An allotment letter constitutes an agreement under Section 56(2)(x) proviso if consideration was fixed and paid via banking channels.

ORDER

Om Prakash Kant, Accountant Member.- This appeal filed by the assessee is directed against the order dated 09.03.2026 passed by the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [In short the Ld. CIT(A)] for Assessment Year [In short the AY], 2018-19, raising following grounds;-

2. The assessee has raised several grounds , challenging the validity of the reassessment proceedings initiated under sections 147, 148 and 148A of the Income-tax Act, 1961 (“the Act”) as well as the addition of Rs.38,64,335/- made under section 56(2)(x) of the Act. Since the principal controversy revolves around the applicability of section 56(2)(x) and the first proviso thereto, the remaining grounds, being either general or consequential in nature, do not call for separate adjudication.

3. Briefly stated facts of the case are that the assessee, an individual, filed his return of income for the year under consideration on 27.07.2018 declaring a total income of Rs.2,39,900/-. Subsequently, on the basis of information available on the Insight Portal, the Assessing Officer noticed that an immovable property had been purchased for a consideration of Rs.57,00,000/-, whereas the stamp duty authority had adopted its value at Rs.95,64,335/-. Entertaining a belief that income chargeable to tax had escaped assessment on account of the difference between the declared consideration and the stamp duty value, reassessment proceedings were initiated in accordance with the provisions of sections 147, 148A and 148 of the Act.

3.1 During the reassessment proceedings, the assessee explained that the property had originally been allotted on 06.12.2014 by the developer upon payment of substantial consideration through normal banking channels. According to the assessee, the consideration stood irrevocably fixed on the date of allotment itself and, therefore, in view of the first proviso to section 56(2)(x), the stamp duty value as prevailing on the date of the allotment was required to be adopted instead of the value prevailing on the date of execution and registration of the sale deed. It was further submitted that, as on the date of allotment, the stamp duty valuation did not exceed the agreed consideration and consequently no addition could be made under section 56(2)(x) of the Act. The Assessing Officer, however, was not persuaded by the explanation. According to him, the allotment letter dated 06.12.2014 did not constitute an “agreement fixing the amount of consideration” within the meaning of the first proviso to section 56(2)(x). He observed that the allotment letter was neither a registered document nor executed by both parties; further, the subsequently registered agreement dated 13.06.2017 did not make any reference to the alleged earlier arrangement. The Assessing Officer was, therefore, of the view that the registered agreement alone constituted the legally enforceable document governing the transaction and that the proviso to section 56(2)(x) was consequently inapplicable. In support of the above conclusion, the Assessing Officer placed reliance upon the judgment of the Hon’ble Supreme Court in CIT v. Balbir Singh Maini 398 ITR 531 (SC), holding that rights in immovable property cannot be regarded as legally transferred in the absence of a registered instrument. He further declined to follow the decisions of the co-ordinate Benches of the Tribunal relied upon by the assessee, observing that the ratio laid down by the Hon’ble Supreme Court governed the issue. The Assessing Officer also rejected the assessee’s reliance on the assessment completed in the case of the co-owner, holding that each assessment is separate and independent. Proceeding on the aforesaid reasoning, the Assessing Officer treated the difference of Rs.38,64,335/-, being the excess of the stamp duty value over the stated purchase consideration, as income chargeable to tax under section 56(2)(x) of the Act under the head “Income from Other Sources”, observing as under:

” The explanation given by the assessee is not tenable for the following reasons.

1. The allotment letter was not having any legal value as same was not registered.

2. The said registered agreement of sale dated 13/06/2017 did not have any reference of existence of prior agreement between the assessee and the seller i.e. Kaustubh Construction Pvt. Ltd.

3. The letter of allotment dated 06/12/2014 cannot be considered as the date of execution of agreement by any stretch of imagination since immovable property is not conveyed by delivery of possession but by a duly registered deed.

4. The allotment letter and the sale agreement are two separate “documents and cannot be considered to mean one and the same.

5. Moreover, the said allotment letter has only been signed by the seller, not by the assessee. Therefore, the said allotment cannot be termed as sale agreement between the assessee and the said seller for fixing the value of consideration for transfer of property.

