NARESH BANSILAL JAIN,MUMBAI V. INCOME TAX OFFICER, WARD 20(1)(1) MUMBAI, MUMBAI

ITA 643/MUM/2025

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The case involves Mr. Naresh Bansilal Jain, who appealed against the order of the Commissioner of Income-tax (Appeals) confirming an addition made by the Assessing Officer under Section 56(2)(x) of the Income Tax Act, 1961. The addition was based on the difference between the purchase value and the stamp duty value of a property. The Tribunal noted that the assessee had claimed the property was received as a compensatory arrangement for surrendering his rights in an old property, which was not adequately supported by documentary evidence. The Tribunal decided to set aside the order and restore the matter to the Assessing Officer for a de novo adjudication.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 779103 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2021-2022
• Appeal Filed On: 29-01-2025
• Other Referred Cases: Dattaram Pitale v. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LEYAQAT ALI AAFAQUI
• Assessee Lawyers: SATYAPRAKASH SINGH
• Keywords: Set aside; Capital asset; Corroborative evidences; Unexplained expenditure; Sale consideration of property below Jantri Value; Onus to prove; Principle of natural justice; Search and seizure
• Section: 143(3); 43CA; 132

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “B” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI NARENDER KUMAR CHOUDHRY (JUDICIAL MEMBER) ITA No. 643/MUM/2025 Assessment Year: 2021-22 Mr. NareshBansilal Jain, Room No. 39, Bldg. No. 1 Ahmed Sailor, GovindjiKeni Road, Naigaon, Dadar, Mumbai-400014. Vs. The ITO Ward 20(1)(1), Piramal Chamber, Lalbaug, Parel, Mumbai-400012. PAN NO. AABPJ 9833 H Appellant Respondent Assessee by : Mr. Satyaprakash Singh Revenue by : Mr. Leyaqat Ali Aafaqui, Sr. DR Date of Hearing : 04/09/2025 Date of pronouncement : 16/10/2025 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 08.01.2025 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2021-22, confirming the addition made by the Assessing Officer (“AO”) under Section 56(2)(x) of the Income- tax Act, 1961 (“the Act”). The grounds raised in appeal are reproduced as under: Printed from counselvise.com 1. The order dated 08/01/2025 bearing No.ITBA/NFAC/S/250/2024 Honourable CIT[Appeal], NFAC, Delhi, is excessive, unreasonable, arbitrary, against the provisions of Income Tax Act, 1961 and therefore liable to be quashed. 2. On facts and circumstances of the case and in law, the Honourable C.I.T.(A) has erred in confirming the addition of Rs.64,49,214/ 56(2)(x) of Income Tax Act, 1961 on acc between purchase value and stamp duty value (50% share) of the property purchased by the Appellant, without appreciating the facts of the case and on the basis of statement on oath recorded under section 132(4) by Shri Amit MahendraRupar Director of Shree Sukhkarta Developers 2. The central issue for adjudication pertains to the alleged difference between the sale consideration and the stamp duty valuation in respect of a flat purchased by the assessee and the consequent addition of 2.1 Briefly stated, the facts are that the assessee, an individual, is engaged in the business of retail trading of gold ornaments under the proprietary concern Jewellers. For the year under consideration, the assessee filed his return of income on 01.09.2021 declaring total income of ₹5,08,040/-.The return was selected for scrutiny, and necessary statutory notices under the Act were duly issued and complied with. During the course of assessment, the AO noted that the assessee had purchased a flat in a project developed by Group, which was subjected to a search and seizure action under Section 132 of the Act on 25.11.2021. The Investigation Wing, in that search, allegedly unearthed that certain flats were sold or The order dated 08/01/2025 bearing No.ITBA/NFAC/S/250/2024-25/1071984171[1] passed by the Honourable CIT[Appeal], NFAC, Delhi, is excessive, unreasonable, arbitrary, against the provisions of Income Tax 61 and therefore liable to be quashed. 2. On facts and circumstances of the case and in law, the Honourable C.I.T.