RANI MIHIR SHAH,SANTACRUZ vs. DY COMMISSIONER OF INCOME TAX CIRCLE 42 3 1 MUMBAI, MUMBAI

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ITA 3685/MUM/2026Status: DisposedITAT Mumbai03 August 2026AY 2018-198 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the difference between the DVO's valuation and the actual consideration paid was less than 10%, falling within the safe harbor limit. Therefore, no addition was warranted under section 56(2)(x). The issue regarding society dues was rendered infructuous.

What were the facts?

The assessee purchased an immovable property for Rs. 3,75,00,000, which was valued by the Stamp Valuation Authority at Rs. 7,03,57,000. The DVO valued it at Rs. 4,10,91,000. The AO added the difference of Rs. 35,91,000 under section 56(2)(x) as income from other sources.

What were the issues?

Whether the addition under section 56(2)(x) is justified when the difference between the DVO's valuation and the actual consideration is within the 10% tolerance limit. Whether society dues paid by the assessee should be considered part of the purchase consideration.

Which sections of the Income-tax Act were involved?

Section 56(2)(x),Section 50C(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, MUMBAI

Before: SHRICHALLA NAGENDRA PRASAD, JM & SHRI ARUN KHODPIA, AM

Pronounced: 03.08.2026

आयकरअपीलीयअिधकरण�ायपीठमुंबईम�। IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRICHALLA NAGENDRA PRASAD, JM & SHRI ARUN KHODPIA, AM I.T.A. No.3685/Mum/2026 (Assessment Year: 2018-19) Rani Mihir Shah Dy. Commissioner of Income Tax, 101, Popular Apartments, 37, Circle 42(3)(1), Mumbai Tagore Road, Opposite Vs. Kautilya Bhavan, Mumbai Laxminarayan Temple, Santacruz (West), Mumbai-400054 PAN: AAEPM7719C Assessee- अपीलाथ� / Appellant Revenue-��थ�/ Respondent :

Assesseeby : Shri Jitendra Singh & Shivali S. Mhatre : Shri Amit Kumar Singh, Sr. DR Revenueby : 24.07.2026 Date of Hearing Date of Pronouncement : 03.08.2026

O R D E R Per Arun Khodpia, AM: This appeal is preferred by the assessee, directed against the order of the Commissioner of Income Tax Appeals, National Faceless Appeal Centre (NFAC), Delhi [in short, “the Ld. CIT(A)”], dated 08.01.2026 for the Assessment Year (AY) 2018-19, arises from the assessment order under section 143(3) of the Income Tax Act, 1961 [in short,“the Act”] dated 26.08.2021, passed byNational Faceless Assessment Centre, Delhi [in short,“the Ld.AO”].

ITA No. 3685/Mum/2025 Rani Mihir Shah 2. The grounds of appeal raised by the assessee are as under: “1. The National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as "Ld. CIT(A)/NFAC"] erred in passing the order dated 8th January 2026 under section 250 of the Income Tax Act, 1961 (hereinafter referred to as "the Act"] upholding the action of the National Faceless Assessment Centre, Delhi [hereinafter referred to as "Ld. AO"] in passing the assessment order dated 26th August 2021 under section 143(3) r.w.s 1448 of determining total income of the Appellant at Rs. 1,82,92,630/- as against returned income of Rs.1,47,01,630/-without appreciating the facts and circumstances of the case. The Appellant strongly objects to the impugned order passed by Ld. CIT(A) as the same is illegal, arbitrary and perverse on the following amongst other grounds which are urged without prejudice to one another: - 2. Addition under head Income from other sources invoking the provisions of section 56(2)(x)(b) of the Act unjustified-35,91,000/-. (i)The Ld. CIT(A) fell in error of law in upholding the action of the Ld. AO in making addition of Rs. 35,91,000/-under section 56(2)(x)(b) of the Act being difference between the actual purchase consideration and value determined by the Stamp Valuation Authority for collection of stamp duty without appreciating the facts and circumstances of the case. The Appellant, therefore, prays that the addition of Rs.35,91,000/- is unjustified and the same may be deleted. (ii) The Ld. CIT(A) failed to appreciate that the property was purchased under distress sale as the sellers were unable to repay the debt borrowed from a financial institution and ultimately settled at Rs.3,75,00,000/- paid by the Appellant towards purchase consideration of the impugned property. Thus, the provisions of section 56(2)(x) is not at all applicable to the facts of the present case. Hence, the impugned addition of Rs.35,91,000/-made under section 56(2)(x) of the Act is not at all justified and the same may be deleted. (iii) The Ld. CIT(A) further failed to appreciate that the difference between value determined by DVO and actual consideration paid for the purchase of impugned property is less than 10% of the consideration. Therefore, the addition of Rs.35,91,000/- under section 56(2)(x) of the Act is unjustified and the same may be deleted. (iv) The Ld. CIT(A) further failed to appreciate that the fourth proviso to section 56(2)(x), explicitly states that no addition can be made if the difference between the SDV and the consideration does not exceed 10% of the consideration paid. Thus, the impugned addition of Rs.35,91,000/- under section 56(2)(x) of the Act is against the provisions of law and the same may be deleted. 3. Addition by excluding society dues from purchase value of Rs. 2,85,121/-is unjust and must be deleted (i) The Ld. CIT(A) further erred in upholding the action of Ld. AO in excluding the amount of Rs. 2,85,121/- paid by the Appellant towards society dues as part of the purchase consideration while computing the value for addition under section 56(2)(x) of the Act. The Appellant, therefore, prays that the amount of Rs.2,85,121/- shall be 2