6. The assessee, in his afore-stated submission, has taken a plea for drop proceedings after taking a reference of judgment pronounced by the Hon’ble ITAT, Mumbai ‘C’ Bench in the case of ParthDashrath Gandhi v. Addl./Deputy/Asstt. Commissioner of Income Tax, NFAC, Delhi in ITA No. 1990/Mum/2022 for the A.Y.-2018-19. In this regard, it is averred that in the case of CIT v. Balbir Singh Maini &Ors. in 398 ITR 531 [2017] (SC), the Hon’ble Apex Court held that there cannot be transfer of immovable property without registration of sale agreement. The ratio laid down by the Hon’ble S.C. in the aforesaid case law, there is no necessity of distinguishing the order of the Hon’ble ITAT in the case of ParthDashrath Gandhi v. Addl./Deputy/Asstt. Commissioner of Income Tax, NFAC, Delhi .

7. Further, the assessee has furnished the copy of scrutiny assessment order for his mother Mrs. Pravina Bharat Sheth for the A.Y.-2015-16 wherein the return income has been accepted. In this regard, it is asserted that the issue under consideration (i.e. purchase of immovable property at a consideration below the Govt. rate) did not arise in A.Y.-2015-16 as the said property was not registered and the said issue cropped up only after registration process got duly effected i.e. in A.Y.-2018-19. Moreover, it is argued that each assessee is a separate entity. Therefore, finding in the case of other co-owners cannot have any adverse impact on the case of the assessee. As such, the above plea of the assessee cannot be accepted.

Hence the allotment letter is not in the nature of the agreement for sale and thus the same cannot be considered as agreement to sale within the meaning of provisos of section 56(2)(x) of the Act.”

3.2 Aggrieved by the reassessment order, the assessee carried the matter in appeal before the ld. CIT(A), who concurred with the reasoning adopted by the Assessing Officer. The appellate authority held that the allotment letter lacked the essential characteristics of a legally enforceable agreement for transfer of immovable property and, therefore, could not be regarded as an agreement contemplated by the first proviso to section 56(2)(x). The ld. CIT(A.) further held that the registered agreement dated 13.06.2017 alone governed the transaction and, consequently, the stamp duty valuation prevailing on that date had rightly been adopted by the Assessing Officer. The addition made under section 56(2)(x) was accordingly sustained. Relevant finding of the Ld. CIT(A) is reproduced as under ;-

6.2 Findings:-I have carefully considered the assessment order, the written submissions of the appellant, the documentary evidences placed on record and the relevant statutory provisions. The central issue requiring adjudication is whether the allotment letter dated 06.12.2014 can be regarded as an “agreement fixing the amount of consideration” within the meaning of the first proviso to section 56(2)(x) of the Act. The proviso to section 56(2)(x) provides that where the date of agreement fixing the consideration and the date of registration are different, the stamp duty value on the date of agreement may be considered, provided that part or whole of the consideration has been paid through banking channels on or before the date of such agreement. However, the applicability of the proviso presupposes the existence of a valid agreement fixing the consideration.

In the present case, the appellant relies upon the allotment letter dated 06.12.2014 as the agreement. However, upon examination of the material on record, the following facts emerge:

Therefore, the allotment letter cannot be equated with a legally enforceable agreement for transfer of immovable property. In this context, reliance may be placed on the decision of the Hon’ble Supreme Court in CIT v. Balbir Singh Maini, wherein it was held that transactions relating to transfer of immovable property must be supported by a registered instrument to have legal enforceability, particularly in the context of transfer of property rights. Further, the Hon’ble Supreme Court in Suraj Lamp & Industries Pvt. Ltd. v. State of Haryana has held that transfer of immovable property can take place only through a duly registered conveyance deed, and that unregistered arrangements do not confer legally enforceable ownership rights.

These judicial pronouncements emphasize the legal necessity of a registered instrument for recognizing transfer of immovable property rights, which reinforces the conclusion that the allotment letter relied upon by the appellant cannot be treated as an agreement for the purpose of the proviso to section 56(2)(x).

Accordingly, the only legally valid agreement for transfer of the property in the present case is the registered agreement dated 13.06.2017.

On that date, the stamp duty value was Rs.95,64,335/-, which is significantly higher than the agreement value of Rs.57,00,000/-. Therefore, the difference of Rs.38,64,335/- squarely attracts the provisions of section 56(2)(x) of the Act. A

6.3 Rebuttal of Judicial Precedents Relied upon by the Appellant:- The appellant has relied upon several decisions of the Income Tax Appellate Tribunal wherein allotment letters were treated as agreements fixing the consideration.

However, those decisions are distinguishable on facts because in those cases:

In the present case, however, the allotment letter lacks the essential attributes of a legally binding agreement and does not form part of a contractual framework recognized under the Transfer of Property Act or Registration Act.