(A) has erred in confirming the addition of Rs.64,49,214/- made by the Assessing Officer under section 56(2)(x) of Income Tax Act, 1961 on account of difference between purchase value and stamp duty value (50% share) of the property purchased by the Appellant, without appreciating the facts of the case and on the basis of statement on oath recorded under section 132(4) by Shri Amit MahendraRupar Director of Shree Sukhkarta Developers Pvt Ltd. The central issue for adjudication pertains to the alleged difference between the sale consideration and the stamp duty valuation in respect of a flat purchased by the assessee and the consequent addition of ₹64,49,214/- as income from other sources. riefly stated, the facts are that the assessee, an individual, is engaged in the business of retail trading of gold ornaments under the proprietary concern M/s Shah Tarachand Chamnaji . For the year under consideration, the assessee filed his return of income on 01.09.2021 declaring total income of .The return was selected for scrutiny, and necessary statutory notices under the Act were duly issued and complied with. During the course of assessment, the AO noted that the assessee purchased a flat in a project developed by M/s Ruparel Realty , which was subjected to a search and seizure action under Section 132 of the Act on 25.11.2021. The Investigation Wing, in that search, allegedly unearthed that certain flats were sold or Mr. NareshBansilal Jain 2 ITA No. 643/MUM/2025 The order dated 08/01/2025 bearing 25/1071984171[1] passed by the Honourable CIT[Appeal], NFAC, Delhi, is excessive, unreasonable, arbitrary, against the provisions of Income Tax 2. On facts and circumstances of the case and in law, the Honourable C.I.T.(A) has erred in confirming the addition of made by the Assessing Officer under section ount of difference between purchase value and stamp duty value (50% share) of the property purchased by the Appellant, without appreciating the facts of the case and on the basis of statement on oath recorded under section 132(4) by Shri Amit MahendraRuparel, The central issue for adjudication pertains to the alleged difference between the sale consideration and the stamp duty valuation in respect of a flat purchased by the assessee and the as income from other sources. riefly stated, the facts are that the assessee, an individual, is engaged in the business of retail trading of gold ornaments under Chamnaji Porwal . For the year under consideration, the assessee filed his return of income on 01.09.2021 declaring total income of .The return was selected for scrutiny, and necessary statutory notices under the Act were duly issued and complied with. During the course of assessment, the AO noted that the assessee M/s Ruparel Realty , which was subjected to a search and seizure action under Section 132 of the Act on 25.11.2021. The Investigation Wing, in that search, allegedly unearthed that certain flats were sold or Printed from counselvise.com registered below the market value, thus indicating possible contravention of Sections 43CA and 56(2)(x) of the Act. The AO observed that the assessee, along with his spouse, Smt. KantaNaresh Jain, as co the project “Ruparel Ariana” M/s Shree Sukhkarta Developers Pvt. Ltd. Ruparel Group. The stamp duty valuation authority, however, determined the value of the said flat at assessee, in response, submitted that he was previously a tenant or occupant in the old structure which was demolished for redevelopment by the same builder. It was stated that though the builder did not recognize him as a lawful tenant entitled to alternate accommodation, there was prolonged dispute and negotiation, and the matter was amicably settled by allotting the subject flat as a compensatory arrangement for the surrender of his possession and all rights in the old premises, for a nominal consideration of crore.It was further submitted that the transaction, being in the nature of compensation rights, could not be treated as a case of receipt of immovable property for inadequate consideration within the meaning of Sectio 56(2)(x). However, the AO rejected this contention on the ground that the assessee failed to furnish documentary evidence to substantiate the claim of prior occupation or tenancy rights. The AO also relied on the statement of Shri Amit Mahendra Director of the developer company, recorded during search registered below the market value, thus indicating possible contravention of Sections 43CA and 56(2)(x) of the Act. The AO observed that the assessee, along with his spouse, Smt. KantaNaresh Jain, as co-applicant, had purchased Flat No. 4502 “Ruparel Ariana” for a consideration of M/s Shree Sukhkarta Developers Pvt. Ltd., an entity belonging to the Ruparel Group. The stamp duty valuation authority, however, determined the value of the said flat at ₹2,28,98,427/ in response, submitted that he was previously a tenant or occupant in the old structure which was demolished for redevelopment by the same builder. It was stated that though the builder did not recognize him as a lawful tenant entitled to alternate dation, there was prolonged dispute and negotiation, and the matter was amicably settled by allotting the subject flat as a compensatory arrangement for the surrender of his possession and in the old premises, for a nominal consideration of rore.It was further submitted that the transaction, being in the compensation-cum-settlement for the loss of tenancy rights, could not be treated as a case of receipt of immovable property for inadequate consideration within the meaning