ITAT Deletes Addition u/s 56(2)(x); Holds Sale Price Below Stamp Duty Value Justified Due to Title Dispute, Variation Within 5% Threshold
Considering both the minor difference in valuation and the fact that the property’s title was under dispute at the time of sale, the tribunal found the addition unjustified and directed its deletion.
The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) deleted an addition of ₹16,12,245 made under section 56(2)(x) of the Income Tax Act,1961, holding that the variation between the sale consideration and the stamp duty value was within the permissible 5% threshold and that the lower sale price was justified due to a title dispute.
Deepakkumar Chandulal Shah,appellant-assessee, challenged the order passed by CIT(A) dated 28.1.2025 for the AY 2017-18. The dispute was over an addition of ₹16,12,245 made under section 56(2)(x) of the Act. The Assessing Officer found that the sale price of the property was lower than the stamp duty value and treated the difference as income. The CIT(A) confirmed the addition.
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The tribunal noted that the assessee’s counsel made two key submissions. First, the difference between the sale consideration and the stamp duty value was less than 5%, and as per section 56(2)(x)(B)(ii) of the Act, no addition was warranted since the variation fell within the permissible limit.
Second, the counsel submitted that there was a dispute over the title of the property at the time of execution of the sale deed, which led to a lower sale price. In support, he referred to the Gujarat High Court’s order dated 21.06.2018, highlighting an earlier agreement to sell the same property in 2004 by a power of attorney holder, which was held unenforceable since the original owner had passed away in 1997.
The High Court upheld the trial court’s order and dismissed the civil suit seeking specific performance. The appellate tribunal observed that the litigation over the property's title was ongoing at the time of sale, and it was reasonable to conclude that the disputed title affected the property's market value.
Further, since the difference between the sale consideration and the stamp duty value was admittedly less than 5%, the tribunal held that the addition under section 56(2)(x) was not justified and directed its deletion.
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The two member bench comprising Sanjay Garg ( Judicial Member) and Narendra Prasad Sinha ( Accountant Member)allowed the appeal filed by the assessee.
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