It is also a settled principle that each case must be decided on its own facts, and therefore the judicial precedents cited by the appellant do not automatically apply to the facts of the present case.

6.4 Rebuttal of Appellant’s Argument Regarding Assessment in the Case of the Mother:-The appellant has further contended that in the case of the co-owner, namely his mother Mrs. Pravina Bharat Sheth, the assessment for the same issue was completed without making any addition, and therefore similar treatment should be accorded in the present case.

This contention cannot be accepted for the following reasons:

Therefore, the fact that no addition was made in the case of the coowner cannot by itself invalidate the addition made in the appellant’s case.

6.5 Conclusion:- Considering the totality of the facts and circumstances of the case, it is evident that:

3.3 The assessee, being dissatisfied with the findings recorded by the lower authorities, is now in further appeal before the Tribunal. Before us, the Ld. Counsel for the assessee filed a paper book containing pages 1-55.

4. During the course of hearing, the learned Authorised Representative (“the ld. AR”) assailed the orders of the lower authorities both on the jurisdictional issue relating to reassessment as well as on the addition sustained under section 56(2)(x) of the Act. At the outset, however, he fairly submitted that the controversy on merits lies in a narrow compass and centres around the applicability of the first proviso to section 56(2)(x). He, therefore, addressed elaborate arguments on the said issue. The ld. AR submitted that the authorities below proceeded on an erroneous premise that the proviso to section 56(2)(x) requires a registered agreement fixing the consideration. According to him, the statutory language employed in the proviso merely refers to “the date of the agreement fixing the amount of consideration” and nowhere stipulates that such agreement must necessarily be registered. It was argued that once the consideration stood irrevocably determined under the allotment letter and a substantial part thereof had been paid through banking channels on or before the date of such allotment, the statutory conditions prescribed under the proviso stood fully satisfied. Consequently, the stamp duty value prevailing on the date of allotment alone could be adopted for the purposes of section 56(2)(x). Inviting our attention to the paper book, the ld. AR submitted that the allotment letter dated 06.12.2014 unequivocally identified the property, specified the agreed consideration and was accompanied by payment through normal banking channels. It was contended that the allotment created enforceable contractual rights between the parties and the subsequent registered agreement merely formalised the transaction that had already crystallised several years earlier. Therefore, according to him, the authorities below erred in disregarding the allotment merely because it was not a registered instrument. The ld. AR further contended that both the Assessing Officer and the ld. CIT(A) had misdirected themselves in placing reliance upon the judgments of the Hon’ble Supreme Court in CIT v. Balbir Singh Maini (supra) and Suraj Lamp & Industries (P.) Ltd. v. State of Haryana 2012 340 ITR 1 (SC). According to him, those decisions were rendered in an altogether different statutory context dealing with transfer of immovable property and the enforceability of transactions under the Transfer of Property Act, 1882 and the Registration Act, 1908. The controversy before the Tribunal, however, did not concern the validity of transfer of title but merely the interpretation of the expression “agreement fixing the amount of consideration” occurring in the first proviso to section 56(2)(x). It was, therefore, submitted that the reliance placed upon the aforesaid judgments was misconceived. The ld. AR also relied upon various decisions of the co-ordinate Benches of the Tribunal wherein it has consistently been held that, for the purposes of sections 43CA, 50C and 56(2)(vii)/(x), an allotment letter issued by the developer, accompanied by payment of consideration through banking channels, constitutes an agreement envisaged under the respective provisos. According to him, these decisions correctly interpret the legislative intent underlying the proviso and squarely govern the issue arising in the present appeal.

4.1 Without prejudice to the above submissions, the ld. AR drew our attention to the Ready Reckoner rates prevailing during the Financial Year 2014-15 and submitted that if the proviso is held to be applicable, the stamp duty valuation as on the date of allotment would not exceed the agreed purchase consideration. He, however, fairly submitted that if the Tribunal considers verification of the factual aspects necessary, the matter may be restored to the Assessing Officer for the limited purpose of examining the documentary evidence.

