Facts of the Case

The assessee, Mr. Mohd. Rizwan Khan, filed an appeal before the Income Tax Appellate Tribunal (ITAT), Allahabad Bench, challenging the order of the Commissioner of Income Tax (Appeals) for the relevant assessment year.

The Assessing Officer made an addition under Section 56(2)(vii)(b) of the Income-tax Act, 1961 on the ground that the assessee had purchased immovable properties at a consideration lower than the value adopted for stamp duty purposes. The difference between the stamp duty valuation and the actual purchase price, amounting to ₹41,48,166, was treated as taxable income in the hands of the assessee.

The addition was confirmed by the Commissioner (Appeals), leading to the present appeal before the Tribunal.

Issues Involved

Whether the difference between the stamp duty value and the actual consideration paid for purchase of immovable property is taxable as income under Section 56(2)(vii)(b) in the hands of the purchaser.

Petitioner’s (Assessee’s) Arguments

  • The properties were purchased for genuine consideration as reflected in the sale deeds.
  • The stamp duty valuation did not represent the fair market value of the properties.
  • The addition was made mechanically without proper appreciation of facts and circumstances.
  • The provisions of Section 56(2)(vii)(b) were incorrectly applied.

Respondent’s (Department’s) Arguments

  • The properties were purchased at a value lower than the stamp duty valuation adopted by the State authorities.
  • Under Section 56(2)(vii)(b), such difference is deemed income in the hands of the purchaser.
  • The Assessing Officer had correctly applied statutory provisions while making the addition.

Court Order / Findings

The Tribunal examined the material on record, the statutory provisions, and the arguments of both sides. It considered whether the difference between stamp duty value and actual consideration was rightly brought to tax under Section 56(2)(vii)(b).

After evaluating the facts and circumstances of the case, the Tribunal adjudicated the validity of the addition in accordance with the applicable legal provisions governing taxation of property transactions at undervalued consideration.

Important Clarification

Section 56(2)(vii)(b) (as applicable to the relevant assessment year) is an anti-abuse provision designed to tax the recipient of immovable property where the consideration paid is lower than the stamp duty value beyond the permissible threshold. The applicability depends on factual determination of valuation, statutory conditions, and evidence produced by the assessee.

 

Link to download the order –https://itat.gov.in/public/files/upload/1614249505-105%20Mohd%20Rizwan%20Khan.pdf

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