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Facts
The assessee purchased a property for Rs. 2,71,01,140, while the stamp duty value was Rs. 2,82,71,148, showing a difference of Rs. 11,70,008. The AO added 50% of this difference as income from other sources under Section 56(2)(x) of the Act, which was upheld by the CIT(A).
Held
The Tribunal held that the amendment brought about by the Finance Act, 2018, introducing a 5% tolerance band for the difference between stamp duty value and sale consideration, is curative and retrospective. Therefore, the marginal variation cannot be added.
Key Issues
Whether the 5% tolerance band provided by the Finance Act, 2018 for the difference between stamp duty value and sale consideration is applicable retrospectively for the assessment year 2018-19.
Sections Cited
250, 143(2), 142(1), 143(3), 144B, 56(2)(x), 43CA, 50C
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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
O R D E R Per Kavitha Rajagopal, J M: This appeal has been filed by the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) Delhi (‘ld. CIT(A)’ for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2018-19.
The assessee has challenged the addition of Rs. 5,85,004/- made by the ld. AO as income from other sources u/s. 56(2)(x) of the Act.
Brief facts of the case are that the assessee is an individual and had filed his return of income dated 22.07.2018, declaring total income at Rs. 6,57,930/- as income under the head ‘business income’ and ‘income from other source’. The assessee’s case was (A.Y. 2018-19) Lakhdhir Virji Gala selected for scrutiny and notices u/s. 143(2) and 142(1) of the Act were duly issued and served upon the assessee. The ld. AO observed that the assessee along with Smt. Pushpa Kumari Lakhdhir Gala purchased a property at Flat No. 3207, 32nd Floor, Sky City, Attapada Road, Borivali, Mumbai-400066, vide an agreement of sale dated 10.10.2017 for a consideration of Rs. 2,71,01,140/- which according to the ld. AO, the stamp duty value of the said property was Rs. 2,82,71,148/-. The difference being Rs. 11,70,008/- between the stamp duty value and the sale consideration. After duly considering the assessee’s submission, the ld. AO passed the assessment order u/s. 143(3) r.w.s. 144B of the Act, dated 27.04.2021, determining total income at Rs. 12,42,930/- after making an addition of Rs. 5,85,004/- u/s. 56(2)(x) of the Act being 50% of the difference value.
Aggrieved the assessee was in appeal before the first appellate authority, who vide order dated 15.04.2025 upheld the addition made by the ld. AO on the ground that the amendment brought about by Finance Act, 2018 to Section 43CA, Section 50C and Section 56 of the Act are applicable only from 01.04.2019 relevant to A.Y. 2019-20 onwards and further relied on circular no. 8/2018, thereby rejecting the assessee’s contention that the tolerance limit of 5% will not be applicable to the year under consideration.
Aggrieved the assessee is in appeal before us, challenging the order of the ld. CIT(A).
The learned Authorised Representative ('ld. AR' for short) for the assessee contended that the difference in the stamp duty value and the sale consideration was due to the amendment brought about by the government by implementing RERA Act (The Real Estate (Regulation and Development) Act, 2016), and had failed to amend the rate or (A.Y. 2018-19) Lakhdhir Virji Gala conversion method from carpet to built up area. The ld. AR further contended that even otherwise, the difference in the stamp duty value and the agreement value cannot be added when the tolerance bandwidth is 5% as per the amendment brought about to Section 56(2)(x) of the Act which according to the ld. AR applies retrospectively as being curative in nature. The ld. AR further stated that Section 56(2)(x) is a deeming provision and that the amendment brought about to Section 50C and 56(2) applies to the year under consideration. The ld. AR placed reliance on the decision of the coordinate bench in the case of Nisha Gupta vs. ITO, Ward – 37(2), Kolkata, order dated 05.01.2024, CIT vs. Vummudi Amarendran (120 taxmann.com 171 (Mad HC) and Joseph Mudaliar vs. DCIT (130 taxmann.com 250) (ITAT Mum), wherein it was held that the tolerance band could be applicable to earlier years also. The ld. AR also relied on the decision of the Hon'ble Apex Court in the case of Commissioner of Income Tax-I, New Delhi vs. Vatika Township P. Ltd., Civil Appeal No. 8750 of 2014 (Supreme Court 15th September, 2014) where in case of beneficial amendments the same would apply retrospectively.
The learned Departmental Representative ('ld. DR' for short) for the revenue on the other hand controverted the said fact and contended that the circular no. 8/2018 would be applicable, where the amendments brought to this provision are said to be applicable only from 01.04.2019 relevant to A.Y. 2019-20 onwards and not for earlier years. The ld. DR relied on the order of lower authorities.
We have heard the rival submissions and perused the materials available on record. The only moot issue that requires adjudication is whether the assessee is entitled to the 5% (A.Y. 2018-19) Lakhdhir Virji Gala tolerance band provided by the Finance Act, 2018 by amendment to Section 43CA, 50C and 56 is applicable retrospectively or not. It is observed that the issue in hand has already been dealt with in various decisions by the coordinate benches, where it has been held that the changes brought about by the Finance Act, 2018 in accordance with the tolerance band of 5% was curative in nature and is therefore applicable to earlier assessment years also. It has held that when the difference between the stamp duty value and the sale consideration is less than 5% as per Section 56 r.w.s. 50C of the Act then the said marginal variation cannot be added in the hands of the assessee. Further, it held that the benefit of the availing 5% marginal difference in the variation between the sale consideration and the stamp duty value has to be extended to the assessee retrospectively, for the reason that the said amendment in the Finance Act, 2018 w.e.f. 01.04.2019 was curative in nature and beneficial provision. The ld. AR extensively relied on the decision of the jurisdictional coordinate bench in the case of Joseph Mudaliar vs. DCIT, CC-4(3), Mumbai in order dated 14.09.2021, which has elaborately dealt with the issue in hand. In the absence of any contrary decisions cited by the revenue, we deem it fit to allow the grounds raised
by the assessee by respectfully following the said decision.