KONDAL RAO KURMAIAHGARI,HYDERABAD vs. DCIT, CIRCLE-2(1), HYDERABAD

आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ B ‘ Bench, Hyderabad �ी रिवश सूद,�ाियक सद� एवं �ी मधुसूदन साविड़या लेखा सद� सम� | Before Shri Ravish Sood, Judicial Member A N D Shri Madhusudan Sawdia, Accountant Member आ.अपी.सं /ITA No.181/Hyd/2026 (िनधा�रण वष�/Assessment Year: 2016-17) Shri Kondal Rao Vs. Dy. CIT Kurmaiahgari Circle 2(1) Hyderabad Hyderabad PAN:AHVPK6085D (Appellant) (Respondent) िनधा�रती �ारा/Assessee by: CA Amrit Kumar Kota राज� व �ारा/Revenue by:: Dr. Sachin Kumar, Sr. AR सुनवाई की तारीख/Date of hearing: 04/06/2026 घोषणा की तारीख/Pronouncement: 19/06/2026 आदेश/ORDER Per Madhusudan Sawdia, A.M.:

This appeal is filed by Shri Kondal Rao Kurmaiahgari (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”) dated 26.11.2025 for the A.Y. 2016-17. 2. The assessee has raised the following grounds of appeal:

revised return on 02.04.2021 declaring total income of Rs.8,18,28,120/-. During the reassessment proceedings, the Ld. AO observed that the assessee had sold an immovable property for a consideration of Rs.13,99,10,731/-. After reducing indexed cost of acquisition of Rs.3,40,61,037/- and indexed cost of improvement of Rs.3,33,54,000/-, the assessee had offered long-term capital gain of Rs.7,24,95,694/- in the return of income. However, the Ld. AO noticed that the market value of the property was Rs.15,25,47,875/-. Invoking the provisions of section 50C of the Act, the Ld. AO substituted the sale consideration of Rs.13,99,10,731/- with the market value of Rs.15,25,47,875/-. The Ld. AO further disallowed the indexed cost of improvement of Rs.3,33,54,000/- and computed the long-term capital gain at Rs.11,84,86,838/-. Consequently, an addition of Rs.4,59,91,144/- was made by the Ld. AO in the hands of the assessee. Accordingly, the reassessment was completed by the Ld. AO under section 147 read with section 144B of the Act vide order dated 28.09.2021 assessing the total income of the assessee at Rs.12,78,62,855/-. 4. Aggrieved with the order of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) allowed the claim of the assessee relating to indexed cost of improvement of Rs.3,33,54,000/-. However, the Ld. CIT(A) upheld the action of the Ld. AO in adopting the market value of Rs.15,25,47,875/- in place of the actual sale consideration of Rs.13,99,10,731/- for the purpose of section 50C of the Act. 5. Aggrieved by the order of the Ld. CIT (A), the assessee is in appeal before the Tribunal. The Learned

Authorized Representative (“Ld. AR”), inviting our attention to Ground No.1 (a) of the appeal, submitted that the actual sale consideration received by the assessee was Rs.13,99,10,731/- . He further submitted that 110% of the actual sale consideration comes to Rs.15,39,01,804/-, whereas the market value taken by the Ld. AO under section 50C of the Act is Rs.15,25,47,875/-. The Ld. AR invited our attention to the third proviso to section 50C(1) of the Act which was inserted by the Finance Act, 2018 w.e.f. 01.04.2019 and submitted that where the value adopted by the stamp valuation authority does not exceed the prescribed tolerance band of 105% of the actual consideration, the actual consideration received by the assessee should be accepted as the full value of consideration. He also submitted that the Finance Act, 2020 enhanced the tolerance limit from 105% to 110% with effect from 01.04.2021. According to the Ld. AR, the said amendments made by the Finance Act, 2018 and 2020 are curative and beneficial in nature and therefore deserves to be applied retrospectively w.e.f. 01.04.2003 i.e. w.e.f. the date of introduction of section 50C of the Act. The Ld. AR also submitted that since the market value of Rs.15,25,47,875/- is less than 110% of the actual sale consideration of Rs.13,99,10,731/-, the actual sale consideration should be accepted for the purpose of computing capital gains. In support of the above contention, reliance was placed by the assessee upon the decision of the Mumbai Bench of the Tribunal in the case of Padmavati Developers Vs. ITO in ITA No.2616/Mum/2026 for Assessment Year 2018-19 dated 22.05.2026, wherein the Tribunal, while dealing with section 56(2)(x) of the Act, held that the tolerance band of 5% inserted by the Finance Act, 2018 w.e.f. 01.04.2019 and the

