We bought a flat below the ready reckoner rate and the department has added the difference to my income and substituted the same figure in my uncle's sale price. Can both of those stand?
The client is a salaried individual in Pune who bought a resale flat at Baner jointly with his wife in equal shares. The agreement to sell was executed on 14 March 2022 for Rs 1.05 crore, and Rs 11 lakh was paid on that date by account payee cheque which cleared on 17 March 2022; the balance went by four bank transfers over the following months. The sale deed was registered on 8 February 2023, eleven months after the agreement, so the receipt falls in AY 2023-24. The ready reckoner value on the registration date was Rs 1.34 crore; on the agreement date it was Rs 1.12 crore. Stamp duty was paid on the reckoner value and neither party contested that value before the stamp authority. The buyer's assessment adds Rs 29 lakh under s.56(2)(x)(b), wholly in his hands and not apportioned with his wife, takes the registration-date value and says nothing at all about the agreement. The seller is the buyer's paternal uncle, assessed at a different ward, and his order for the same year substitutes Rs 1.34 crore for Rs 1.05 crore under s.50C and adds Rs 29 lakh to a long-term gain on a flat held since 2011. The buyer disputed the reckoner value in writing during the assessment - the flat is on the ground floor, its access is encroached and there is a drainage easement across the rear - and asked in terms for a reference to the Valuation Officer; the officer neither refused the request nor made the reference. The seller never asked. Tax was deducted under s.194-IA at 1 per cent on Rs 1.05 crore only. The family holds the agreement, the bank statement showing the 14 March cheque, the registered deed, and reckoner extracts for both dates.
Work out both additions on the agreement-date reckoner value before answering anything on merits, because on these figures that single point disposes of the whole file at both ends. Against a consideration of Rs 1.05 crore the agreement-date value of Rs 1.12 crore is a gap of Rs 7 lakh, which is inside the higher of Rs 50,000 and 10 per cent of the consideration, so there is nothing to add in the buyer's hands; and Rs 1.12 crore is under 110 per cent of Rs 1.05 crore, so there is nothing to substitute in the seller's computation either. Everything therefore turns on one fact - that Rs 11 lakh went by account payee cheque on the date of the agreement - and on getting that fact, with the bank statement behind it, on to both assessment records before either order is passed. A reply that opens on the condition of the property and the Valuation Officer, and reaches the agreement date late or not at all, converts a complete answer into a valuation dispute that runs for two years and ends in a compromise figure.
Both charges carry the same pair of provisos. The first lets the stamp duty value on the date of the agreement fixing the consideration be taken where the agreement and the registration fall on different dates; the second makes that available only where the consideration, or a part of it, was paid by account payee cheque, account payee bank draft, electronic clearing through a bank account or another prescribed electronic mode on or before the agreement date. The library holds a Tribunal decision reading the amendment that inserted the seller-side proviso as curative and therefore reaching back to years before its stated effective date, and it holds the same reasoning applied on the buyer's side, where an allotment or booking document that names the property, the price and the terms has repeatedly been accepted as the agreement fixing the consideration. The library also records that the amount paid on or before the agreement date does not have to be substantial - what the proviso requires is the mode, not the size - and that the point simply fails where the bank evidence is not produced. Here the cheque is the whole case, so it goes in as an annexure with the bank statement, not as an assertion in a paragraph.
On the buyer's side the charge arises only where the excess of the stamp duty value over the consideration is more than the higher of Rs 50,000 and 10 per cent of the consideration; on the seller's side the substitution operates only where the stamp duty value exceeds 110 per cent of the consideration, a band that stood at 105 per cent for two earlier years. The library holds a Tribunal decision treating the increase of the band from 5 per cent to 10 per cent as clarificatory and therefore applicable to earlier years, on the footing that the wording of the proviso did not change and only the band widened. On these figures the agreement-date value takes both sides inside the band, which is a complete answer and not a mitigation. Where the registration-date value has to be used, the band is crossed comfortably and the fight moves to valuation.