4.2 Per contra, the learned Departmental Representative (“the ld. DR”) strongly supported the orders of the Assessing Officer and the ld. CIT(A). He submitted that the proviso to section 56(2)(x) contemplates a legally enforceable agreement and not a mere unilateral allotment letter issued by the developer. It was further argued that the registered agreement executed on 13.06.2017 did not even refer to the alleged earlier arrangement, thereby reinforcing the conclusion that the allotment could not be equated with an agreement contemplated by the statute. The ld. DR submitted that the authorities below have rightly relied upon the ratio laid down by the Hon’ble Supreme Court in Balbir Singh Maini (supra) and Suraj Lamp & Industries (P.) Ltd. (supra), which emphasise that rights in immovable property acquire legal recognition only through a duly registered instrument. According to him, once the registered agreement was executed in June, 2017, the stamp duty valuation prevailing on that date alone could legitimately be considered for the purposes of section 56(2)(x). He, therefore, submitted that the addition had rightly been sustained.

5. We have carefully considered the rival submissions, perused the orders of the authorities below and examined the material placed before us. We have also considered the statutory provisions as well as the judicial precedents cited at the Bar. The controversy, in our considered opinion, lies within a narrow compass. The principal issue requiring adjudication is whether the allotment letter dated 06.12.2014, whereby the purchase consideration stood determined and payments were admittedly made through banking channels, constitutes an “agreement fixing the amount of consideration” within the meaning of the first proviso to section 56(2)(x) of the Act.

5.1 Section 56(2)(x) seeks to bring to tax the difference between the stamp duty value and the actual consideration where an immovable property is acquired for a consideration lower than the stamp duty valuation. However, the Legislature, being conscious of the practical realities of real estate transactions, simultaneously incorporated the first proviso to mitigate hardship in genuine cases where the consideration had been fixed on an earlier date but the registration of the conveyance took place subsequently. The object of the proviso is thus remedial and intended to protect bona fide transactions from being prejudiced merely on account of an increase in the stamp duty valuation during the intervening period.

5.2 A plain reading of the proviso reveals that the Legislature has employed the expression “the date of the agreement fixing the amount of consideration”. Significantly, the statute does not qualify the expression by requiring that such agreement must necessarily be a registered agreement or a registered conveyance. Had Parliament intended to restrict the benefit only to registered agreements, nothing prevented it from expressly incorporating such requirement. The omission is evidently deliberate and cannot be supplied by judicial interpretation. It is a settled principle of statutory construction that the Court cannot read into the statute words which the Legislature has consciously omitted.

5.3 In commercial practice, particularly in transactions involving construction by developers, the allotment letter ordinarily records the identity of the property, the agreed consideration, the payment schedule and the reciprocal obligations of the parties. Such allotment creates enforceable contractual rights between the allottee and the developer, though the legal title ultimately passes upon execution of the registered conveyance. Therefore, for the limited purpose of determining the date on which the consideration stood crystallised, an allotment letter cannot be discarded merely because the conveyance was executed subsequently.

5.4 The reasoning adopted by the Assessing Officer as well as by the learned CIT(A) proceeds on the assumption that unless the document is registered under the Registration Act, it cannot be recognised as an agreement for the purpose of the proviso. In our respectful view, such approach conflates two distinct legal concepts. While the Transfer of Property Act, 1882 and the Registration Act, 1908 regulate the transfer of legal title in immovable property, the first proviso to section 56(2)(x) merely identifies the point of time at which the consideration stood agreed between the parties. The statutory enquiry under the proviso is, therefore, materially different from the question as to when legal ownership or title passes.

5.5 In this context, the reliance placed by the Revenue authorities upon the judgment of the Hon’ble Supreme Court in CIT v. Balbir Singh Maini 398 ITR 531 (SC) is, in our considered opinion, misplaced. The issue before the Hon’ble Supreme Court in that case related to the scope of “transfer” under section 2(47)(v) read with section 53A of the Transfer of Property Act after the amendment to the Registration Act. The Court held that, in the absence of a registered agreement, the provisions of section 53A could not be invoked and consequently there was no transfer for the purposes of capital gains taxation. The controversy before us is entirely different. We are not concerned with determining whether ownership had passed or whether there was a transfer within the meaning of section 2(47). The limited issue is whether the consideration stood fixed on an earlier date for availing the benefit expressly provided under the proviso to section 56(2)(x). The ratio of Balbir Singh Maini cannot, therefore, be extended beyond the statutory context in which it was rendered.

5.6 Similarly, the decision of the Hon’ble Supreme Court in Suraj Lamp & Industries (P.) Ltd. (supra) dealt with the legality of transfer of immovable property through General Power of Attorney, Agreement to Sell and allied documents. The Hon’ble Court reiterated that ownership in immovable property can ordinarily pass only through a duly registered conveyance deed. That principle is unexceptionable. However, the present controversy does not concern the validity of transfer of title but the interpretation of a beneficial proviso contained in the Income-tax Act. The ratio of Suraj Lamp cannot therefore be mechanically imported to deny the statutory benefit expressly contemplated by section 56(2)(x).