enhancement of the tolerance band from 5% to 10% by the Finance Act, 2020 w.e.f. 1.4.2021 are curative and beneficial in nature and therefore applicable retrospectively w.e.f. 01.04.2003 i.e. w.e.f. the date of introduction of section 50C of the Act. The Ld. AR also submitted that the issue under consideration related to section 50C of the Act, which is para materia to section 56(2)(x) of the Act. Therefore, the decision of the Mumbai Bench of the Tribunal in the case of Padmavati Developers Vs. ITO (Supra) will squarely applicable to the case of the assessee. Accordingly, the Ld. AR prayed that the addition sustained by the Ld. CIT(A) be deleted. 6. Per contra, the Learned Departmental Representative (“Ld. DR”) relied upon the orders of the lower authorities and submitted that the amendment inserted by the Finance Act, 2018 w.e.f. 01.04.2019 regarding the tolerance band of 105% and the amendment made by the Finance Act, 2020 w.e.f. 01.04.2021 enhancing the tolerance band from 105% to 110% are applicable prospectively and therefore cannot be applied to the assessment year under consideration. Accordingly, the Ld. DR prayed for sustaining the order of the Ld. CIT(A). 7. We have heard the rival submissions and perused the material available on record including the case law relied upon. The solitary issue involved in the present appeal is whether the benefit of the tolerance band of 105% as inserted by the Finance Act, 2018 w.e.f. 01.04.2019 and the enhanced tolerance band of 110% introduced by the Finance Act, 2020 w.e.f. 1.4.2021 can be applied while computing capital gains under section 50C of the Act for Assessment Year 2016-17. The

undisputed facts of the present case are that the assessee has adopted the actual sale consideration at Rs.13,99,10,731/-, whereas the market value taken by the Ld. AO under section 50C of the Act is Rs.15,25,47,875/-. It is also not disputed that 110% of the actual sale consideration works out to Rs.15,39,01,804/-, which is higher than the market value taken by the Ld. AO under section 50C of the Act. We have carefully gone through para nos. 16 to 30 of the order of the Mumbai Bench of the Tribunal in the case of Padmavati Developers Vs. ITO (supra), which is to the following effect:

“16. We have heard the rival submissions and perused the material available on record. The short issue arising for our consideration is whether the addition of Rs. 11,16,500/- made under section 56(2)(x)(b)(B) of the Act, being the difference between the purchase consideration of Rs. 1,50,00,000/- and the stamp duty value of Rs. 1,61,16,500/-, can be sustained where the variation is admittedly only 7.44% of the purchase consideration. 17. The Assessing Officer has proceeded on the footing that, for A.Y. 2018-19, the tolerance limit of 10% introduced by Finance Act, 2020 was not applicable and that the amendment was prospective. The CIT(A) has also confirmed the said view by holding that the amendment increasing the tolerance limit from 5% to 10% was applicable only from A.Y. 2021-22. The assessee, on the other hand, has submitted that the amendment is curative, beneficial and intended to remove hardship arising from marginal difference between stamp duty value and actual consideration. The assessee has placed reliance on various decisions of the coordinate benches. 18. We find that the issue is squarely covered in favour of the assessee by the decision of the coordinate bench in the case of ACIT v. Sunil B. Dalal(supra). In that case also, the assessment 11 IT A No . 2 6 1 6 / M u m / 2 0 2 6 M/s. Padmavati Developers year involved was A.Y. 2018-19 and the issue was applicability of 10% tolerance band under section 56(2)(x). The relevant findings of the coordinate bench are reproduced hereunder: "18. We have carefully considered the rival contentions and perused the orders of the lower authorities. Referred facts shows that Assessee has purchased 7 properties. Sale consideration in all the properties is 28,78,28,500/- and stamp duty value is Rs 26,96,75,300/-. Thus,

