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Facts
The assessee acquired two flats for a consideration of INR 2,25,00,000. The Stamp Duty Authority valued the property at INR 8,05,39,971. The Assessing Officer made an addition under section 56(2)(x)(b) for the difference between the stamp duty value and the sale consideration, after considering the assessee's share.
Held
The Tribunal held that the amendment increasing the tolerance limit from 5% to 10% under section 56(2)(x)(b) is retrospective and curative in nature. Since the excess of the Fair Market Value determined by the DVO over the purchase consideration was less than 10% of the purchase consideration, no addition was warranted.
Key Issues
Applicability of the increased tolerance limit (from 5% to 10%) under section 56(2)(x)(b) of the Income Tax Act, 1961, and whether it applies retrospectively.
Sections Cited
56(2)(x)(b), 143(2), 142(1), 143(3), 144B, 234A, 234B, 234C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI SANDEEP SINGH KARHAILSHRI JAGADISH
The assessee has filed the present appeal against the impugned order dated 13/11/2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”], for the assessment year 2020-21.
In this appeal, the assessee has raised the following grounds: -
ITA No.439/Mum/2026 (A.Y. 2020-21) 2
“1. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax - Appeals erred in confirming addition made of Rs.26131486/- by the learned Assessing Officer under section 56(2)(x) of the Act. Provisions of the Act ought to have been properly construed and regard being had to facts of the case said addition of Rs.26131486/- should not have been confirmed. Reasons assigned by him are wrong and insufficient to justify addition of Rs.26131486/- made by the learned Assessing Officer.
On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax - Appeals erred in arriving at the conclusion that First proviso to section 56(2)(x) of the Act is not applicable to appellant's case and thereby erred in confirming addition of Rs.26131486/- made by the learned Assessing Officer. Provisions of the Act ought to have been properly construed and regard being had to facts of the case First proviso to section 56(2)(x) of the Act should be made applicable to the appellant's case.
On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax - Appeals failed to appreciate that provision of section 56(2)(x) is not applicable to appellant's case erred in confirming addition of Rs.26131486/- to the total income of the appellant.
On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax - Appeals failed to consider report of Departmental Valuation Officer determining value of property said property at Rs.24631300/-.
Notice issued under section 143(2) of the Act is not in conformity with instruction issued by Central Board of Direct Taxes F.No.225/157/2017/ITA- Il dated 23.06.2017, which is binding on learned Assessing Officer and therefore notice issued under section 143(2) of the Act by him is contrary to the provisions of the Act, without jurisdiction, invalid and make subsequent assessment also invalid and liable to be annulled.
The learned Commissioner of Income tax - Appeals erred in confirming order made under section 143(3) rws 144B of the Act which is illegal, bad-in-law, ultra vires and without allowing reasonable opportunity of the hearing, and without appreciating the facts, submission and evidences in their proper perspective and without providing draft assessment order to the appellant is liable to be annulled.
On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax - Appeals erred in charging interest under section 234A, 234B and 234C of the Act.”
The sole grievance of the assessee, in the present appeal, is against the addition made under section 56(2)(x)(b) of the Act, being the difference between the consideration and stamp duty value of the immovable property acquired by the assessee.
ITA No.439/Mum/2026 (A.Y. 2020-21) 3
The facts of the case are that the assessee is an individual and for the year under consideration filed his return of income on 11/02/2021, declaring a total income of INR 18,58,530. The return filed by the assessee was selected for limited scrutiny to verify the transaction involving immovable property, and statutory notices under sections 143(2) and 142(1) of the Act were issued and served on the assessee. The assessee, jointly with his brother, was allotted Flats No. 2101 and 2201 in the building known as “Krypton Terrace”
from builder M/s Krypton Constructions & Developers for a total consideration of INR 2,25,00,000 vide allotment letter dated 23/06/2007. The assessee made the initial payment of INR 10 lakh vide cheque No. 4757228 dated 20/06/2007 drawn on Bank of Baroda, Mumbai Branch. The assessee's share was 45%, while 55% belongs to his brother, Mr. Deepak O Jain, in the aforementioned flats. The assessee, along with his brother, entered into an Agreement for Sale with the builder on 18/03/2020. Since the Stamp Duty Authority made valuation of the flats on the date of the agreement for sale, i.e. on 18/03/2020, at INR 8,05,39,971, the difference between the sale consideration and value determined by the Stamp Duty Authority, i.e. INR 5,80,69,971, was considered as taxable under section 56(2)(x)(b) of the Act.