of Sectio 56(2)(x). However, the AO rejected this contention on the ground that the assessee failed to furnish documentary evidence to substantiate the claim of prior occupation or tenancy rights. The AO also relied on the statement of Shri Amit Mahendra irector of the developer company, recorded during search Mr. NareshBansilal Jain 3 ITA No. 643/MUM/2025 registered below the market value, thus indicating possible contravention of Sections 43CA and 56(2)(x) of the Act. The AO observed that the assessee, along with his spouse, Smt. Flat No. 4502 in for a consideration of ₹1 crore from , an entity belonging to the Ruparel Group. The stamp duty valuation authority, however, 2,28,98,427/-. The in response, submitted that he was previously a tenant or occupant in the old structure which was demolished for redevelopment by the same builder. It was stated that though the builder did not recognize him as a lawful tenant entitled to alternate dation, there was prolonged dispute and negotiation, and the matter was amicably settled by allotting the subject flat as a compensatory arrangement for the surrender of his possession and in the old premises, for a nominal consideration of ₹1 rore.It was further submitted that the transaction, being in the for the loss of tenancy rights, could not be treated as a case of receipt of immovable property for inadequate consideration within the meaning of Section 56(2)(x). However, the AO rejected this contention on the ground that the assessee failed to furnish documentary evidence to substantiate the claim of prior occupation or tenancy rights. The AO also relied on the statement of Shri Amit Mahendra Ruparel, irector of the developer company, recorded during search Printed from counselvise.com proceedings, wherein he admitted that certain flats were sold below market value. 2.2 Proceeding on this basis, the AO held that the assessee had acquired the immovable property for inadequate consid therefore, the provisions of Section 56(2)(x) were attracted. Considering the assessee’s 50% share in the property, the AO computed the difference of ₹64,49,214/- in the hands of the assessee in assessmen passed u/s 143(3) of the Act on 06/12/2022. 2.3. On further appeal, of the AO. After analyzing the submissions and the materials on record, the appellate authority observed that the assessee had not produced any credible or contemporaneous evidence, such as rent receipts, utility bills, municipal records, or legal documents, to establish his claim of occupation in the old premises.The Ld. CIT(A) held that mere reference to describing the assessee as an “illegal occupant” of the erstwhile property, could not suffice to substantiate the claim of tenancy or possession. The authority further noted that in view of the search findings and the director’s statement admit flats, the transaction had the characteristics of an on component. Accordingly, the addition made by the AO under Section 56(2)(x) was upheld. reproduced as under: proceedings, wherein he admitted that certain flats were sold below Proceeding on this basis, the AO held that the assessee had acquired the immovable property for inadequate consid therefore, the provisions of Section 56(2)(x) were attracted. Considering the assessee’s 50% share in the property, the AO computed the difference of ₹1,28,98,427/- and made an addition of in the hands of the assessee in assessmen 143(3) of the Act on 06/12/2022. On further appeal, the Ld. CIT(A), concurred with the findings of the AO. After analyzing the submissions and the materials on record, the appellate authority observed that the assessee had not produced any credible or contemporaneous evidence, such as rent receipts, utility bills, municipal records, or legal documents, to establish his claim of occupation in the old premises.The Ld. CIT(A) held that mere reference to Point No. FF in the Agreemen describing the assessee as an “illegal occupant” of the erstwhile property, could not suffice to substantiate the claim of tenancy or possession. The authority further noted that in view of the search findings and the director’s statement admitting under flats, the transaction had the characteristics of an on component. Accordingly, the addition made by the AO under Section 56(2)(x) was upheld.The relevant finding of ld CIT(A) is under: Mr. NareshBansilal Jain 4 ITA No. 643/MUM/2025 proceedings, wherein he admitted that certain flats were sold below Proceeding on this basis, the AO held that the assessee had acquired the immovable property for inadequate consideration and, therefore, the provisions of Section 56(2)(x) were attracted. Considering the assessee’s 50% share in the property, the AO and made an addition of in the hands of the assessee in assessment order he Ld. CIT(A), concurred with the findings of the AO. After analyzing the submissions and the materials on record, the