NANDKISHOR SHANTARAM KADAM,MULUND vs. INCOME TAX OFFICER, WARD 42(2)(4), MUMBAI, KAUTILYA BHAVAN, BANDRA KURLA COMPLEX, MUMBAI

The assessee has raised the following grounds of appeal:

The brief facts of the case are that, the assessee is an individual, filed his return of income for A.Y. 2017-18 declaring total income of Rs.10,82,520/-. On the basis of information that the appellant had purchased immovable property during F.Y. 2016-17 for a consideration of Rs.57,00,000/-, against which the stamp duty valuation authority had valued the property at Rs.60,77,840/-, the case was reopened under section 147 of the Act by issue of notice under section 148. The reassessment was completed under section 147 r.w.s. 144B of the Act, and the difference of Rs.3,77,840/- between the stamp duty value and the actual consideration was added to the appellant's income under section 56(2)(vii)(b) as “income from other sources”.

Before the Ld. CIT(A), the appellant contended, inter alia, (i) that the allotment letter dated prior to the registered agreement ought to have been taken as the date of agreement for stamp duty valuation, in view of the first proviso to section 56(2)(vii)(b); and (ii) that the variation between the stamp duty value and the consideration did not exceed the tolerance band and hence no addition was warranted. The Ld. CIT(A) rejected both contentions and confirmed the addition, holding that the allotment letter was an unregistered, self-serving document that could not be treated as the “agreement fixing the consideration”, and that the tolerance band introduced by the Finance Act, 2018 (5%) and enhanced by the Finance Act, 2020 (10%) applied only prospectively from A.Y. 2019-20 and A.Y. 2021-22 respectively, and hence had no application to A.Y. 2017-18.

During the course of hearing before us, the learned Authorised Representative (“ld. AR”) for the assessee, at the outset, confined his arguments to Ground No. 1, and placed strong reliance on the decision of the coordinate Bench of this Tribunal in Padmavati Developers v. ITO, ITA No. 2616/Mum/2026, dated 25.02.2026, for A.Y. 2018-19. It was submitted that in the said case, on identical facts, addition under section 56(2)(x)(b)(B) on account of difference between stamp duty value of Rs.1,61,16,500/- and consideration of Rs.1,50,00,000/-, being a variation of 7.44%, this Tribunal held that the enhanced tolerance limit of 10% introduced by the Finance Act, 2020 is curative in nature and therefore retrospective in operation, notwithstanding that it was made statutorily effective only from A.Y. 2021-22. The Tribunal in that case followed its own consistent line of decisions in the following cases:-

It was submitted that in the present case, the variation between the stamp duty value of Rs.60,77,840/- and the consideration of Rs. Rs.57,00,000/- is Rs.3,77,840/-, which works out to approximately 6.2% of the stamp duty value (and about 6.6% of the consideration), in either view, well within the 10% tolerance band. It was submitted that if a variation of 7.44% was held to fall within the protected band in Padmavati Developers (supra), the marginally lower variation in the present case must, a fortiori, be entitled to the same relief. Judicial discipline and consistency required this Bench to follow the ratio of the coordinate Bench.

The learned Departmental Representative (“ld. DR”), on the other hand, relied on the orders of the authorities below and supported the addition.

We have heard the rival contentions and perused the material on record, including the order of the Ld. CIT(A) and the decision of the coordinate Bench in Padmavati Developers v. ITO (supra).

The short question for consideration is whether the addition of Rs.3,77,840/- made under section 56(2)(vii)(b) of the Act is sustainable, having regard to the quantum of variation between the stamp duty value and the actual consideration paid by the appellant. It is not in dispute that the said variation, expressed as a percentage, is approximately 6.2%- 6.6%, and thus falls well within the tolerance band of 10% introduced by the Finance Act, 2020.

The coordinate Bench of this Tribunal, in Padmavati Developers v. ITO, ITA No. 2616/Mum/2026, dated 25.02.2026, on facts materially identical to those before us, has held that the enhanced tolerance limit of 10% is curative in nature and is intended to remove the hardship caused to genuine purchasers on account of marginal, bona fide variations between stated consideration and stamp duty valuation that routinely arise from differing methods of valuation. Following its earlier decisions in Sunil B. Dalal, Glory Shipmanagement Private Limited, Balkrishna Venkappa Bhandary, NRB Developers, Sandeep Patil, Chandraprakash Jhunjhunwala and Maria Fernandes Cheryl, the coordinate Bench held that a curative amendment of this nature must be given retrospective effect, and that the ratio of the Hon'ble Supreme Court in CIT v. Vatika Township (P) Ltd., which raises a presumption against retrospectivity, is confined to provisions that impose a fresh liability and has no application to a beneficial provision that merely relaxes an existing deeming fiction.

Respectfully following the aforesaid ratio of the coordinate Bench, and applying it to the facts of the present case, we hold that the variation of approximately 6.2%-6.6% between the stamp duty value and the consideration paid by the appellant falls squarely within the protected 10% band, and consequently no addition under section 56(2)(vii)(b) of the Act is sustainable in law. We find no material distinction between the facts of Padmavati Developers (supra) and the facts of the present case that would warrant a departure from the ratio laid down therein; on the contrary, the variation in the present case is lower than that considered and accepted by the coordinate Bench. Judicial propriety and consistency require us to follow the same view. We accordingly set aside the order of the Ld. CIT(A) and direct the AO to delete the addition of Rs.3,77,840/-. Ground Nos. 1 is allowed.

Since relief has been granted to the appellant on Ground No. 1 on the quantum/tolerance-band issue, resulting in deletion of the entire addition, Ground No. 2 relating to the date to be adopted for stamp duty valuation in cases where the date of agreement fixing the amount of consideration for transfer of immovable property and the date of registration are not the same, is rendered academic and is not separately adjudicated.

Ground No. 3, challenging the validity of the initiation of reassessment proceedings under section 147 r.w.s. 148A of the Act, was not pressed with any specific submissions at the time of hearing, and in view of the relief already granted on merits, has also become academic. This ground is accordingly dismissed as infructuous, without expressing any opinion on the merits thereof.

In the result, the appeal of the assessee is allowed.