Loading judgment…
Facts
The assessee filed a return of income for AY 2018-19. The Assessing Officer (AO) made an addition of Rs. 7,17,500/-, representing the difference between the purchase consideration and the fair market value determined by the DVO, which was 4.63% of the total consideration. The assessee appealed to the CIT(A), arguing that the difference was within the 10% tolerance limit under Section 56(2)(x)(b) of the Act. However, the CIT(A) dismissed the appeal, holding that the relevant amendment was effective from AY 2019-20 onwards.
Held
The Tribunal noted that similar issues have been decided by multiple benches in favor of the assessee, relying on decisions that held the amendments to Section 56(2)(x)(b)(B) are curative and retrospective. The Tribunal found that the difference between the stated consideration and the stamp duty valuation was 4.63%, which is below the 10% tolerance limit. Therefore, Section 50C of the Act was held to have no application.
Key Issues
Whether the addition made by the AO under Section 56(2)(x)(b) is valid when the difference between purchase consideration and fair market value is less than 10% of the transaction value, and if the relevant amendment is retrospective.
Sections Cited
250, 56(2)(x)(b), 143(3), 50C
AI-generated summary — verify with the full judgment below
(AY:2018-19) Vikas Satish Khanna, vs. Income-tax Officer, CIRCLE 13(3)(2), 102, Green Acres Apartment, 61/B, Aaykar Bhawan, Mumbai-400020. Pali Hill Road, Bandra West, MUMBAI-400050. PAN/GIR No: AHZPK7423R (Appellant) (Respondent) Appellant by Shri Ashwin Chhag Respondent by Shri Akhtar H. Ansari (Sr. DR) Date of Hearing 26.02.2026 Date of Pronouncement 11.03.2026 O R D E R PER BIJYANANDA PRUSETH, AM:
This appeal filed by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘Act’) by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre [in short, ‘CIT(A)’], dated 07.10.2025 for the assessment year (AY) 2018-19.
The grounds of appeal raised by the assessee are as under:
“1. Ld. NFAC(A) appeal is grossly erred, to appreciate the facts and the law while confirming the addition vide s.56(2)(x)(b) of the Act ignoring the decision of the Jurisdictional Tribunal causing violation of principle of principle of jurisprudence including the violation of principle of natural justice. 2. Appellant craves to add, alter OR amend the aforesaid grounds of appeal, if required.”
Facts of the case in brief are that the assessee filed his return of income for the AY 2018-19 on 30.10.2018 declaring total income at Rs.1,03,87,500/-.
Subsequently, the case was selected for scrutiny and assessment order u/s 143(3)
(AY 2018-19) Vikas Satish Khanna was passed by making an addition of Rs.7,17,500/-, being the difference between purchase consideration and fair market value determined by the DVO. The difference of Rs.7,17,500/- was 4.63% of the total consideration.
Aggrieved by the order of AO, the assessee filed appeal before the CIT(A).
The appellant submitted that the difference in value of Rs.7,17,500/- is 4.63% of the fair market value determined by the DVO. Since the difference was not more than 10% of the transaction value, the addition is against law. The appellant referred to section 56(2)(x)(b) of the Act and submitted that the difference was within the permissible variation in the Act itself. He relied on the decision in the case of Maria Fernandes Cheryl vs. ITO (ITA No.4850/Mum/2019 dated 15.01.2021). The CIT(A), however, held that the amendment is effective from AY 2019-20 onwards and hence, not applicable in case of the assessee for AY 2018-
For the above reason, addition of Rs.7,17,500/- was confirmed and appeal of assessee was dismissed.
Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The Ld. AR submitted that the issue is fully covered by a number of decisions by the Tribunals including the jurisdictional Mumbai Tribunal in cases of Maria Fernandes Cheryl vs. ITO (ITA No.4850/Mum/2019 dated 15.01.2021) and Saggar Perimmal vs. ITO (ITA No.84/Mum/2025 dated 21.03.2025) and decision of Special Bench of the ITAT in case of Shreyas Naynesh Modi vs. ITO [ITA No.4453/Mum/2024 dated 23.01.2026 (AY 2018-19)]. He submitted that the (AY 2018-19) Vikas Satish Khanna amendment to section 56(2)(x)(b)(B) of the Act is a curative amendment to avoid unintended consequences and is retrospective in nature. Therefore, no addition was needed because the difference between purchase consideration and fair market value determined by DVO was only 4.63%, which is less than the tolerance limit of 10%.
On the other hand, the Ld. Sr. AR of the revenue relied on the orders of lower authorities. However, he submitted that bench may decide the matter as it thinks fit.
We have heard both sides and perused the materials on record. We have also deliberated on the decisions relied upon by the Ld. AR. Both the sides agreed that this is a covered issue in the light of various decisions of the Tribunals including the jurisdictional ITAT in case of Maria Fernandes Cheryl (supra), Saggar Perimmal (supra) and Shreyas Naynesh Modi (surpa). The Tribunal in case of Maria Fernandes (surpa) held as under:-
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 3 (AY 2018-19) Vikas Satish Khanna 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 Assessment year: 2011-12 computation, as made by the Assessing Officer, thus stands disapproved. The assessee gets the relief accordingly.
7.1 The Tribunal in case of Saggar Parimmal also decided the issue in favour of assessee for AY 2018-19, after referring to the decisions in cases of ACIT vs. Sunil B Dalal, (2022) 145 taxmann.com 313 (Mum. Trib) and Shri Ashutosh Sinha vs. ITO (ITA No.643/Mum/2023 dated 29.08.2023) by stating as under:-
In light of these decisions, we find that the amendment in question is curative in nature and is retrospectively applicable for impugned assessment year. Consequently, the assessee is eligible for the 10% tolerance limit under section 56(2)(x)(b)(B) of the Act and the impugned addition is deleted. Furthermore, in the Ld. AO has adopted a view that limits the tolerance threshold to 5% of the total consideration. This view is wholly unjustified and contrary to the correct interpretation of section 56(2)(x)(b)(B) of the Act. Therefore, the addition made on this account is directed to be deleted. With respect to we note that the CIT(A) has passed an ex parte order (AY 2018-19) Vikas Satish Khanna without considering the merits of the case. Since both assessee’s are co- owners of the property and the issue involved is common, we find it appropriate to decide both appeals in favor of the assessee’s. The principle of mutatis mutandis applies, and accordingly, the grounds raised in both appeals are allowed.
The facts of the instant case are similar to the facts of the cases reproduced above. The difference between the two values in the instant appeal was only 4.63%, which is below the tolerance limit under section 56(2)(x)(b)(B) of the Act.
Hence, following the reasons given in the decisions cited supra, the grounds are allowed.
In the result, the appeal of the assessee is allowed.
Order is pronounced on 11.03.2026.