Property Valuation Should Be Based on Original Allotment Year: ITAT

The Income Tax Appellate Tribunal (ITAT), Mumbai, ruled that property value should be based on the original allotment year, not a later date, due to a typographical error in the allotment letter.

The assessee, Lilo Satramdas Ballani, purchased Flat No. 1002 for Rs 48,00,000, but the stamp duty valuation of this property as per the agreement was Rs 1,73,65,600. The difference between these amounts (Rs 1,25,65,000) was added to the income of the assessee as an addition.

The assessee had originally booked Flat No. 1403 in 2009, but due to some issues in the builder’s project, the developer could not allot the said Flat and instead allotted Flat No. 1002 through the allotment letter. However, there was a typographical mistake in the allotment letter, as it mentioned Flat No. 1001. The assessee argued that the valuation of the property should be adopted with reference to Year 2009-10 (AY 2010-11).

The AO rejected the claim and adopted stamp duty valuation as on 22/08/2019, and the CIT(A) upheld the AO’s order, arguing that the change in flat number is not a genuine transaction and was done to evade taxes. Therefore, the assessee approached the Income Tax Appellate Tribunal (ITAT), Mumbai.

The Tribunal accepted the assessee’s contentions, noting that the developer had admitted the typographical error in the letter and the payment by the assessee in 2009 was duly acknowledged and fully adjusted against the new allotment. The Tribunal also noted that the assessee did not make any extra payment, and there was no change in the area of the flat.

The Tribunal ruled that the property should be valued according to 2009 (A.Y. 2010-11), as per the Explanation to Section 56(2)(vii)(b). Based on this, the Tribunal restored the matter to the Assessing Officer, who was directed to verify the letter, the agreement and the assessee’s contention and then pass a fresh assessment.