Since the assessee's share was only 45%, the Assessing Officer (“AO”), vide order dated 29/09/2022 passed under section 143(3) of the Act read with section 144B of the Act, made an addition of INR 2,61,31,471 in the hands of the assessee under section 56(2)(x)(b) of the Act. The learned CIT(A), vide impugned order, upheld the addition made by the AO under section (A.Y. 2020-21) 4 56(2)(x)(b) of the Act and dismissed the ground raised by the assessee on this issue. Being aggrieved, the assessee is in appeal before us.
During the hearing, the learned Authorised Representative (“learned AR”), inter alia, submitted that during the assessment proceedings in the case of his brother, i.e. Mr. Deepak O Jain, the AO sought a report from the Department Valuation Officer (“DVO”) in respect of the valuation of the aforesaid two flats purchased by the assessee along with his brother. In the report received by the AO on 05/04/2023 from the DVO, the Fair Market Value of the property was arrived at INR 2,46,31,300 as against the purchase consideration of INR 2.25 crore agreed between the assessee, along with his brother, and the builder vide allotment letter dated 23/06/2007. The learned AR submitted that the AO accordingly made an addition of INR 21,31,300, being the difference between the Fair Market Value determined by the DVO and the purchase consideration, in the hands of the assessee’s brother under section 56(2)(vii)(b) of the Act. The learned AR submitted that since the excess of Fair Market Value determined by the DVO over the purchase consideration of the two flats is less than 10% of the purchase consideration, no addition can be made under section 56(2)(x)(b) of the Act, as the purchase consideration is within the tolerance range.
On the other hand, the learned Departmental Representative (“learned DR”) vehemently relied upon the order passed by the lower authorities.
Having considered the submissions of both sides and perused the material available on record, at the outset, it is pertinent to note the provisions (A.Y. 2020-21) 5 of section 56(2)(x)(b) of the Act, which are relevant for the year under consideration, and the same are reproduced as follows: –
“(x) where any person receives, in any previous year, from any person or persons on or after the 1st day of April, 2017,—
(a) ……………..;
(b) any immovable property,—
(A) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;
(B) for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely:—
(i) the amount of fifty thousand rupees; and (ii) the amount equal to five per cent of the consideration:
Provided that where the date of agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for the purposes of this sub-clause :
Provided further that the provisions of the first proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, on or before the date of agreement for transfer of such immovable property:
Provided also that where the stamp duty value of immovable property is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of this sub-clause as they apply for valuation of capital asset under those sections;”
Thus, as per the 3rd proviso to section 56(2)(x)(b) of the Act, where the 8. stamp duty value of the immovable property is disputed, the AO may refer the valuation of such property to the Valuation Officer, and the provisions of section 50C and section 155(15) of the Act shall apply. In the present case, (A.Y. 2020-21) 6 from the perusal of the assessment order dated 20/04/2023 passed in the case of assessee’s brother, i.e. Mr. Deepak O Jain, for the assessment year 2020-21, we find that pursuant to the request of the assessee’s brother, the AO sought valuation report from the DVO in respect of two flats purchased by the assessee along with his brother. We further find that the DVO determined the Fair Market Value of the property at INR 2,46,21,300. Since the DVO has already determined the Fair Market Value of the two flats purchased by the assessee along with his brother, we are of the considered view that the said valuation is equally applicable to the case of the assessee, as he is a co-owner of the said flats.
It is pertinent to note that vide Finance Act 2020, w.e.f. 01/04/2021, sub-clause (B) of section 56(2)(x)(b) of the Act was amended, and the tolerance limit was increased from 5% to 10% of the consideration.
Accordingly, the assessee claims that as per the amended provisions of section 56(2)(x)(b) of the Act, since the excess of Fair Market Value determined by the DVO over the purchase consideration, i.e. INR 21,31,300, is less than the 10% of the purchase consideration, i.e. Rs.22,50,000, therefore no addition under the provisions of section 56(2)(x)(b) of the Act is warranted.
We find that a similar issue came up for consideration before the Coordinate Bench of the Tribunal in Sandeep Kumar Poddar v/s ITO, reported in [2023] 151 taxmann.com 18 (Kol.-Trib.), wherein the Coordinate Bench following another decision of the Tribunal in Maria Fernandes Cheryl v/s ITO, reported in [2021] 123 taxmann.com 252 (Mum.-Trib), decided the issue in favour of the taxpayer and held that amendment of increasing the tolerance (A.Y. 2020-21) 7 band from 5% to 10% under section 56(2)(x)(b) of the Act shall be applicable retrospectively, as the amendment is clarificatory/curative in nature. The relevant findings of the Coordinate Bench, in the decision mentioned above, are reproduced as follows: –
“6. We have heard the rival contentions and perused the material available on record. It is noted that the amendment to section 56(2)(x) of the Act brought in by Finance Act, 2020 of increasing tolerance limit from 5% to 10% is w.e.f. 1-4-2021.The point for consideration before us in the present appeal is, if this increase in tolerance limit is to be treated as clarificatory/curative in nature having retrospective application or otherwise. Admittedly, quantification of the difference between the valuation for stamp duty and the actual consideration is undisputed.