appellate authority observed that the assessee had not produced any credible or contemporaneous evidence, such as rent receipts, utility bills, municipal records, or legal documents, to establish his claim of occupation in the old premises.The Ld. CIT(A) in the Agreement for Sale, describing the assessee as an “illegal occupant” of the erstwhile property, could not suffice to substantiate the claim of tenancy or possession. The authority further noted that in view of the search ting under-valuation of flats, the transaction had the characteristics of an on-money component. Accordingly, the addition made by the AO under The relevant finding of ld CIT(A) is Printed from counselvise.com “6.1 On perusal of the sub during appellate proceedings, it is observed that the appellant is a proprietor and engaged in the business of trading of Gold Ornaments on retail basis & runs his firm under the name & style of M/s Shah TarachandChamnajiPo appellant had purchased flat No.4502 in \"Ruparel Ariana on 23.03.2021 with Mrs. KantaNaresh Jain, wife as co at the sale consideration value of Rs.1,00,00,000/ Sukhkarta Developers Private Limited (an entity of RR against the Stamping Valuation Authority (SVA) value determined at Rs.2,28,98,427/ Rs. 64,49,214/ 56(2)(x) of the IT Act during the year. The contention of the appellant is that before demoliation of old building and the builder which alleged to be an illegal tenant cum occupant in Point No. FF on page 6 of the Agreement to sale. 6.2 During the appellate proceedings also, the appellan given the same submissions in support of its claim. It is required to substantiate his submissions with evidences, which it has failed miserably. On perusal of records, it is seen that the appellant failed to furnish any documentary evidence except t point No. FF of agreement for sale. The AO has rightly held that the appellant has failed to furnish any documents regarding any settlement or in support of his submission regarding \"assessee fought for his rights with the builder and was finally rewarded for the efforts made. This is a case where, there is on money component involved in the transaction as accepted by Shri Amit MahendraRuparel, Director of Shree Sukhkarta Developers Private Limited in his statement on oath u/s 132(4) of the I. T. Act, 19 find any reason to differ with the order of the AO and the addition made by the assessing officer amounting to 64,49,214/- under head income from other source u/s 56(2)(x) of the IT Act is upheld and the grounds dismissed.” 3. We have carefully heard the rival submissions, perused the material on record including registered document of property duly considered the relevant statutory provisions as well as judicial precedents cited before us. 6.1 On perusal of the submissions and the documents filed during appellate proceedings, it is observed that the appellant is a proprietor and engaged in the business of trading of Gold Ornaments on retail basis & runs his firm under the name & style of M/s Shah TarachandChamnajiPorwal Jewellers. The appellant had purchased flat No.4502 in \"Ruparel Ariana on 23.03.2021 with Mrs. KantaNaresh Jain, wife as co at the sale consideration value of Rs.1,00,00,000/- from Shree Sukhkarta Developers Private Limited (an entity of RR against the Stamping Valuation Authority (SVA) value determined at Rs.2,28,98,427/-. The AO has made additions of Rs. 64,49,214/- under head income from other source u/s 56(2)(x) of the IT Act during the year. The contention of the appellant is that he was earlier a tenant in old premises i.e., before demoliation of old building and the builder which alleged to be an illegal tenant cum occupant in Point No. FF on page 6 of the Agreement to sale. 6.2 During the appellate proceedings also, the appellan given the same submissions in support of its claim. It is required to substantiate his submissions with evidences, which it has failed miserably. On perusal of records, it is seen that the appellant failed to furnish any documentary evidence except t point No. FF of agreement for sale. The AO has rightly held that the appellant has failed to furnish any documents regarding any settlement or in support of his submission regarding \"assessee fought for his rights with the builder and was finally ed for the efforts made. This is a case where, there is on money component involved in the transaction as accepted by Shri Amit MahendraRuparel, Director of Shree Sukhkarta Developers Private Limited in his statement on oath u/s 132(4) of the I. T. Act, 1961 on 28.11.2021. In view thereof, I do not find any reason to differ with the order of the AO and the addition made by the assessing officer amounting to under head income from other source u/s 56(2)(x) of the IT Act is upheld and the grounds of appeal no. 1 is We have carefully heard the rival submissions, perused the including registered