PINSTRIPE PROPERTIES PRIVATE LIMITED,MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 2(3)(1), MUMBAI

ITA 3756/MUM/2024

AI Insights

The case involves Pinstripe Properties Private Limited, which appealed against the order of the National Faceless Appeal Centre (NFAC) confirming an addition of Rs. 93,46,548 to its income for the assessment year 2018-19. This addition was based on the difference between the stamp duty valuation and the purchase consideration of a property. The Tribunal examined the circumstances under which the property was purchased, noting that due to changes in the Development Control Regulation for Greater Mumbai, the original allotment of flats was replaced by a new allotment in a different configuration but with continuity in the payment and contractual terms. The Tribunal found that the assessee had made part of the payment through banking channels prior to the execution of the sale agreement, which justified the application of the First Proviso to Section 56(2)(x) of the Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 33702 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2018-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAHESH PAMNANI
• Assessee Lawyers: SAPNESH SHETH
• Keywords: Sale consideration of property below Jantri Value

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “C”, MUMBAI BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER AND SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 3756/Mum/2024 Assessment Year 2018-19 Pinstripe Properties Private Limited B-10, New Putlibai Kapol Niwas, S.V. Road, Vile Parle (West), Mumbai. PAN: AADCP 9683 N Vs. DCIT, Circle – 2(3)(1), Aayakar Bhavan, Mumbai (Appellant) (Respondent) Present for: Assessee by : Shri Sapnesh Sheth Revenue by : Shri Mahesh Pamnani, Sr. DR Date of Hearing : 28.01.2025 Date of Pronouncement : 21.02.2025 O R D E R PER AMARJIT SINGH, ACCOUNTANT MEMBER: The appeal of the assessee for the assessment year 2018-19 is directed against the order dated 12.07.2024 passed by the ld. National Faceless Appeal Centre (NFAC), Delhi. The assessee has raised the following grounds of appeal: “i. On the facts and circumstances of the case as well as law on the subject, the ld. CIT(A), NFAC has erred in confirming the action of assessing officer in making addition of Rs. 93,46,548/- u/s 56(2)(x) of the I.T. Act, 1961 as income from other sources on account of alleged difference between value as per stamp duty rate and consideration paid by assessee as per registered purchase deed. ii. It is therefore prayed that above addition made by assessing officer and confirmed by Commissioner of Income-tax (Appeals) may please be deleted.” ITA No. 3756/Mum/2024 Pinstripe Properties Private Limited A.Y. 2018-19 2 2. Fact in brief is the return of income declaring total income of Rs. 83,05,810/- was filed on 19.10.2018. The case was subject to scrutiny assessment. During the course of assessment, the assessing officer noticed that assessee has purchased a property situated at Flat No. 204, B-Wing in “Insignia” at Kalina, Santacruz (E), Mumbai at a price of Rs. 1,79,94,452/- on 11.09.2017. However, the assessing officer observed that stamp value of the said property was of Rs. 2,73,41,000/- and there was a difference of Rs. 93,46,548/- between purchase consideration and stamp duty valuation. Therefore, the assessing officer issued show cause notice to the assessee to explain why not the difference of the purchase consideration and stamp duty valuation amounting to Rs. 93,46,548/- be added to the total income of the assessee u/s 56(2)(x) of the Act. In response, the assessee submitted that original allotment was made for Flat No. 1601 and 1701 on 16th floor, E-Wing “Insignia” at Santacruz (E), Mumbai having 3867 sq. ft. area vide allotment letter dated 18.03.2011. The assessee also submitted that it had paid an amount of Rs. 25,00,000/- vide RTGS dated 08.02.2011 bearing no. 11039008123 drawn on Unit Trust of India and the said transaction was reflected in the bank statement of the assessee wherein account no. 447010200004404 maintained with Axis Bank and same was also reflected in the allotment letter. The assessee also explained that because of change in Development Control Regulation for Greater Mumbai, 1991, the builder was constrained to alter/amend the building plans, therefore, the builder allotted the assessee and other Flat No. 204 on the 2nd floor of Insignia building instead of Flat No. ITA No. 3756/Mum/2024 Pinstripe Properties Private Limited A.Y. 2018-19 3 1601 & 1701 on 16th Floor E-Wing. The assessee had also submitted the allotment letter dated 26.04.2016 issued by the builder stating that because of modification of plan due to change in Development Regulation the earlier allotment was replaced by the new flat no. 204 on 2nd floor as discussed. However, the AO has not agreed with the submission of the assessee and he has taken stamp value assessed of Rs. 2,73,41,000/- on 11.09.2017 as value of property and added the difference amount of Rs. 93,46,548/- to the total income of the assessee u/s 56(2)(x). 3. The assessee filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 4. During the course of appellate proceedings before us, the ld. Counsel submitted that due to change in Development Control Regulation for Greater Mumbai, the flat no. 1601 & 1701 allotted earlier was replaced by allotment of another flat no. 204 and same was in continuation of the allotment made in 2011. The ld. Counsel vehemently contended that assessee had made part of the payment by banking mode through RTGS on 08.02.2011 of Rs. 25,00,000/-. Therefore, as per First Proviso to Section 56(2)(x) of the Act date of agreement will be taken to 18.03.2011 and not 26.04.2016. The ld. Counsel has also referred the copies of allotment letter of flat no. 1601 & 1701 dated 18.03.2011 and copy of letter of allotment of flat no. 204 dated 26.04.2016 wherein circumstances for change in allotment due to change in Development Control Regulation for Greater Mumbai was mentioned. The ld. Counsel has also referred the copy of bank ITA No. 3756/Mum/2024 Pinstripe Properties Private Limited A.Y. 2018-19 4 statement showing that assessee has already made the part payment of Rs. 25,00,000/- towards the purchase consideration through the banking channel on 08.02.2011. The ld. Counsel also referred various judicial pronouncements as placed in the paper book. 4. On the other hand, ld. DR supported the order of assessing officer. 