6.1 Before delving on the issue in hand, the relevant provisions of section 56(2)(x) of the Act are extracted below: "Income from other sources. 56(1). . . . . (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income- tax under any of the head "Income from other sources", namely- (i) and (ii) ** ** **
(x) where any person receives, in any previous year, from any person or persons on or after the 1st day of April, 2017,- (a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum; (b) any immovable property, - (A) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;-(B) for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely : (i) the amount of fifty thousand rupees; and (ii) the amount equal to [ten] per cent of the consideration."
6.2 We note that Finance Act, 2020 enhanced the tolerance band from 5% to 10% w.e.f. 1-4-2021. This issue has been elaborately dealt with by the Coordinate Bench of ITAT, Mumbai in the case of Maria Fernandes Cheryl (supra) which has been subsequently followed by the Coordinate Bench of ITAT, Kolkata in the case of Karb Associates (P.) Ltd. (supra). Since we have nothing more to add or improve upon the observations and finding given by the Coordinate Bench of ITAT Mumbai, we extract the relevant observations and finding below for ease of reference:
"7. . . . . . . . The insertion of the third proviso to section 50C(1) provides for this tolerance band with respect to a certain degree of variations between the stamp duty valuation and the stated consideration of an immovable property. In other words, as long as the variations are within the permissible limits, the anti-avoidance provisions of section 50C do not come into play. As we have noted earlier, the CBDT itself accepts that there could be various bona fide reasons explaining the small variations (A.Y. 2020-21) 8 between the sale consideration of immovable property as disclosed by the assessee vis-à-vis the stamp duty valuation for the said immovable property. Obviously, therefore, disturbing the actual sale consideration, for the purpose of computing capital gains, and adopting a notional figure, for that purpose, will not be justified in such cases. On a conceptual note, an estimation of market price is an estimation nevertheless, even if by a statutory authority like the stamp duty valuation authority, and such a valuation can never be elevated to the status of such a precise computation which admits no variations. The rigour of section 50C(1) was thus relaxed, and very thoughtfully so, to take these bona fide cases of small variations between the stated sale consideration vis-à-vis stamp duty valuation, out of the scope of adjustments contemplated in the computation of capital gains under this anti-avoidance provision. In our humble understanding, it is a case of a curative amendment to take care of unintended consequences of the scheme of section 50C. It makes perfect sense, and truly reflects a very pragmatic approach full of compassion and fairness, that just because there is a small variation between the stated sale consideration of a property and stamp duty valuation of the same property, one cannot proceed to draw an inference against the assessee, and subject the assessee to practically prove his being truthful in stating the sale consideration. Clearly, therefore, this insertion of the third proviso to section 50C(1) is in the nature of a remedial measure to address a bona fide situation where there is little justification for invoking an anti-avoidance provision. Similarly, so far as enhancement of tolerance band to 10% by the Finance Act 2020, is concerned, as noted in the CBDT circular itself, it was done in response to the representations of the stakeholders for enhancement in the tolerance band. Once the Government acknowledged this genuine hardship to the taxpayer and addressed the issue by a suitable amendment in law, the next question was what should be a fair tolerance band for variations in these values. As a responsive Government, which is truly the hallmark of the present Government, even though the initial tolerance band level was taken at 5%, in response to the representations by the stakeholders, this tolerance band, or safe harbour provision, was increased to 10%. There is no particular reason to justify any particular time frame for implementing this enhancement of tolerance band or safe harbour provision. The reasons assigned by the CBDT, i.e., "the variation between stamp duty value and actual consideration received can occur in respect of similar properties in the same area because of a variety of factors, including the shape of the plot or location," was as much valid in 2003 as it is in 2021. There is no variation in the material facts in this respect in 2021 vis-à-vis the material facts in 2003. What holds good in 2021 was also good in 2003. If variations up to 10% need to be tolerated and need not be probed further, under section 50C, in 2021, there were no good reasons to probe such variations, under section 50C, in the earlier periods as well. We are, therefore, satisfied that the amendment in the scheme of section 50C(1), by inserting the third proviso thereto and by enhancing the tolerance band for variations between the stated sale consideration vis-à-vis stamp duty valuation to 10%, are curative in nature, and, therefore, these provisions, even though stated to be prospective, must be held to relate back to the date when the related statutory provision of section 50C, i.e. 1st April 2003. In plain words, what is means is that even if the valuation of a property, for the purpose of stamp duty valuation, is 10% more than the stated sale consideration, the stated sale consideration will be accepted at the face value and the anti-avoidance provisions under section 50C will not be invoked.