document of property duly considered the relevant statutory provisions as well as judicial precedents cited before us. Mr. NareshBansilal Jain 5 ITA No. 643/MUM/2025 missions and the documents filed during appellate proceedings, it is observed that the appellant is a proprietor and engaged in the business of trading of Gold Ornaments on retail basis & runs his firm under the name & rwal Jewellers. The appellant had purchased flat No.4502 in \"Ruparel Ariana on 23.03.2021 with Mrs. KantaNaresh Jain, wife as co-applicant from Shree Sukhkarta Developers Private Limited (an entity of RR Group) against the Stamping Valuation Authority (SVA) value . The AO has made additions of under head income from other source u/s 56(2)(x) of the IT Act during the year. The contention of the he was earlier a tenant in old premises i.e., before demoliation of old building and the builder which alleged to be an illegal tenant cum occupant in Point No. FF on page 6 of 6.2 During the appellate proceedings also, the appellant has given the same submissions in support of its claim. It is required to substantiate his submissions with evidences, which it has failed miserably. On perusal of records, it is seen that the appellant failed to furnish any documentary evidence except the point No. FF of agreement for sale. The AO has rightly held that the appellant has failed to furnish any documents regarding any settlement or in support of his submission regarding \"assessee fought for his rights with the builder and was finally ed for the efforts made. This is a case where, there is on- money component involved in the transaction as accepted by Shri Amit MahendraRuparel, Director of Shree Sukhkarta Developers Private Limited in his statement on oath u/s 132(4) 61 on 28.11.2021. In view thereof, I do not find any reason to differ with the order of the AO and the addition made by the assessing officer amounting to under head income from other source u/s 56(2)(x) of appeal no. 1 is We have carefully heard the rival submissions, perused the including registered document of property, and duly considered the relevant statutory provisions as well as judicial Printed from counselvise.com 3.1 The issue for determination is whether the allotment of Flat No. 4502 in “Ruparel Ariana” to the assessee, jointly with his wife, for consideration of ₹1 crore, attracts the deeming provisions of Section 56(2)(x) of the Act, having regard to the difference between the stated consideration and the stamp duty valuation of ₹2,28,98,427/-. The a person receives any immovable property for a consideration less than the stamp duty value by an amount exceeding the prescribed threshold, the differential amount shall be chargeable to tax as “income from other sources.”However, the provision presupposes that the transaction represents an consideration and not a from redevelopment, tenancy, or compensatory arrangements. The fundamental principle underlying Section 56(2)(x) is to curb tax avoidance through transactions structured below fair value, not to penalize genuine settlement arrangements involving pre rights.In this context, the Coordinate Bench of the Tribunal in DattaramPitale v. ITO that where a new flat is allotted in exchange for surrender of an old flat or tenancy rights under a redevelopment agreement, such transaction constitutes an purchase of property for inadequate consideration provisions of Section 56(2)(x) were held to be inapplicable. relevant finding of the Tribunal (supra) is reproduced as under: The issue for determination is whether the allotment of Flat No. 4502 in “Ruparel Ariana” to the assessee, jointly with his wife, for 1 crore, attracts the deeming provisions of Section 56(2)(x) of the Act, having regard to the difference between the stated consideration and the stamp duty valuation of The Section 56(2)(x) of the Act provides that where any immovable property for a consideration less than the stamp duty value by an amount exceeding the prescribed threshold, the differential amount shall be chargeable to tax as “income from other sources.”However, the provision presupposes tion represents an outright transfer for inadequate and not a settlement or exchange of rights from redevelopment, tenancy, or compensatory arrangements. The fundamental principle underlying Section 56(2)(x) is to curb tax hrough transactions structured below fair value, not to penalize genuine settlement arrangements involving pre rights.In this context, the Coordinate Bench of the Tribunal in DattaramPitale v. ITO (ITA No. 465/Mum/2025, A.Y. 2018 t where a new flat is allotted in exchange for surrender of an old flat or tenancy rights under a redevelopment agreement, such transaction constitutes an exchange of capital assets purchase of property for inadequate consideration. According provisions of Section 56(2)(x) were held to be inapplicable. relevant finding of