds Rs 50,000 in a financial year.

Consequently, the AO passed a draft assessment order on March 27, 2022, making an addition of Rs 40,45,000.

In response a notice by the AO, the taxpayer filed ITR on January 24, 2022. “The AO erred both on facts and in law in confirming the addition of Rs 40,45,000/ to the income under Section 56(2)(vii) (b)(ii) on account of consideration paid for the purchase of the flat, completely disregarding the actual date of allotment agreement and disregarding the Provisions of proviso to Section 56(2)(vii)(b)(ii) of the Act,” Shyamkumar Madhavdas Chugh said in his appeal.

While ruling in favour of the taxpayer, the tribunal in its January 8, 2024 order said: “First proviso to Section 56(2)(vii)(b) categorically provides that where the date of agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purpose of this provision.”