5.7 On the contrary, various Benches of the Tribunal, while interpreting identical expressions occurring in sections 43CA, 50C and 56(2)(vii)/(x), have consistently held that where the consideration stood fixed under an allotment letter and payment had been made through banking channels, the allotment letter constitutes the agreement contemplated by the proviso. We find ourselves in respectful agreement with the aforesaid line of reasoning as it advances the legislative intent underlying the proviso instead of frustrating it by importing conditions which the statute itself does not prescribe.

5.8 We are, therefore, unable to subscribe to the reasoning adopted by the authorities below that an allotment letter can never constitute an agreement within the meaning of the first proviso merely because it is not a registered instrument. Such interpretation not only travels beyond the language employed by the Legislature but also defeats the remedial object sought to be achieved by the proviso.

5.9 Having held that, in principle, an allotment letter is capable of constituting an agreement for the purposes of the first proviso to section 56(2)(x), we now proceed to examine whether the assessee satisfies the factual requirements necessary for claiming the benefit thereof.

5.10 During the course of hearing, the learned Authorised Representative drew our attention to the Ready Reckoner rates prevailing as on 06.12.2014 and contended that the stamp duty valuation on the date of allotment was lower than the agreed consideration. It was also submitted that substantial payments had already been made through banking channels prior to or on the date of allotment.

5.11 . However, upon careful examination of the paper book, we notice certain factual inconsistencies which require verification before the benefit of the proviso can be extended. Firstly, the receipt bearing No. 6714 dated 06.12.2014 appears to refer to payments relatable to Flat Nos.1701 and 1702. The receipt, on its face, does not clearly indicate the precise allocation of the payments between the two flats. Secondly, certain documents placed in the paper book indicate that Flat No.1702 stands in the names of Mrs. Pravina Bharat Sheth and Shri Bharat K. Sheth, whereas the present appeal concerns Flat No.1701 purchased by the assessee. Thirdly, some of the annexures forming part of the registered agreement contain references to Chawl Nos. 8, 9 and 10, thereby creating ambiguity regarding the exact property to which the registered documents placed before us relate. Lastly, although the assessee asserts that the consideration had substantially been discharged prior to the execution of the registered agreement, the precise linkage between the payments reflected in the documentary evidence and the property under consideration has not been conclusively demonstrated from the present record.

5.12 These discrepancies do not, in our view, justify rejection of the assessee’s claim in limine. Equally, they do not permit us to record a conclusive factual finding in favour of the assessee in the absence of proper verification. Since the benefit of the proviso depends upon objective facts, namely, the date of the agreement, the agreed consideration, the payments made through prescribed banking modes and the corresponding stamp duty valuation as on that date, these foundational facts necessarily require proper verification by the Assessing Officer.

5.13 Accordingly, while holding as a matter of law that an allotment letter is capable of constituting an agreement contemplated by the first proviso to section 56(2)(x), we deem it appropriate, in the peculiar facts of the present case, to restore the matter to the file of the Assessing Officer for the limited purpose of verifying—(i) whether the allotment letter dated 06.12.2014 pertains to the property forming the subject matter of the present appeal;(ii) whether the consideration stood finally determined under the said allotment;(iii) whether whole or part of such consideration had been paid by the modes prescribed in the proviso on or before the date of the allotment;(iv) whether the stamp duty valuation prevailing on the date of allotment was not in excess of the agreed consideration; and (v) whether the documentary evidence relied upon by the assessee establishes the aforesaid facts beyond doubt.

5.14 If, upon such verification, the Assessing Officer finds that the statutory conditions prescribed in the first proviso to section 56(2)(x) stand satisfied, the stamp duty valuation prevailing on the date of the allotment shall be adopted and the addition shall be recomputed or deleted, as the case may be, strictly in accordance with law. Needless to state, the Assessing Officer shall afford the assessee an adequate opportunity of being heard and shall consider all documentary evidence that may be produced in support of the claim before passing a fresh order.

5. Since we have restored the issue on merits to the file of the Assessing Officer for fresh adjudication, the jurisdictional grounds challenging the reassessment proceedings are left open and no adjudication thereon is considered necessary at this stage. The assessee shall be at liberty to raise all contentions available in law, if the occasion so arises.

6. In the result, the appeal of the assessee is allowed for statistical purposes in the terms indicated hereinabove.