the Tribunal (supra) is reproduced as under: Mr. NareshBansilal Jain 6 ITA No. 643/MUM/2025 The issue for determination is whether the allotment of Flat No. 4502 in “Ruparel Ariana” to the assessee, jointly with his wife, for 1 crore, attracts the deeming provisions of Section 56(2)(x) of the Act, having regard to the difference between the stated consideration and the stamp duty valuation of Section 56(2)(x) of the Act provides that where any immovable property for a consideration less than the stamp duty value by an amount exceeding the prescribed threshold, the differential amount shall be chargeable to tax as “income from other sources.”However, the provision presupposes outright transfer for inadequate settlement or exchange of rights arising from redevelopment, tenancy, or compensatory arrangements. The fundamental principle underlying Section 56(2)(x) is to curb tax hrough transactions structured below fair value, not to penalize genuine settlement arrangements involving pre-existing rights.In this context, the Coordinate Bench of the Tribunal in Anil (ITA No. 465/Mum/2025, A.Y. 2018–19) held t where a new flat is allotted in exchange for surrender of an old flat or tenancy rights under a redevelopment agreement, such exchange of capital assets rather than a . Accordingly, the provisions of Section 56(2)(x) were held to be inapplicable.The relevant finding of the Tribunal (supra) is reproduced as under: Printed from counselvise.com “3. The facts relating to the above said issue are discussed in brief. The assessee had purchased a flat in the financi 1997-98 in Mahavir Nagar Tristar Co no.C-5/28. society underwent redevelopment as per the agreement entered with the developer. As per the terms and conditions of the agreement, the assesse 1102, vide reg lieu of the old flat surrendered by him. The stamp duty value of new flat was Rs.25,17,700/ was Rs.5,43,040/ between the above s income of the assessee confirmed the sam 4. We heard the partie discussed above would show that the assessee in the redevel of extinguishment of old flat has got new flat as per the agreement entered with the developer for redevelopment of the society. Thus it is not a case of receipt of that would fall within the purview of the provisions of scc.56(2)(x). Accordingly, we are of the view that the provisions of sec.56(2)(x) will not be applicable to the facts of the present case. 3.2 In the instant case, the assessee’s principal contention is that he was occupying a portion of the old building prior to redevelopment and that the present allotment was part of a settlement with the developer for relinquishment of possession. assessee claims that the agreement, extracted below, supports that the assessee was in occupation of a residential unit admeasuring 804 sq. ft. in the erstwhile property and that the developer had agreed to compensate him by allotting the crore: 3. The facts relating to the above said issue are discussed in brief. The assessee had purchased a flat in the financi 98 in Mahavir Nagar Tristar Co-op Hsg Society bearing 5/28. society underwent redevelopment as per the agreement entered with the developer. As per the terms and ns of the agreement, the assessee got a new flat no.B 1102, vide registered agreement dated 26th December, 2017 in u of the old flat surrendered by him. The stamp duty value of new flat was Rs.25,17,700/-. The indexed cost of the old flat was Rs.5,43,040/-. Accordingly, the AO assessed the difference between the above said values amounting to Rs.19,74,660/ income of the assessee u/s 56(2)(x) of the Act. The LdCIT(A) confirmed the same. 4. We heard the parties and perused the record. The facts discussed above would show that the assessee got a new flat the redeveloped property in lieu of old flat. Hence, it is a case of extinguishment of old flat and in lieu thereof, the assesse has got new flat as per the agreement entered with the developer for redevelopment of the society. Thus it is not a case of receipt of immovable property for inadequate consideration that would fall within the purview of the provisions of scc.56(2)(x). Accordingly, we are of the view that the provisions of sec.56(2)(x) will not be applicable to the facts of case.” nstant case, the assessee’s principal contention is that he was occupying a portion of the old building prior to redevelopment and that the present allotment was part of a settlement with the developer for relinquishment of possession. that the paragraph “FF” of the registered agreement, extracted below, supports that the assessee was in occupation of a residential unit admeasuring 804 sq. ft. in the erstwhile property and that the developer had agreed to compensate him by allotting the present flat for an additional payment of Mr. NareshBansilal Jain 7 ITA No. 643/MUM/2025 3. The facts relating to the above said issue are discussed in brief. The assessee