difference of Rs 1,81,53,200/- was made by the LD AO u/s 56 92) (x) of The Act. The LD CIT found that out of 7 properties in case of 6 properties the difference between the agreed consideration and stamp duty value is approximately 6 %. In the 7th property, such difference was 14.50 % . Therefore, he confirmed the addition of 7 th properties and deleted the addition with respect to 6 properties holding that Proviso to section 50 C inserted with effect from 1/4/2019 by the Finance Act 2018 allowed the tolerance band of 5 % . It was held to be applicable retrospectively. Further, by the Finance Act 2020 with effect from 1/4/2021 in the same proviso the tolerance band is replaced by increasing it to 10 %. Therefore, when there is no change in the wording of the proviso but only tolerance band is increased it should also apply retrospectively. 19. Coordinate bench in case of Maria Fernandes Cheryl (supra)has already held that the amendment made by Introducing proviso [ Introduction of tolerance band of 5 % and later on 10 %] applies with effect from 1/4/2003 when the provision of section 50 C was introduced. 20. Further introduction of tolerance band is for removing the hardship in the section. once a statutory amendment is being made to remove an undue hardship to the assessee or to remove an apparent incongruity, such an amendment has to be treated as effective from the date on which the law, containing such an undue hardship or incongruity, was introduced as held by Hon Supreme Court in Alom Enterprises Ltd. [2009] 185 taxman 416/319 ITR 306 (SC). 21. In view of above, respectfully following the decision of the coordinate bench in Maria Fernandes Cheryl [ supra] we do not find any infirmity in the orders of the ld CIT (A) in applying the tolerance band limit of 10 % in the impugned assessment year also and thereby deleting the addition of Rs 1,51,20,900/-. 19. The aforesaid decision was thereafter followed by another coordinate bench in the case of Glory Shipmanagement Private Limited(supra). In the said case, the variation between purchase consideration and fair market value was 9.14% and the Tribunal deleted the addition under section 56(2)(x)(b)(B). The relevant findings are as under: 10. Consistent with the view taken by the Tribunal in the above decisions, we hold that the benefit of tolerance band of 10% shall be available to the Appellant for the Assessment Year 2018-19. Since, in the present case, admittedly the variation is purchase consideration and the fair market value is 9.14%, no addition was

warranted in terms of Section 56(2)(x)(b)(B)(ii) of the Act. Accordingly, addition of INR 3,86,000/- made by the Assessing Officer, which was confirmed by the CIT(A), is deleted. Accordingly, Ground No. 1 raised by the Appellant is allowed. 20. The coordinate bench in Glory Shipmanagement Private Limited, after reproducing the relevant paras from the decision of Co-ordinate Bench in case of Joseph Mudaliar Vs. Deputy Commissioner of Income Tax : [2021] 130 taxmann.com 250 (Mumbai - Trib.) 191 ITD 719 (Mumbai - Trib.)[14-09-2021], also examined the statutory scheme of section 50C and section 56(2)(x), and held that the benefit granted to the seller in respect of marginal variation cannot be denied to the buyer where both provisions operate on the same valuation mechanism. 21. In Balkrishna Venkappa Bhandary v. DCIT(supra), the coordinate bench again considered A.Y. 2018-19 and held that where the difference was within 10% tolerance limit, no addition could be sustained under section 56(2)(x). 22. The latest coordinate bench decision placed before us is in the case of NFAC v. NRB Developers, wherein the Tribunal has expressly held that the amendment introduced by Finance Act, 2020 increasing the tolerance limit under section 56(2)(x)(b)(B) from 5% to 10% has retrospective effect and applies to A.Y. 2018-19. The relevant portion reads as under: 6. Upon reviewing the said chart, we find that, with respect to Unit No. 103, the incremental difference exceeds 10%, i.e. 10.01%. The Ld. AR contended that any excess over 10% should be added. In our considered view, we hold that the provision of section 56(2)(x)(b)(B) has retrospective effect and is applicable to the impugned assessment year. Accordingly, we uphold the view adopted by the Ld. CIT(A) in reducing the addition under section 56(2)(x). However, with respect to section 56(2)(x)(b)(B), we remit the matter to the file of the Ld. AO for allowing the assessee the incremental differences as per the said Act for the alleged properties. In the case of Unit No. 103, the excess over 10% shall be considered for addition. Consequently, the appeal of the assessee is allowed. 23. Thus, there is a consistent line of decisions of the Coordinate benches holding that the enhancement of tolerance band to 10% under section 56(2)(x)(b)(B) is curative and beneficial in nature and is applicable to A.Y. 2018-19. The present case stands on a stronger footing since the variation is only 7.44%, which is clearly below 10%.