Once legislature very graciously accepts, by introducing the legal amendments in question, that there were lacunas in the provisions of (A.Y. 2020-21) 9
section 50C in the sense that even in the cases of genuine variations between the stated consideration and the stamp duty valuation, anti- avoidance provisions under section 50C could be pressed into service, and thus remedied the law, there is no escape from holding that these amendments are effective with effect from the date on which the related provision, i.e., section 50C, itself was introduced. These amendments are thus held to be retrospective in effect. In our considered view, therefore, the provisions of the third proviso to Section 50C (1), as they stand now, must be held to be effective with effect from 1st April 2003. We order accordingly. Learned Departmental Representative, however, does not give up. Learned Departmental Representative has suggested that we may mention in our order that "relief is being provided as a special case and this decision may not be considered as a precedent". Nothing can be farther from a judicious approach to the process of dispensation of justice, and such an approach, as is prayed for, is an antithesis of the principle of "equality before the law," which is one of our most cherished constitutional values. Our judicial functioning has to be even-handed, transparent, and predictable, and what we decide for one litigant must hold good for all other similarly placed litigants as well. We, therefore, decline to entertain this plea of the assessee.
As has been aptly explained above, the rational for holding newly inserted proviso to sub-section (1) to section 50C of the Act as curative in nature, hence, having retrospective application, the same analogy would apply to the provisions of section 43CA of the Act. Both the sections are similarly worded except that both the sections have application on different sets of assessee. As has been pointed earlier, section 43CA gets attracted where the consideration received or accrues as a result of transfer of an asset (other than a capital asset) being land or building or both. Whereas, provisions of section 50C operates where the consideration received or accrues as a result of transfer of a capital asset being land or building or both. Both the sections induce deeming fiction to substitute actual sale consideration with notional value of asset based on Stamp Duty valuation. Further, a perusal of Circular 8 of 2018 (supra), would show that identical reasons have been given in Para 16 for 'Rationalization of Sections 43CA and 50C'. The proviso has been inserted and subsequently tolerance band limit has been enhanced to mitigate hardship of genuine transactions in the real estate sector. Ergo, in the light of reasoning given for insertion of the proviso and exposition by the Tribunal for retrospective application of the said proviso, I have no hesitation in holding that the proviso to sub-section (1) to section 43CA and the subsequent amendment thereto relates back to the date on which the said section was made effective i.e. 01/4/2014."
6.3 Finding given by Coordinate Bench of ITAT, Kolkata in Karb Associates (P.) Ltd. (supra), on the above is reproduced as under:
"15. In the light of the submission of the assessee on this aspect, and taking into consideration the Tribunal's decision in the case of Radhika Sales Corporation (supra), we are of the opinion that the proviso explaining the tolerance limit has to be read retrospectively, therefore, if the difference between the declared value by the assessee and the value decided by the DVO is less than 10%, no addition is warranted. With the aforesaid observations, the issue raised by the assessee is disposed off and the A.O is directed to assess the income of the assessee on this issue in accordance to law."
ITA No.439/Mum/2026 (A.Y. 2020-21) 10
Considering the submissions made by the assessee and the undisputed facts relating to quantum of difference and by placing reliance on the observations and finding of the Coordinate Bench of ITAT, Mumbai in the case of Maria Fernandes Cheryl (supra), followed in the case of Karb Associates (P.) Ltd. (supra), we unhesitatingly hold that the amendment of increasing the tolerance band from 5% to 10% under section 56(2)(x) brought in by Finance Act, 2020 had to be read retrospectively being clarificatory/curative in nature and, therefore, since the difference between the valuation for stamp duty and the actual consideration is less than 10%, which in the present case is 5.93%, no addition is called for. Accordingly, grounds taken by the assessee in this respect are allowed.
Therefore, respectfully following the decision of the Coordinate Bench of the Tribunal cited supra, since in the present case, excess of Fair Market Value determined by the DVO over the purchase consideration is less than 10% of the purchase consideration, we are of the considered view that no addition is warranted under the provisions of section 56(2)(x)(b) of the Act.
Thus, the addition made under section 56(2)(x)(b) of the Act is deleted. As a result, the solitary issue arising in the present case is decided in favour of the assessee.
In the result, the appeal by the assessee is allowed.
Order pronounced in the open Court on 08/04/2026
Sd/- Sd/- Sd/- Sd/- SANDEEP SINGH KARHAIL JAGADISH JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 08/04/2026 Prabhat (A.Y. 2020-21) 11 Copy of the order forwarded to: