The Kolkata Bench of Income Tax Appellate Tribunal ( ITAT ) deleted the ₹19.6 lakh addition made for AY 2018-19 under Section 56(2)(x)(b) of the Income Tax Act,1961 applying the retrospective 10% safe harbor limit introduced by a curative amendment effective from 01.04.2021.
Amit Shrivastva, the appellant-assessee, challenged the Commissioner of Income Tax ( Appeals )[CIT(A)] order dated 29.11.2023 for Assessment Year(AY) 2018-19, passed under Section 250 of the Act, against the Assessment Order issued under Section 147 read with Section 144B on 10.03.2023.
The case was reopened as the assessee purchased property for Rs.2,33,00,000, while the stamp duty value was Rs.2,52,60,000. The Assessing Officer ( AO ) added the difference of Rs.19,60,000 under Section 56(2)(x)(b) of the Act.
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The assessee argued before the CIT(A) that the difference was within the 10% limit but exceeded the 5% safe harbor applicable for the year. The CIT(A) applied the 5% limit and upheld the addition.
Aggrieved by the order of the CIT(A) the assessee appealed before the ITAT, challenging the addition of Rs.19,60,000.
The two member bench comprising Sanjay Garg ( Judicial Member ) and Sanjay Awasthi ( Accountant Member ) carefully considered the submissions and reviewed the documents before it. It observed that the value differential in this case was between 5% and 10%.
To determine whether the amendment raising the safe harbor limit from 5% to 10%, effective from 01.04.2021, could be applied retrospectively, the Tribunal referred to several cases, particularly Joseph Mudaliar vs. DCIT (AY 2015-16), which held that the increase in the safe harbor limit was curative and should apply to prior years.
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The appellate tribunal also cited the Nisha Gupta vs. ITO case, where it was stated that if the difference between sale consideration and stamp duty value is less than 10%, no addition should be made under Section 56(2)(x)(b)(ii). Since the provisions of Sections 50C and 56(2) are identical, this principle applies equally to buyers and sellers. The bench noted that these amendments were consistently treated as retrospective in several rulings.
Following these decisions, the tribunal concluded that the 10% safe harbor limit applied to the current assessment year and, accordingly, directed the deletion of the addition.
In short,the appeal filed by the assessee was allowed.
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