KARAN DEVINDER JULKA,MUMBAI V. ITO 41(3)(2), MUMBAI

ITA 509/MUM/2025

AI Insights

The case revolves around the dispute concerning the valuation of a residential flat purchased by Karan Devender Julka and his family, which was assessed for tax purposes based on a higher stamp duty valuation date rather than the date of the initial payment. The assessee argued that the valuation should be based on the date of the oral agreement and the initial payment made in 2011, rather than the date of registration in 2016. The assessing officer added the difference in valuation to the assessee's income, which was upheld by the Commissioner (Appeals). However, the Tribunal found that the payments made before the registration were substantial and thus allowed the appeal, directing that the valuation should be considered as per the date of the agreement and initial payment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314285 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, Indian Contract Act 1872
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value
• Section: 147; 148; 56; 56(2)(vii)(b); 10

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, HON’BLE JUDICIAL MEMBER SHRI GIRISH AGRAWAL, HON’BLE ACCOUNTANT MEMBER ITA No. 509/Mum/2025 (AY: 2017-18) (Physical hearing) Karan Devender Julka, A-1403, Gemini Building, Hiranandani Meadows, Thane, Maharashtra -400610 PAN. AFVPJ 5853 L Vs ITO 41(3)(2), Kautilya Bhawan, BKC, Mumbai Appellant (Respondent) Assessee Represented by : Shri Kirit Sheth CA Department Represented by : Shri Rajesh Meshram, Sr DR Date of Conclusion of hearing : 26.03.2025 Date of Pronouncement of Order : 08.05.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessing is directed against the order of National Faceless Appeal Centre- New Delhi/ learned Commissioner (Appeals) dated 29.11.2024 for the assessment year (AY) 2017-18. The assessee has raised four grounds of appeal. (1) Ground No. 1.- the oral agreement for purchase of residential flat was made on 30th April 2011 being date of payment of first instalment of ₹ 3,60,720/- against the orally agreed consideration of ₹ 39,64,200/-. The first proviso to section 56 (2)(vii) refers to the „date of agreement fixing the amount of consideration for the transfer of immovable property „. The proviso doesn‟t stipulate that agreement should be in writing. Under section 10 of the Indian Contract Act 1872, an oral agreement is a valid agreement if there is a (a) free will (b) party is competent to contract (c) not expressly declared as void. The conduct of the appellant in making periodic payment of instalments is evidence of the existence of oral agreement. Hence stamp duty value as on 30 April 2011 should be compared with the actual consideration paid. ITA No. 509/Mum/2025 (AY 2017-18) Karan Devender Julka 2 (2) Ground 2 - the oral agreement as aforesaid was in respect of purchase of yet to be constructed residential flat. At the time of payment of first instalment the appellant acquired only a right to own an under construction residential flat. This right was akin to the right to sue for a specific performance. On the other hand, the agreement for sale was registered only on 30 December 2016. After (a) all the instalments were paid (b) the residential flat was fully constructed and (c) completion certificate was received. Your appellant respectfully submits that stamp duty value as on 30 December 2016 cannot be adopted since the nature of right itself had undergone change when compared with three rights originally acquired at the time of fixation of total consideration amount. (3) Ground No3 -Your appellant respectfully submits that, without prejudice to the above two grounds, the valuation of the residential flat should be referred to the valuation officer as contemplated in the provision of below to section 56 (2)(vii). 2. Brief fact facts of the case are that assessee filed his return of income for the assessment year (AY) 2017-18 declaring total income at ₹ 6,90,570/-. The case of assessee was reopened under section 147 by issuing notice under section 148 dated 21.07.2022. As the issue of reopening is not a ground of appeal before us, thus, those facts are not discussed herein. During the assessment the assessing officer noted that assessee along with two of his family members purchased a residential flat for a consideration of Rs.39,64,200, however, stamp duty valuation authority (SVA) for the purpose of registration of transaction valued such property at ₹ 59,02,000/-, thereby there is a difference of ₹ 19,37,800/-. The assessing officer was of the view that provision of section 56(2)(vii)(b) of the Income Tax Act are attracted. The assessee vide show cause notice dated 06.02.2023 was asked to explain as to why the difference vis a vis value declared by the assessee and the value determined by SVA may not be added to the income of assessee. The assessee filed his reply to the show cause notice issued ITA No. 509/Mum/2025 (AY 2017-18) Karan Devender Julka 3 by assessing officer. In the reply the assessee stated that he along with his Mother Dimpy Julka, Father Devinder Julka purchased a residential flat, which was booked in 2011 an initial payment of ₹ 3,60,720/- was paid to builder via Oriental Bank of Commerce (OBC) on 30th April 2011. The part consideration was paid after fixing the final consideration. Thereafter, he made various payments between the years 2011 to 2016 through banking mode as per the demand raised by the builder. The payment made to builder against the flat is also mentioned in the registered agreement, specifying the percentage of total payment on different dates as per progress of the construction. The assessee also furnished the mode of payment and the copy of registered agreement executed by assessee, along with his mother and father. The assessee also stated that that where the date of agreement fixing the amount of consideration for transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for the purpose of sub-clause-(b) of clause (vii) of sub-section (2) of section 56 as per the proviso to the said section if the part of consideration is paid by any other mode other than cash on or before the agreement. The assessing officer disregarded the contents of reply of the assessee and added 1/3 (one third) of difference between the sale value shown by assessee and the value determined by staff valuation authority, thereby made an addition of ₹ 6,45,870/-in the assessment order passed on 13 January 2023. Aggrieved by the additions in the assessment order, the assessee filed appeal before learned Commissioner (Appeals). Before learned Commissioner (Appeals) the assessee again filed detailed written submission. The submissions of assessee are recorded in the para- 4 of order of learned Commissioner (Appeals). The assessee in addition to his factual submission again stated that that where the date of agreement fixing the amount of ITA No. 509/Mum/2025 (AY 2017-18) Karan Devender Julka 4 consideration for transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for the purpose of sub-clause-(b) of clause (vii) of sub-section (2) of section 56 as per the proviso to the said section, if the part of consideration is paid by any other mode other than cash on or before the agreement. The assessee reiterated that entire consideration against purchase of flat was paid through banking channel that too prior to registration of document in the year 2016, thus, the value as SVA in the year 2011 is to be considered. 