ITA No. 3685/Mum/2025 Rani Mihir Shah treated as part of acquisition while computing the value for making addition under section 56(2)(x) of the Act. (ii) The Ld. CIT(A) failed to appreciate that the society dues paid by the Appellant forms an integral part of the cost of acquisition. The Appellant, therefore, prays that amount of Rs.2,85,121/- should be treated as part of acquisition while computing the fair market value of the impugned property. 4. The Appellant denies any liability to pay interest under section 234B and 234C of the Act. Hence, the same are not leviable. 5. The Appellant craves leave to add, alter, amend, delete, rescind, or withdraw any of the grounds of appeal mentioned hereinabove.” 3. In the instant case, the return of assessee was selected for limited scrutiny on the following issues: - i. Investment in immovable property ii. Foreign Financial Interest 4. During the assessment proceedings, it is observed by the Ld. AO that the assessee has purchased an immovable property for Rs.3,75,00,000/- which is valued by the Stamp Valuation Authority at Rs.7,03,57,000/-. Therefore, the assessee was called upon to explain, why the difference of Rs.3,75,00,000/- should not be added invoking the provisions of section 56(2)(x). In response, the assessee submitted that the value has been adopted by the Stamp Duty Authority based on ready reckoner rate of the concerned area, which the assessee objected to and requested to get it valued from the District Valuation Officer (DVO) as per provisions of section 50C(2) r.w.s 56(2)(x) of the Act. Accordingly, the valuation was obtained from the DVO vide valuation report dated 08.06.2021, wherein the property was valued at RS.4,10,91,000/-. The Assessing Officer has taken into consideration the value given by the DVO,and the difference of Rs.35,91,000/-

ITA No. 3685/Mum/2025 Rani Mihir Shah (4,10,91,000/- – 3,75,00,000/-) is treated as income in the hands of assessee under the head income from other sources as per provisions of section 56(2)(x) of the Act and the addition was made.

5.

Being aggrieved with the aforesaid addition, assessee preferred an appeal before the Ld. CIT(A). However, the appeal of assessee was partly allowed with the following observations: “5. Decision: 5.1. The grounds of appeal, assessment order u/s.143(3) r.w.s. 144B of the Act and submission of the appellant have been carefully considered and the appeal is adjudicated as under: 5.2. The ground no.1,2 & 3 relates to the addition made by the AO in the impugned order, AO did not consider the TDS amount of Rs.3,78,788/- was made u/s. 1941A and payment of Rs.2,85,121/- to the society on account of society dues. All the grounds are clubbed together for the sake of convenience. 5.2. On perusal of the assessment order, it was noticed that the appellant raised objection against the stamp value as per Stamp Valuation Authority. The AO consider the same, refer the case to the Valuation Officer for determination of fair market value of the property. After receipt of report from the Valuation Officer, the AO made the addition of Rs.35,91,000/- being the difference between the market value of the property and as per the valuation report. During the appeal proceedings, the appellant stated that as per the Finance Act amendments and ITAT decision, justify applying 10% tolerance for the A.Y. 2018-19 and no addition was made u/s. 56(2)(x) of the Act. The appellant did not raise thisobjection before the AO after receipt of DVO report. There was almost of two months from the DVO report to the completion of the assessment. It is not correct on the part of the appellant to raise fresh claim during the appeal proceedings. Accordingly, the ground raised on this issue is dismissed. With regard to claim of TDS amounting to Rs.3,78,788/-, the AO is directed to verify the claim of the appellant give credit, if found correct and pass necessary order to that effect. Accordingly, the ground raised on this issue is partly allowed. With regard to claim of society dues of Rs.2,85,121/-, the contention of the appellant is rejected. Accordingly, the ground raised on this issue is dismissed. 6. Ground No.4 relates to initiation of penalty proceedings u/s. 270A of the Act. On perusal of the assessment order, it was noticed that the AO has only initiated penalty proceedings u/s. 270A of the Act and not levied the penalty against the appellant. This ground is consequential in nature and hence this ground is dismissed. 4