The buyer's charge borrows the seller-side machinery: where the stamp duty value is disputed on the grounds that it exceeds fair market value and has not been contested before or accepted in any stamp valuation proceeding, the officer may refer the valuation, and the consequences of the seller-side provision follow, including the ceiling that the reported figure cannot be adopted if it comes out above the stamp duty value. The library records a High Court refusing to read that permissive word as a free discretion in the seller's context, holding that the legislature provided machinery to give fair treatment to the taxpayer, that the officer discharges a quasi-judicial function, and that he must offer the option even where the assessee never asked. It records a Tribunal decision carrying that reasoning into the buyer's charge and setting an addition aside for a fresh valuation where the buyer had disputed the value and no reference was made, and another where the reported figure, taken at the earlier date, brought an addition of over Rs 9 crore down to about Rs 81 lakh. Because of the ceiling, the reference cannot make either party worse off. The seller's file needs the same request made separately, since the failure to ask is exactly what his officer will rely on.
The library records that where property is bought jointly any taxable difference is apportioned among the co-owners according to their shares rather than assessed wholly on one of them, and it lists letting the whole addition sit on one joint owner among the standard errors in these assessments. On an equal-share purchase that halves the exposure even if every other argument fails, and it costs nothing to take. Put the deed and the funding trail from both accounts on record so the shares are definite and ascertainable on the face of the file rather than asserted.
The two charges are computed off one number, so a concession or a valuation obtained in one assessment is the first thing the other officer will be shown. The seller's provision deems the stamp duty value to be the full value of consideration for the capital gains computation once the band is crossed; it does not create a separate head, so cost, expenses of transfer and the reinvestment reliefs all still work on the substituted figure, and the year of charge is fixed by when the transfer is effected rather than by when money moved. The seller's file needs the agreement, the same bank statement, the same request for a reference and the same point that stamp duty was borne by the purchaser, so that nothing in the instrument amounts to the seller's acceptance of the sub-registrar's valuation - which is the reasoning the library records for refusing to infer acceptance from the recital in the deed.
The buyer's withholding obligation on a purchase of immovable property is computed on the higher of the consideration and the stamp duty value, and the library sets that out expressly, along with the rule effective from 1 October 2024 aggregating amounts paid by all transferees to a transferor so that a purchase cannot be split across joint holders to stay under the threshold. Deducting on the agreed price alone where the reckoner value is higher is a short deduction that carries interest and a per-day fee and lands as a separate proceeding on the buyer, usually after the assessment has closed. If the agreement-date argument succeeds on the assessment the withholding position does not automatically follow, because the withholding provision is drafted on stamp duty value without the agreement-date proviso, so this has to be looked at on its own terms.
Where an amount is brought to tax on the buyer under this charge, the library records that the cost of acquisition is stepped up to the value that was taxed, so the same amount is not taxed again when the flat is sold; that entry has to be made in the client's records now, because it will be needed years later and nobody will remember. On the penalty side, an addition of this kind ordinarily produces an under-reporting charge, and the library sets out the immunity route - payment of the tax and interest within the demand period, no appeal against the assessment, and an application in the prescribed form within one month from the end of the month of receipt of the order - which is available for under-reporting but not where the notice alleges misreporting. Those two routes are mutually exclusive, so the client has to choose before the demand-notice period runs out rather than after the appeal is filed.
Where the cheque on the agreement date is provable from the bank statement, both additions go, and on these numbers they go completely rather than being reduced, because the agreement-date value takes both sides inside the band. Officers at the assessment stage frequently decline the point on the footing that the agreement was unregistered or that the payment was small, and it is the first appellate stage that applies it, so plan on one round. Where the payment cannot be evidenced, the fallback is the Valuation Officer, and the usual order there is a restoration for fresh valuation rather than a deletion, with the reported figure typically landing between the agreed price and the reckoner rate. The joint-ownership point halves whatever survives. The outcome turns almost entirely on the quality of one bank statement and on whether the request for a reference is visible on the assessment record rather than raised for the first time in appeal.