had purchased a flat in the financial year op Hsg Society bearing 5/28. society underwent redevelopment as per the agreement entered with the developer. As per the terms and e got a new flat no.B- dated 26th December, 2017 in u of the old flat surrendered by him. The stamp duty value of . The indexed cost of the old flat . Accordingly, the AO assessed the difference 4,660/- as u/s 56(2)(x) of the Act. The LdCIT(A) s and perused the record. The facts got a new flat u of old flat. Hence, it is a case and in lieu thereof, the assessee has got new flat as per the agreement entered with the developer for redevelopment of the society. Thus it is not a case immovable property for inadequate consideration that would fall within the purview of the provisions of scc.56(2)(x). Accordingly, we are of the view that the provisions of sec.56(2)(x) will not be applicable to the facts of nstant case, the assessee’s principal contention is that he was occupying a portion of the old building prior to redevelopment and that the present allotment was part of a settlement with the developer for relinquishment of possession. The paragraph “FF” of the registered agreement, extracted below, supports that the assessee was in occupation of a residential unit admeasuring 804 sq. ft. in the erstwhile property and that the developer had agreed to compensate present flat for an additional payment of ₹1 Printed from counselvise.com “The premises/flat purchaser/s herein was one of the illegal occupant on the said property whereas in possession of the residential premises admeasuring 804 sq. ft. carpet area however there has been sett promoters and the purchaser herein and accordingly the promoters has agreed to give him one premises admeasuring 804 sq. ft. carpet area for an additional compensation of Rs.1,00,00,000/ has agreed for the down payment of Rs.1,00,00,000/ One crore only) (“Total Consideration”) 3.3In our opinion, however, t does not conclusively establish the factum of prior occupation. The burden of proof rests on the assessee to substantiate such claim with supporting evidence property tax records, or any other correspondence with municipal or redevelopment authorities possession of the old 3.4 The lower authorities have rightly observed that no such evidence was furnished. However, having regard to the peculiar nature of the claim and the equitable aspect that the assessee’s assertion, if substantiated, would take the transaction ambit of Section 56(2)(x), we consider it in the substantial justice to afford one final opportunity to the assessee to establish his claim. 3.5. In case, the assessee fails in establishing the possession of illegal occupan may arise in the case of the assessee. The AO allegations on the seller or admission by the seller that properties The premises/flat purchaser/s herein was one of the illegal occupant on the said property whereas in possession of the residential premises admeasuring 804 sq. ft. carpet area however there has been settlement arrived between the promoters and the purchaser herein and accordingly the promoters has agreed to give him one premises admeasuring 804 sq. ft. carpet area for an additional compensation of Rs.1,00,00,000/- (Rupees One crore only) and the purchaser has agreed for the down payment of Rs.1,00,00,000/ One crore only) (“Total Consideration”)” 3.3In our opinion, however, this recital, though indicative, by itself does not conclusively establish the factum of prior occupation. The rests on the assessee to substantiate such claim with supporting evidence—such as electricity or water bills, property tax records, or any other correspondence with municipal or redevelopment authorities—showing that he was indeed in premises. The lower authorities have rightly observed that no such evidence was furnished. However, having regard to the peculiar nature of the claim and the equitable aspect that the assessee’s assertion, if substantiated, would take the transaction ambit of Section 56(2)(x), we consider it in the to afford one final opportunity to the assessee to , the assessee fails in establishing the possession of illegal occupancy in old building, then one more issu may arise in the case of the assessee. The AO has allegations on the seller or admission by the seller that properties Mr. NareshBansilal Jain 8 ITA No. 643/MUM/2025 The premises/flat purchaser/s herein was one of the illegal occupant on the said property whereas in possession of the residential premises admeasuring 804 sq. ft. carpet area lement arrived between the promoters and the purchaser herein and accordingly the promoters has agreed to give him one premises admeasuring 804 sq. ft. carpet area for an additional compensation of (Rupees One crore only) and the purchaser has agreed for the down payment of Rs.1,00,00,000/- (Rupees his recital, though indicative, by itself does not conclusively