deeming fiction taxes the difference between stamp duty value and actual consideration in the hands of the purchaser. Such fiction cannot be extended beyond its legitimate field. Where the Legislature itself has recognised that marginal variation between declared consideration and stamp valuation should be ignored, such beneficial recognition must be applied in a manner which advances the object of the amendment and avoids unintended hardship. The tolerance band is not in the nature of a substantive exemption granted for the first time. It is a statutory recognition of the practical reality that stamp duty valuation is only a presumptive benchmark and may not, in all cases, represent the true market value with mathematical precision. 28. In the present case, the assessee purchased immovable property for Rs. 1,50,00,000/- and the stamp duty valuation was Rs. 1,61,16,500/-. The difference is Rs. 11,16,500/-, which works out to 7.44% of the purchase consideration. Thus, the variation is admittedly less than 10%. Applying the ratio of the coordinate benches, no addition is sustainable under section 56(2)(x)(b)(B) of the Act. 29. We also find that the CIT(A) has rejected the assessee's contention only on the ground that the amendment is prospective from A.Y. 2021-22. The CIT(A) has not pointed out any distinguishing feature in the facts of the present case vis-a-vis the coordinate bench decisions relied upon by the assessee. Judicial discipline requires us to follow the consistent view taken by coordinate benches, particularly where the same provision, same assessment year and identical controversy are involved. 30. In view of the foregoing discussion, we hold that the assessee is entitled to the benefit of 10% tolerance band under section 56(2)(x)(b)(B) of the Act for A.Y. 2018-19. Since the difference between the purchase consideration and stamp duty value is only 7.44%, the addition of Rs. 11,16,500/- made by the Assessing Officer and confirmed by the CIT(A) is directed to be deleted.” 8. On perusal of the above, we find that the Tribunal, while dealing with the provisions of section 56(2)(x) of the Act, held that the tolerance band of 5% inserted by the Finance Act, 2018 w.e.f. 1.4.2019 and the enhancement of the tolerance band from 5% to 10% by the Finance Act, 2020 with effect from 01.04.2021 are curative and beneficial in nature and therefore deserves to be applied retrospectively. The Tribunal accordingly

extended the benefit of the tolerance band of 10% even to Assessment Year 2018-19, which is prior to the insertion of tolerance band of 5% by the Finance Act, 2018 w.e.f 01.04.2019. Though the aforesaid decision was rendered in the context of section 56(2)(x) of the Act, we find that the issue involved therein is pari materia with the issue arising in the present appeal. Both the provisions seek to address situations where there is a marginal variation between the actual consideration and the value adopted for stamp duty purposes. The rationale behind introduction of the tolerance band is to mitigate hardship arising on account of minor variations in valuation and therefore the amendments are clearly beneficial in nature. Respectfully following the decision of the Mumbai Bench of the Tribunal in the case of Padmavati Developers Vs. ITO (supra), and as a matter of judicial consistency, we hold that the tolerance band of 105% inserted by the Finance Act, 2018 w.e.f. 01.04.2019 and enhancement of the tolerance band from 105% to 110% by the Finance Act, 2020 w.e.f. 1.04.2021 are curative and beneficial in nature and therefore deserves to be applied retrospectively to the assessment year under consideration. Since the market value of Rs.15,25,47,875/- taken by the Ld. AO for the purpose of 50C of the Act does not exceed 110% of the actual sale consideration of Rs.13,99,10,731/-, the actual sale consideration received by the assessee is required to be accepted for the purpose of computing capital gains under section 50C of the Act. Accordingly, we direct the Ld. AO to adopt the actual sale consideration of Rs.13,99,10,731/- and delete the addition made on account of substitution of sale consideration under section 50C of the Act.