3. The learned Commissioner (Appeals) after considering the submission of assessee despite recording the various submission of assessee in para-5 and 5.1 of his order confirm the action of assessing officer in two sentences by taking view that “It can be seen, though the initiation for purchase of property was done in the year 2011, the registration of property as well as possession was made in the year 2016. As per provisions of section 56(2)(vii)(b) the view taken by AO is justified and hence the addition made of ₹ 6,47,870/- is confirmed”. Further aggrieved, the assessee has filed the present appeal before Tribunal. 4. On carful perusal of grounds of appeal, we find that the grounds of appeal framed at the instance of assessee are narration of facts and law, which is not in accordance with the Income Tax (Appellate Tribunal) Rules-1963. Therefore, we reframed the grounds of appeal in the following manner; “Whether on the basis of facts and circumstances of the case and in law, the learned Commissioner (Appeals) erred in confirming the action of Assessing Officer in making addition of ₹ 6,45,870/- under section 56(2)(vii)(b) of the Act”. 5. We have heard the submission of learned authorised representative of the assessee and the learned senior departmental representative for the revenue. The learned authorised representative of the assessee submits that he along with his Mother Dimpy Julka, Father Devinder Julka purchased a residential flat, which was booked in 2011. Initial ITA No. 509/Mum/2025 (AY 2017-18) Karan Devender Julka 5 payment of ₹ 3,60,720/- was paid to builder through Cheque drawn on OBC 26.04.2011 which was cleared by her banker on 30th April 2011. The said cheque was issued from the account of her mother; copy of pass book is filed on record. Entire payment of consideration was paid through banking channel either from the account of assessee or from the account of his mother or father who are also co-owners. Similarly other payments made through banking channel is reflected in the receipt of entire consideration, which is part of registered agreement to sale dated 30.12.206, copy of which is already filed at page no. 81 of the paper book. The proof of payment reflected in the said receipt is also filed from the pass books of assessee, his mother and father. The part consideration was paid after fixing the final consideration. Thereafter, he made various payments between the years 2011 to 2016 through banking mode as per the demand raised by the builder. The payment made to builder against the flat is also mentioned in the registered agreement, specifying the percentage of total payment on different dates as per progress of the construction. The assessee also furnished the mode of payment and the copy of registered agreement executed by assessee, along with his mother and father. The learned authorised representative of the assessee submits that as per proviso to section 56(2)(vii)(b), where the date of agreement fixing the amount of consideration for transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken, if the part of consideration is paid by any other mode other than cash on or before the agreement. The assessing officer as well as learned Commissioner (Appeals) not appreciated the factual and legal position and added 1/3 (one third) of difference between the sale value shown by assessee and the value determined by SVA, thereby made an addition of ₹ 6,45,870/-. The revenue authorities have also made addition of ITA No. 509/Mum/2025 (AY 2017-18) Karan Devender Julka 6 entire difference of Rs. 19,37,800/- in case of mother of assessee namely Dimpy Julka (PAN: AFVPJ 5854 P) in the assessment order passed on 13 January 2023, copy of which is also placed on record. However, the case of third co-owner that is Devinder Julka, is not selected for scrutiny. The learned authorised representative of the assessee submits that the assessee is entitled for the benefit of first proviso to section 56(2)(vii)(b) and the addition made by assessing officer is liable to be deleted. 6. On the other hand, the learned Senior Departmental representative for the revenue submits that for claiming benefits of first proviso to section 56(2)(vii)(b), substantial part of sale consideration should have been paid at the time of alleged oral agreement for fixing the sale consideration. 7. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. On careful perusal of submissions of both the parties, we find that short controversy in the present appeal is if the assessee has paid part consideration at the time of fixing the sale consideration or not or the value of the flat (asset) is to be consider at the time of registration of registered agreement or at the time of oral agreement with the builder. We find that the assessee has placed on record copy of payment schedule of sale consideration which is part of registered agreement copy of which is filed at page no. 81. The assessee has also filed copy of bank statement about with reference to the schedule of sale consideration in highlighting the relevant entry in the copy of pass book, on comparison of which we find in order. On considering the evidence of payment of sale consideration, we find force in the submissions of learned authorised representative that the assessee and his family members had made payment in accordance with the construction plan/ progress of construction. For ITA No. 509/Mum/2025 (AY 2017-18) Karan Devender Julka 7 appreciation of fact the copy of receipt of payment, which is part of registered agreement is extracted below. 8. Considering the facts that the assessee has made part payment of consideration of sale at the time of fixation of final price i.e. agreement, which is much prior to the registration of agreement to sale, therefore, the assessee is eligible for benefit of first ITA No. 509/Mum/2025 (AY 2017-18) Karan Devender Julka 8 proviso to section 56(2)(vii)(b) of the Act. Thus, the substantial ground of appeal framed by us is allowed. 9. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 8th May, 2025. d/-/- Sd/- GIRISH AGRAWAL ACCOUNTANT MEMBER Sd/- Sd/- PAWAN SINGH JUDICIAL MEMBERs MUMBAI, DATED: .05.2025 Self Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai "