Difference Between Stamp Duty Value and Purchase Consideration on Flat Within 10% Tolerance Limit u/s 56(2)(x): ITAT Deletes Rs. 3.31 Cr Income Tax Addition [Read Order]

The Mumbai bench of Income Tax Appellate Tribunal (ITAT) deleted a 3.31 crore addition on the ground that the difference between the stamp duty and the purchase consideration on the flat was within the 10% tolerance limit under Section 56(2)(x) of the Income Tax Act.

The assessee, Deluxe Recycling India Private Limited, had booked a flat bearing No. A-2, 3212 at

India Bulls Sky Forest, Mumbai, in the year 2014 for a consideration of Rs 8,01,61,000/-. The sale agreement for this was registered on 27.09.2019, for which the stamp duty value on the date of registration was Rs 11,32,76,000/-. Assessee disputed this stamp duty valuation before the AO, and the matter was referred to the DVO at the request of the assessee.

Since the assessment was getting time-barred, the AO completed the assessment pending receipt of the report from the DVO, by making an addition of Rs 3,31,15,000/- under Section 56(2)(x), being the difference between the purchase consideration and the stamp duty value. The impugned assessment was completed by order. Subsequent to this report, the DVO report was issued on determining the total value at Rs 8,73,87,000/-.

These facts were brought by the assessee before the CIT(A) by placing a copy of the valuation report. The CIT(A) took note of the valuation report of ld. DVO and considering the difference within the tolerance band of 10%, allowed the ground of the assessee, deleting the addition thereof. Aggrieved by this order the revenue filed an appeal before the tribunal.

The Tribunal observed that there is no difference in the valuation arrived at by the DVO in both the reports, wherein the valuation amount stated is Rs 8,73,87,000/-. It is a verifiable fact, and admittedly, there is no variation in the two reports.

The tribunal further observed that it is a settled position of law that the tolerance limit was increased from 5% to 10% in section 56(2)(x) by the Finance Act, 2020, which is held to be applicable retrospectively, it being curative in nature and therefore would apply retrospectively from AY 2018-19.

The Tribunal quoted the case of Maria Fernandes Cheryl, in which it was held that the amendment made by introducing a proviso for a tolerance band of 5% and later on increased to 10% applied when the provisions of section 50C were introduced.

The Tribunal also noted that the third proviso to section 56(2)(vii) provides reference to section 50C for determining the valuation of the property by the Valuation Officer. The third proviso to section 50C provides that where the value adopted or assessed or assessable by the Stamp valuation Authority does not exceed 10% of the consideration received shall be taken as full value of the consideration, i.e., if the difference is less than 10%, the same can be taken as fair market value..

The two-member bench of Sandeep Gosain (Judicial Member) and Girish Agrawal (Accountant Member) held that the assessee is eligible for a 10% tolerance limit under Section56(2)(x)(b)(B). Accordingly, the addition made by the AO is deleted.

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