DARSHINI AMIT SHARMA,DAMAN vs. INCOME TAX OFFICER, WARD, DAMAN, DAMAN
Income Tax Appellate Tribunal, SURAT BENCH, BENCH
Before: SMT. ANNAPURNA GUPTA
The present appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals),
National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi (hereinafter referred to as “CIT(A)”) dated
30.09.2025 passed under Section 250 of the Income Tax Act,
1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2017-18. ITA No.1345/SRT/2025 [Darshini
Amit Sharma vs. ITO] A.Y. 2017-18 - 2 –
2. The grounds of appeal raised by the assessee are as under:
“1. The ld. CIT(A) erred in law as well as on facts in upholding an addition of Rs.7,10,600/- made by ld. AO u/s 56(2)(x) of the Act.”
The solitary issue in the present appeal pertains to addition made to the income of the assessee u/s.56(2)(x) of the Act on account of purchase consideration of an immovable property purchased by the assessee during the impugned year being less than its stamp duty value. The property was purchased by the assessee for a consideration of Rs.83,66,400/- and as per the Stamp Valuation Authority, the stamp value of the property was Rs.90,77,000/-. The difference of Rs.7,10,000/- was added to the income of the assessee in terms of the provisions of Section 56(2)(x) of the Act.
The solitary contention of the Ld. Counsel for the assessee before me was that the difference between actual consideration and the stamp duty value was less than 10% of the consideration received and in terms of the provisions of Section 56(2)(x) of the Act, no addition needed to be made to the income of the assessee. He contended that this argument was raised before the AO who rejected the same stating that for the impugned assessment year adjustment only to the extent of 5% of the consideration was required to be made and was increased to 10% only by Finance Act, 2020 w.e.f. 01.04.2021. That the amendment was prospective and, thus, not applicable to the case of the assessee. He contended that the Ld. CIT(A) did not adjudicate this particular ground raised by the assessee before him. The Ld.
ITA No.1345/SRT/2025 [Darshini
Amit Sharma vs. ITO] A.Y. 2017-18 - 3 –
Counsel for the assessee, thereafter, pointed out that retrospective nature of the amendment made to Section 56(2)(x) of the Act increasing the limit to 10% of the difference in the actual consideration received and stamp duty value of the immovable property, which was not liable to be treated as income of the assessee has been dealt with at length by the ITAT, Mumbai
15.01.2021 in ITA No.4850/Mum/2019 categorically holding the amendment to be curative in nature and, thus, applicable retrospectively. My attention was drawn to the detailed discussion on the aspect of the retrospectivity of the amendment made by the Finance Act, 2020 at para 7 to para 10 of its order as under:
“7. These submissions, however, do not impress us. As noted by the Central Board of Direct Taxes circular # 8 of 2018, explaining the reason for the insertion of the third proviso to Section 50C(1), has observed that "It has been pointed out that 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". Once the CBDT itself accepts that these variations could be on account of a variety of factors, essentially bonafide factors, and, for this reason, Section 50C(1) should not come into play, it was an "unintended consequence" of Section 50(1) that even in such bonafide situations, this provision, which is inherently in the nature of an anti-avoidance provision, is invoked. Once this situation is sought to be addressed, as is the settled legal position- as we will see a little later in our analysis, this situation needs to be addressed in entirety for the entire period in which such legal provisions had effect, and not for a specific time period only. There is no good reason for holding the curative amendment to be only as prospective in effect.
Dealing with a somewhat materially identical situation in the case of Rajeev
Kumar Agarwal Vs ACIT [(2014) 45 taxmnann.com 555 (Agra)] wherein a coordinate bench was dealing with the question whether insertion of a proviso to Section 40(a)(i) to cure intended consequence could have retrospective effect, even though not specifically provided for, and speaking through one of us (i.e. the Vice President), the coordinate bench had, after a detailed analysis of the legal position, observed that, "Now that the legislature has been compassionate enough to cure these shortcomings of provision, and thus obviate the unintended
ITA No.1345/SRT/2025 [Darshini
Amit Sharma vs. ITO] A.Y. 2017-18 - 4 –
hardships, such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced". Referring to this decision, and extensively reproducing from the same, including the portion extracted above,
Hon'ble Delhi High Court, in the case of CIT Vs Ansal Landmark Township Pvt
Ltd [(2015) 61 taxmann.com 45 (Del)], has approved this approach and observed that "(t)he Court is of the view that the above reasoning of the Agra Bench of ITAT as regards the rationale behind the insertion of the second proviso to Section 40(a)(ia) of the Act and its conclusion that the said proviso is declaratory and curative and has retrospective effect from 1st April 2005, merits acceptance". The same was the path followed by another bench of this Tribunal in the case of Dharmashibhai Sonani Vs ACIT [(2016) 161 ITD 627 (Ahd)] which has been approved by Hon'ble Madras High Court in the judgment reported as CIT Vs
Vummudi Amarendran [(2020) 429 ITR 97 (Mad)]. The question that we must take a call on, therefore, is as to what is the rationale behind the insertion of the third proviso to Section 50C(1), and if that rationale is to provide a remedy for unintended consequences of the main provision, we must hold that the third proviso to Section 50C(1) comes into force with effect from the same date on which the main provision, unintended provisions of which are sought to be nullified, itself was brought into effect. Let us understand what the nature of the provisions of Section 50C is. In terms of this provision, if the property is sold below the stamp duty valuation rate, which is often called circle rate, this stamp duty valuation report is assumed as sale consideration for the property in question, and, accordingly, capital gains tax is levied. This deeming fiction to substitute apparent sale considerations by notional consideration computed on the basis of a stamp duty valuation rate, was thus to address the issue with respect to potential evasion of taxes by understating the sale consideration amount in a sale deed. As noted by the CBDT, while explaining the justification for insertion of Section 50 C, "(t)he Finance Act, 2002, has inserted a new section 50C in the Income-tax Act to make a special provision for determining the full value of consideration in cases of transfer of immovable property". Section 50C, thus, on a conceptual note, is a provision to address capital gains tax evasion on account of understatement of the consideration. Of course, the law provides, under section 50C(2), that wherever an assessee claims that the actual market rate is less than the stamp duty valuation, he can have the matter referred to a Departmental
Valuation Officer for the ascertainment of the market value, but then it is a cumbersome procedure and, at the end of the day, every valuation, whether by the departmental valuation officer or under the stamp duty valuation notification, is an estimate, and there can always be bonafide variations, though to a certain limited extent, in these estimations. Unless, therefore, some kind of a tolerance band or a safe harbour provision, in respect of such bonafide variations, is implicit in the scheme of law, the assessees are bound to face undue hardships.