5. Heard both the sides and perused the material on record. During the course of assessment, the assessing officer noticed that assessee had purchased flat no. 204, B-Wing, “Insignia” building situated at Kalina, Santacruz (E), Mumbai for a consideration of Rs. 1,79,94,452/-. However, the value of the said property as per the stamp duty was determined at Rs. 2,73,41,000/-. Therefore, the assessing officer has added difference of Rs. 93,46,548/- in the total income of the assessee after applying the provisions of section 56(2)(x) of the Act. The assessee has submitted the copies of allotment letter of flat no. 1601 & 1701 dated 18.03.2011 wherein it is categorically stated that said flat has been allotted to the assessee and the assessee had paid Rs. 25,00,000/-. The assessee has also referred the allotment letter issued on 26.04.2016 placed in the paper book filed before us. We have perused the said allotment letter wherein it is specifically incorporated that due to change in Development Control Regulation for Greater Mumbai the builder was constrained to alter/amend the building plans. In view of the same assessee has been allotted another flat no. 204 on the 2nd floor in “Insignia” building in place of the flat no. 1601 & 1701 ITA No. 3756/Mum/2024 Pinstripe Properties Private Limited A.Y. 2018-19 5 which was earlier allotted in A-Wing in “Insignia” building on 16th floor for a total consideration of Rs. 1,78,91,327/-. It is also mentioned in the allotment letter that acknowledgement of advance payment already made shall be considered and be treated to have been issued in respect of flat no. 204 in place of the earlier allotment. The assessee has also referred the copy of agreement for sale dated 11.09.2017 placed in the paper book. He also referred copy of bank statement showing that part of the sale consideration has been paid through banking channel on 08.02.2011. After perusal of the copies of material placed on record, it is evident that assessee has brought before the lower authority that due to change in Development Control Regulation for Greater Mumbai, 1991, the builder was constrained to alter/amend the building plans and in view of the same the builder allotted another flat on a lower floor. We find that this fact was not disproved by the assessing officer neither by making any enquiry from the builder nor brought any material on record to controvert the claim of the assessee. The allotment letter issued to the assessee dated 26.04.2016 substantiate that booking of old flat no. 1601 and 1701 was replaced by flat no. 204 because of the circumstances of change in Development Control Regulation as discussed (supra) in this order. We have also perused the provision of section 56(2)(x) of the Act applicable from A.Y. 2017-18, the relevant extract of the provision of section 56(2)(x) is reproduced as under: “Section 56(2)(x) ITA No. 3756/Mum/2024 Pinstripe Properties Private Limited A.Y. 2018-19 6 Where any person receives, in any previous year from any person or persons on or after the 1st day of April, 2017 (a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum, (b) any immovable property (A) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property, (4) for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the Following amounts, namely (i) the amount of fifty thousand rupees, and (ii) the amount equal to ten per cent of the consideration: Provided 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 agreement may be taken for the purposes of this sub-clause: Provided further that the provisions of the first proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed28, on or before the date of agreement for transfer of such immovable property:” 6. The First Proviso to section 56(2)(x) of the Act as above 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 agreement may be taken. However, the Second Proviso provides that the provisions of first proviso shall apply only in a case where ITA No. 3756/Mum/2024 Pinstripe Properties Private Limited A.Y. 2018-19 7 the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account on or before the date of agreement for transfer of such immovable property. In the case of the assessee it has already made part payment of Rs. 25,00,000/- vide RTGS dated 08.02.2011 through banking channel as discussed (supra) in this order. Apart of this even it is settled issue as per the various decisions of ITAT, Mumbai that Stamp Duty Valuation as on date of allotment letter should be considered for purposes of sectin 56(2)(vii)(b) of the Act. We consider that the the respective allotment letters issued to the assessee should be considered as “Agreement to sell” for the purpose of section 56(2)(x) of the Act. Since the assessee has paid the parts of consideration as per the terms and conditions of allotment through banking channels prior to the execution of sale agreement therefore, we consider that proviso to section 56(2)(x) should apply to the facts of the present case. Therefore, as per the proviso to section 56(2)(x) as discussed the date of agreement in the case of the assessee will be taken to 18.03.2011 and not 26.04.2016 since it is clearly demonstrated from the relevant supporting material that allotment of the new flat has been made to the assessee in continuation of the replacing of the earlier allotment which was changed because of the unavoidable circumstances of change in the Development Control Regulation. Therefore, we consider that decision of ld. CIT(A) in sustaining the addition made by the assessing officer is not ITA No. 3756/Mum/2024 Pinstripe Properties Private Limited A.Y. 2018-19 8 justified. Accordingly, the ground of appeal of the assessee is allowed. 7. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 21.02.2025. Sd/- Sd/- (RAHUL CHAUDHARY) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 21.02.2025 Biswajit, Sr. P.S. Copy to: 1. The Appellant: 2. The Respondent: 3. The CIT, 4. The DR //True Copy// [ By Order Assistant Registrar ITAT, Mumbai Benches, Mumbai "