establish the factum of prior occupation. The rests on the assessee to substantiate such claim such as electricity or water bills, property tax records, or any other correspondence with municipal showing that he was indeed in The lower authorities have rightly observed that no such evidence was furnished. However, having regard to the peculiar nature of the claim and the equitable aspect that the assessee’s assertion, if substantiated, would take the transaction outside the ambit of Section 56(2)(x), we consider it in the interest of to afford one final opportunity to the assessee to , the assessee fails in establishing the claim of , then one more issue has mentioned of allegations on the seller or admission by the seller that properties Printed from counselvise.com were sold below the market value against cash consideration received. If the claim o payment on and above stamp duty value may also need to be examined in the case, which may be in the nature of unexplained expenditure 69A of the Act inviting higher rate of tax u/s 115BBE of the Act. 3.6 Accordingly, we deem it just and proper to of the Ld. CIT(A) and deciding the matter afresh assessee had any demonstrable occupancy, possession, or tenancy in the old property prior to redevelopment, and whether the impugned flat was allotted in consideration thereof. The AO shall also verify the authenticity of any supporting evidence the assessee may produce and adjudicate the issue afresh in accordance with law and principles of natural justice. 3.7 In light of the foregoing discussion, the addition sustained under Section 56(2)(x) amounting to without proper verification of the assessee’s claim of compensatory allotment. The matte for de novo adjudication opportunity of hearing and to pass a speaking order in accordance with law. were sold below the market value against cash consideration If the claim of old residence fails, then the issue of cash payment on and above stamp duty value may also need to be examined in the case, which may be in the nature of unexplained 69A of the Act inviting higher rate of tax u/s 115BBE rdingly, we deem it just and proper to set aside the order and restore the matter to the file of the AO deciding the matter afresh. The AO shall examine whether the assessee had any demonstrable occupancy, possession, or tenancy e old property prior to redevelopment, and whether the impugned flat was allotted in consideration thereof. The AO shall also verify the authenticity of any supporting evidence the assessee may produce and adjudicate the issue afresh in accordance with and principles of natural justice. In light of the foregoing discussion, the addition sustained under Section 56(2)(x) amounting to ₹64,49,214/- cannot be upheld without proper verification of the assessee’s claim of compensatory allotment. The matter is therefore restored to the Assessing Officer for de novo adjudication, with a direction to grant reasonable opportunity of hearing and to pass a speaking order in accordance Mr. NareshBansilal Jain 9 ITA No. 643/MUM/2025 were sold below the market value against cash consideration f old residence fails, then the issue of cash payment on and above stamp duty value may also need to be examined in the case, which may be in the nature of unexplained 69A of the Act inviting higher rate of tax u/s 115BBE set aside the order restore the matter to the file of the AO for . The AO shall examine whether the assessee had any demonstrable occupancy, possession, or tenancy e old property prior to redevelopment, and whether the impugned flat was allotted in consideration thereof. The AO shall also verify the authenticity of any supporting evidence the assessee may produce and adjudicate the issue afresh in accordance with In light of the foregoing discussion, the addition sustained cannot be upheld without proper verification of the assessee’s claim of compensatory restored to the Assessing Officer with a direction to grant reasonable opportunity of hearing and to pass a speaking order in accordance Printed from counselvise.com 3.8 Consequently, the ground raised by the assessee is statistical purposes. 4. In the result, the appeal of the assessee is statistical purposes. Order pronounced in the open Court on 16 Sd/- (NARENDER KUMAR CHOUDHRY JUDICIAL MEMBER Mumbai; Dated:16/10/2025 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Consequently, the ground raised by the assessee is In the result, the appeal of the assessee is statistical purposes. ronounced in the open Court on 16/10/2025. Sd/ NARENDER KUMAR CHOUDHRY) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Mr. NareshBansilal Jain 10 ITA No. 643/MUM/2025 Consequently, the ground raised by the assessee is allowed for In the result, the appeal of the assessee is allowed for /10/2025. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai Printed from counselvise.com "