The Kolkata Bench of Income Tax Appellate Tribunal ( ITAT ) ruled that the 10% tolerance band under Section 43CA introduced by the Finance Act, 2020 to address stamp duty valuation discrepancies applies retrospectively.
Ashiana Housing Limited, the assessee filed its income tax return declaring a total income of Rs. 33,41,38,850 for the assessment year 2018-19. The Assessing Officer (AO) made multiple additions to the assessee’s declared income.
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For the stamp valuation difference, the AO identified a variance between the declared sale price of certain real estate units and the valuation by the Stamp Valuation Authority which led to the addition of Rs. 25,62,729 under Section 43CA.
The assessee argued that the difference was within a 10% tolerance band introduced by the Finance Act, 2020, making the addition unwarranted. On appeal, the Commissioner of Income Tax (Appeals) ruled in favor of the assessee. Aggrieved the revenue challenged the CIT(A) order before the ITAT.
The assessee’s counsel argued that the Finance Act, 2020 introduced a 10% tolerance band for deviations between actual sale prices and stamp valuations, applicable retrospectively as it was curative and intended to mitigate genuine hardships. The counsel relied on Sandeep Kumar Poddar vs. ITO (Supra) where the retrospective application of the 10% tolerance band was upheld.
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On the other hand, the revenue counsel argued that the amendment increasing the tolerance band to 10% was prospective and should not apply to the assessment year 2018-19.
The two-member bench comprising Rajpal Yadav (Vice President) and Sanjay Awasthi (Accountant Member) referenced the case from the same tribunal Sandeep Kumar Poddar vs. ITO (Supra) which explained that the 10% tolerance band was introduced to address genuine variations in property valuations and was curative in nature and that discrepancies below the 10% threshold should not invoke anti-avoidance provisions under Sections 43CA and 50C.
The tribunal confirmed that the amendments were remedial, aimed at addressing unintended consequences so it should apply retrospectively from the date the provision came into effect. The tribunal dismissed the revenue’s appeal and directed the AO to verify cases falling within the 10% tolerance band and allow relief accordingly.
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