ITAT Deletes Section 56 Addition on Joint Property Purchase Where Entire Payment Made by Spouse

The assessee, a homemaker, had not filed a return for AY 2017-18. Based on Insight Portal data, the Assessing Officer reopened the assessment alleging understatement in the purchase of a residential flat, where the agreement value was Rs. 46.13 lakh against a stamp duty value of Rs. 1.41 crore.

Treating 50% of the difference as income, the AO made an addition of Rs. 47.74 lakh under Section 56(2)(vii)(b), holding that the assessee failed to establish that the consideration was paid entirely by her husband. The NFAC sustained the addition.

Main Issues: Whether Section 56(2)(vii)(b) could be invoked against a joint holder who did not invest in the property, and whether the reassessment was validly sanctioned.

ITAT Held: The ITAT allowed the appeal in full. On merits, it held that the entire consideration stood fully explained in the hands of the assessee’s husband and that mere inclusion as a joint owner could not justify taxing the assessee when she had made no payment. The Tribunal also noted the inconsistency in sustaining the addition in the assessee’s case after dropping identical proceedings against the husband.

The Tribunal admitted the additional ground and held that the reassessment was invalid, as approval under Sections 148A(d) and 148 was granted by an incompetent authority. Therefore, the addition of Rs. 47.74 lakh was deleted on both legal and factual grounds.

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