KHUSHBOO ALKESH THAKKAR,MUMBAI vs. INCOME TAX OFFICER, WARD 16(2)(1), MUMBAI

The brief facts of the case are that the assessee is an individual and, for the AY 2018-19, filed the return of income declaring total income of Rs.27,38,860/-. The case was selected for scrutiny on account of mismatch between the stamp duty value and the actual transaction value in relation to purchase of immovable property. The assessee, jointly with two other co- purchasers, purchased a residential flat at Borivali, Mumbai, for a total consideration of Rs.2,47,74,629/-, whereas the stamp duty valuation of the property was Rs.2,59,15,218/-. The difference between the two values was Rs.11,40,589/-.

The Ld. AR submitted that the assessee has filed a paper book comprising pages 1 to 55, which has been placed on record. It was contended that the agreement fixing the consideration of the property was entered into on 03.11.2015, much prior to the registration of the property on 10.10.2017.

The Ld. AR further submitted that, even independently of the above contention, the addition is not sustainable having regard to the tolerance limit applicable to marginal differences between the actual consideration and the stamp duty value. The total consideration is Rs.2,47,74,629/-, whereas the stamp duty value is Rs.2,59,15,218/-. Thus, the difference is only Rs.11,40,589/- and the stamp duty value works out to approximately 104.60% of the consideration. This factual position was also specifically pleaded before the first appellate authority.

The Ld. AR placed reliance upon the decision of the Coordinate Bench of the Tribunal in M/s. Padmavati Developers v. ITO, ITA No.2616/Mum/2026, order dated 22.05.2026 (A.Y. 2018-19). It was submitted that the Coordinate Bench, while dealing with the same assessment year and section 56(2)(x)(b)(B), held that the enhancement of the tolerance band to 10% is curative and beneficial in nature and is applicable to A.Y. 2018-19. The Ld. AR, therefore, submitted that since the variation in the present case is only about 4.60%, the impugned addition deserves to be deleted.

Per contra, the Ld. DR relied upon the orders of the revenue authorities. The Ld. DR submitted that the provisions applicable to A.Y. 2018-19 did not provide any tolerance band and that the subsequent amendment introducing/enhancing the tolerance limit cannot automatically be applied retrospectively. The Ld. DR further supported the finding of the Ld. CIT(A) that, for adopting the stamp duty value as on the date of the agreement instead of the date of registration, the statutory conditions attached to the relevant proviso to section 56(2)(x)(b) were required to be fulfilled. The Ld. CIT(A) had proceeded on the basis that sufficient evidence of payment through the prescribed mode on or before the agreement date had not been demonstrated before him. Accordingly, the Ld. DR prayed for sustaining the impugned appellate order.

We have heard the rival submissions and perused the material available on record. The short controversy before us relates to the addition of Rs.3,80,196/- under section 56(2)(x) on account of the difference between the consideration stated in the agreement and the stamp duty value of the immovable property. It is an undisputed fact emerging from the record that the total consideration of the property was Rs.2,47,74,629/-, whereas the stamp duty value was Rs.2,59,15,218/-. The difference is, therefore, Rs.11,40,589/-. The Ld. AO, considering the assessee's one-third share, brought Rs.3,80,196/- to tax under section 56(2)(x). The variation between the consideration and the stamp duty value is approximately 4.60%, which is well below 10%.

We find that the issue relating to the tolerance band for A.Y. 2018-19 has been considered by the Coordinate Bench in M/s. Padmavati Developers (supra). In that case, the Coordinate Bench was dealing with A.Y. 2018-19 and an addition under section 56(2)(x)(b)(B), where the difference between the purchase consideration and stamp duty valuation was 7.44%. The Coordinate Bench noticed the earlier decisions in

The Coordinate Bench in Padmavati Developers (supra) observed that there is a consistent line of decisions holding that enhancement of the 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 Tribunal accordingly held that where the variation was only 7.44%, being below the 10% tolerance band, the addition under section 56(2)(x)(b)(B) could not be sustained.

In the present case, the factual position is on the same footing insofar as the tolerance issue is concerned. Rather, the variation herein is only 4.60%, which is substantially below the 10% tolerance band considered by the Coordinate Bench in Padmavati Developers (supra). Respectfully following the aforesaid decision of the Coordinate Bench, we hold that the assessee is entitled to the benefit of the tolerance band. Consequently, the addition of Rs.3,80,196/- made by the Ld. AO under section 56(2)(x) and sustained by the Ld. CIT(A) cannot be sustained and is accordingly deleted.

In view of our finding on the tolerance-limit issue, the alternative contention regarding the date of agreement and the first payment receipt dated 03.11.2015 does not require separate adjudication and is left open.

Accordingly, Ground No.1 of the assessee is allowed. Ground No.2 relating to levy of interest is consequential, whereas initiation of penalty proceedings is premature at this stage.

In the result, the appeal of the assessee bearing ITA No. 7734/Mum/2026 is allowed.