ITA No. 3685/Mum/2025 Rani Mihir Shah 7. In the result, the appeal filed by the appellant against order u/s. 143(3) r.w.s. 144B of the Act dated 26.08.2021 for the AY 2018-19 is partly allowed.” 6. At the outset, Ld. Counsel of the assessee submitted that the difference in valuation as per DVO and the actual consideration paid by the assessee as per purchase deed was less than 10%, therefore as per Third Proviso to Section 50Cr.w.s 56(2)(x) no disallowance is called for. Ld. AR placed his reliance on the following decisions:

i. Shreyas Naynesh Modi vs. Income Tax Officer-23(3)(6), Mumbai (ITA No.4453/Mum/2024 AY 2018-19) ii. Pramod Yeshwant Kadam vs. Income Tax Officer (ITA No.395/Mum/2026 AY 2017-18)

7.

Per contra, Ld. DR representing the Revenue vehemently supported the orders of Revenue Authorities.

8.

We have considered the rival submissions, perused the material available on record and the decisions relied upon by the assessee. The disallowance in the present case made by the Ld. AO and sustained by the Ld. CIT(A) was on account of difference in valuation of property as per DVO report and the actual consideration paid by the assessee. On this issue, the assessee has raised a ground before the Ld. CIT(A) that the tolerance band for variation in actual consideration and DVO is of 10%, whereas in the present case the variation is Rs.35,91,000/- only, which in terms of percentage of actual consideration is 9.57% only. Therefore, it is within the limits prescribed as per amended Third Proviso to Section 50C r.w.s 56(2)(x) of the Act. It was therefore, the request to 5

ITA No. 3685/Mum/2025 Rani Mihir Shah delete the addition as the valuation by DVO was within permissible range of safe harbor limits. One more issue is raised by the assessee that an amount of Rs.3,78,788/- made towards the tax deducted at source at the rate of 1% of 3,78,78,800/- which includes 3,75,000/- + TDS 3,78,788/-. The credit was not allowed to assessee as this also pertains to purchase of property and, therefore, shall be considered as part of purchase value of the property.

9.

Another issue was regarding a payment of Rs.2,85,121/- made under the agreement to the society towards the society dues as part of the purchase of property which was not considered while computing the variation or addition u/s 56(2)(x) of the Act. Regarding the safe harbor limit or tolerance band, we find substance in the contention raised by the Ld. AR that such limits are enhanced to 10% and the limits are applicable even when a valuation is done by review which is received at a lesser amount than what the Stamp Duty Authority has valued. On this aspect, Hon’ble Special Bench of ITAT in the case of Shreyas Naynesh Modi vs. Income Tax Officer-23(3)(6), Mumbai in ITA No.4453/Mum/2024 for AY 2018-19 vide order dated 23.01.2026 has categorically held that the valuation made by the Ld. DVO replaces the Stamp Duty Value for all practical purposes. The object behind introducing the safe harbor rule is for the purpose of discounting the difference between the actual and deemed sale consideration, if it is within permissible limits. Accordingly, the safe harbor rule in terms of Third Proviso to Section 50C(1) and in other similar provisions including section 56(2)(x) will apply to value determined by the DVO. 6

ITA No. 3685/Mum/2025 Rani Mihir Shah 10. Regarding applicability of 10% safe harbor limit which is brought into the statutes from Finance Act 2018 with effect from 01.04.2019, the same being curative and beneficial change shall be considered retrospective in nature, therefore, it would have its effect retrospectively. ITAT Mumbai in the case of Pramod Yeshwant Kadam vs. ITO in ITA No.395/Mum/2026 dated 15.05.2026 had decided the identical issue for AY 2017-18 allowing the safe harbor of 10% following the decision of Dr. Rajivraj Ranbir Singh Choudhary vs. ACIT, 393 ITR 650 (Gujarat) wherein it is held that the amendment in harbor provisions are intended to avoid hardship to genuine transactions, so are curative and retrospective in nature.

11.

Coming to the facts of present case, since the difference in DVO’s valuation and actual consideration of the assessee is less than 10%, no addition on account of difference in value of assessee’s purchased property is called for under the provisions of section 56(2)(x) of the Act. We, accordingly, set aside the order of Ld. CIT(A) on this aspect and direct the Ld. AO to delete the addition. Regarding claim of TDS, the Ld. CIT(A) has already directed the Ld. AO to verify the claim ad give credit to the assessee.Apropos, the claim of society dues of Rs.2,85,121/-, the Ld. CIT(A) has rejected the claim of assessee without assigning any reason for such rejection, however as the substantive addition has been directed to be deleted by us, this ground of assessee becomes infructuous and need not be adjudicated.

ITA No. 3685/Mum/2025 Rani Mihir Shah 12. In result, the appeal of assessee is allowed in above terms.

Order pronounced in the open court on 03-08-2026.

Sd/- Sd/- (ARUN KHODPIA) (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated :- 03-08-2026. Ankit K., Sr. PS

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT

BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai

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