The mechanism under section 50C proceeds on the assumption that when the sale consideration is less than the stamp duty valuation, the sale consideration is to be treated as understated. This assumption is, however, laid to rest when the variations between the stated consideration and the stamp duty valuation figure are treated as explained. The insertion of the third proviso to Section 50C(1)
ITA No.1345/SRT/2025 [Darshini
Amit Sharma vs. ITO] A.Y. 2017-18 - 5 –
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 bonafide reasons explaining the small variations 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 bonafide 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 bonafide 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 50 C(1), by inserting the third proviso thereto and by enhancing the tolerance band for variations between the stated sale consideration vis-à-vis
ITA No.1345/SRT/2025 [Darshini
Amit Sharma vs. ITO] A.Y. 2017-18 - 6 –
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 Section 50 C 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.
We have noted that as against the stated consideration of Rs 75,00,000, the stamp duty valuation of the property is Rs 79,91,500. The difference is just Rs 4,91,500, which is about 6.55% of the stated sale consideration. As the difference between the stated consideration vis-à-vis the stamp duty valuation is admittedly less than 10% of the stated consideration in this case, and in the light of the above discussions, we are of the considered view that Section 50C will have no application in the matter. The enhancement in capital gain computation, as made by the Assessing Officer, thus stands disapproved. The assessee gets the relief accordingly.
As we have decided the appeal on the short issue regarding the retrospective effect of the third proviso to Section 50C(1), as elaborated above, we see no need to deal with other issues raised in the appeal before us. As of now, those issues are infructuous and do not call for any adjudication at this stage.”
My attention was further invited to several other decisions of the ITAT, which had deleted addition made following the ITA No.1345/SRT/2025 [Darshini Amit Sharma vs. ITO] A.Y. 2017-18 - 7 – proposition laid down by the ITAT in the case of Maria Fernandes Cheryl (supra) in the case of Joseph Mudaliar vs. DCIT, CC-4(3), Mumbai in ITA No.6912/Mum/2019, dated 14.09.2021 and Sri Sandeep Patil vs. ITO in ITA No.924/Bang/2019, dated 09.09.2020, copies of the all the orders were placed before me.
Ld. DR relied, however, on the order of the AO though he was unable to bring our notice to any contrary to the decision of either ITAT or any higher judicial authority holding to the contrary as submitted by the Ld. Counsel for the assessee before me.
In view of the above, it is patently clear that the amendment to Section 56(2)(x) of the Act enhancing the limit from 5% to 10% for the difference in the value of sale consideration actually received and the stamp duty value of immovable property not to be considered for the purposes of Section 56(2)(x) of the Act, has been found to be a curative amendment and hence, retrospective in nature, by the ITAT in several decisions as cited by the Ld. Counsel for the assessee before me, the relevant portion of which order has been reproduced above in our order. No contrary decision being brought to our notice of any higher judicial authority, I agree with the Ld. Counsel for the assessee that there was no case for making any addition to the income of the assessee in terms of Section 56(2)(x) of the Act on account of facts on record clearly revealing that the difference between the actual consideration paid by the assessee for the purchase of immovable property and the stamp duty value of the property was less than ITA No.1345/SRT/2025 [Darshini Amit Sharma vs. ITO] A.Y. 2017-18 - 8 – 10% of the actual consideration. In view of the same, the addition made in the hands of the assesee, I hold, is not sustainable in law and I direct deletion of the addition made of Rs.7,10,600/- u/s.56(2)(x) of the Act.
In the result, the appeal of the assessee is allowed.
This Order pronounced on 19/03/2026 (ANNAPURNA GUPTA)
ACCOUNTANT MEMBER
Ahmedabad; Dated 19/03/2026
S. K. SINHAआदेश कȧ Ĥितिलǒप अĒेǒषत/Copy of the Order forwarded to :
1. अपीलाथȸ / The Appellant
2. Ĥ×यथȸ / The Respondent.
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ(अपील) / The CIT(A)-
5. ǒवभागीय Ĥितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाईल / Guard file.
आदेशानुसार/ BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt.