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Facts
The assessee acquired an immovable property for a consideration of ₹1,47,06,823, while the stamp duty value was ₹1,52,92,194. The Assessing Officer invoked Section 56(2)(x) of the Income Tax Act, 1961, and added the differential amount of ₹5,83,371 as 'Income from Other Sources'. The assessee argued that the variation was within the tolerance band and that the agreement for purchase and part-payments originated in 2013.
Held
The Tribunal held that the insertion of the tolerance band is a remedial and curative legislative move. It observed that the variation between the purchase consideration and stamp duty value in this case was approximately 3.98%, which falls within the 5% (and later 10%) tolerance band. Therefore, the benefit of the tolerance band should be extended to the assessee.
Key Issues
Whether the tolerance band under Section 56(2)(x) operates retrospectively and is applicable to the facts of the case.
Sections Cited
56(2)(x), 50C
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Income Tax Appellate Tribunal, MUMBAI BENCH “B” MUMBAI
Before: SHRI OM PRAKASH KANT & MS. KAVITHA RAJAGOPAL
ORDER
PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated 25.09.2025 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2018-19, raising following grounds:
1. The Ld. CIT(A) erred in confirming the addition of Rs. 5,83,371/ The Ld. CIT(A) erred in confirming the addition of Rs. 5,83,371/- The Ld. CIT(A) erred in confirming the addition of Rs. 5,83,371/ under section 56(2)(x) without properly appreciating the facts a under section 56(2)(x) without properly appreciating the facts a under section 56(2)(x) without properly appreciating the facts and documentary evidence placed on record, including the fact that the documentary evidence placed on record, including the fact that the documentary evidence placed on record, including the fact that the consideration was fixed in 2013 and substantial payments were consideration was fixed in 2013 and substantial payments were consideration was fixed in 2013 and substantial payments were made through banking channels prior to registration. made through banking channels prior to registration.
The Ld. CIT(A) erred in adopting the Stamp Duty Value as on the 2. The Ld. CIT(A) erred in adopting the Stamp Duty Value as on the 2. The Ld. CIT(A) erred in adopting the Stamp Duty Value as on the date of registration instead of the date of booking/allotment, contrary of registration instead of the date of booking/allotment, contrary of registration instead of the date of booking/allotment, contrary to the mandatory First and Second Provisos to section 56(2)(x), to the mandatory First and Second Provisos to section 56(2)(x), to the mandatory First and Second Provisos to section 56(2)(x), despite the Stamp Duty Value on the agreement date being despite the Stamp Duty Value on the agreement date being despite the Stamp Duty Value on the agreement date being significantly lower than the consideration actually paid. significantly lower than the consideration actually paid. significantly lower than the consideration actually paid.
3. The Ld. CIT(A) erred in disregarding the legislative intent of the Ld. CIT(A) erred in disregarding the legislative intent of the Ld. CIT(A) erred in disregarding the legislative intent of the provisos to section 56(2)(x) and in treating earlier agreements and provisos to section 56(2)(x) and in treating earlier agreements and provisos to section 56(2)(x) and in treating earlier agreements and part-payments as irrelevant, even though the statute expressly payments as irrelevant, even though the statute expressly payments as irrelevant, even though the statute expressly requires valuation to be linked to the booking date where requires valuation to be linked to the booking date where requires valuation to be linked to the booking date where consideration is fixed and part consideration is paid through banking ideration is fixed and part consideration is paid through banking ideration is fixed and part consideration is paid through banking channels.
The Ld. CIT(A) erred in passing the impugned order without 4. The Ld. CIT(A) erred in passing the impugned order without 4. The Ld. CIT(A) erred in passing the impugned order without considering the submissions made on 24 considering the submissions made on 24-11-2025 by Appellant and 2025 by Appellant and without granting the Appellant an opportunity of perso without granting the Appellant an opportunity of perso without granting the Appellant an opportunity of personal hearing despite specific written request, thereby violating the principles of despite specific written request, thereby violating the principles of despite specific written request, thereby violating the principles of natural justice. natural justice. 2. Briefly stated, facts of the case are that assessee Briefly stated, facts of the case are that assessee Briefly stated, facts of the case are that assessee, an individual, filed his return of income for the assessment year under individual, filed his return of income for the assessment year under individual, filed his return of income for the assessment year under consideration consideration on on 23.10.2018, 23.10.2018, declaring declaring a a total total income income of of ₹78,73,910/-. The return was subsequently selected for scrutiny. . The return was subsequently selected for scrutiny. . The return was subsequently selected for scrutiny. During the assessment proceedings, the Assessing Officer (AO) During the assessment proceedings, the Assessing Officer (AO) During the assessment proceedings, the Assessing Officer (AO) noted that the assessee had acquired an immovable property for a noted that the assessee had acquired an immovable property for a noted that the assessee had acquired an immovable property for a total consideration of ₹1,47,06,823/-, whereas the value adopted total consideration of , whereas the value adopted by the Stamp Duty Authority stood at ₹1,52,92,194/ 1,52,92,194/-. Invoking the by the Stamp Duty Authority stood at provisions of Section 56(2)(x) Section 56(2)(x) of the Income Tax Act, 1961, the AO of the Income Tax Act, 1961, the AO treated the differential amount of ₹5,83,371/- as "Income from treated the differential amount of as "Income from Other Sources" and added the same to the assessee’s taxable Other Sources" and added the same to the assessee’s taxable Other Sources" and added the same to the assessee’s taxable income.
Aggrieved by the addition, the assessee preferred an appeal Aggrieved by the addition, the assessee preferred an appeal Aggrieved by the addition, the assessee preferred an appeal before the Ld. CIT(A). The assessee contended that the variation before the Ld. CIT(A). The assessee contended that the variation before the Ld. CIT(A). The assessee contended that the variation between the declared consideration and the between the declared consideration and the stamp duty value was stamp duty value was less than 5%, thus falling within the protected "tolerance band" , thus falling within the protected "tolerance band" , thus falling within the protected "tolerance band" provided under the proviso to Section 56(2)(x), so no addition was the proviso to Section 56(2)(x), so no addition was the proviso to Section 56(2)(x), so no addition was warranted u/s 56(2)(x) of the Act. warranted u/s 56(2)(x) of the Act. It was further argued that since It was further argued that since the agreement for purchase and par the agreement for purchase and part-payments originated in 2013, payments originated in 2013, the stamp duty value as of the date of the stamp duty value as of the date of the agreement should prevail the agreement should prevail and the stamp duty value as on date of agreement should be the stamp duty value as on date of agreement should be the stamp duty value as on date of agreement should be considered for the purpose of section 56(2)(x) and not the stamp considered for the purpose of section 56(2)(x) and not the stamp considered for the purpose of section 56(2)(x) and not the stamp duty value as on date of registra duty value as on date of registration.
3.1 However, the Ld. CIT(A) sustained the addition, placing However, the Ld. CIT(A) sustained the addition, placing However, the Ld. CIT(A) sustained the addition, placing reliance on the Hon’ble Supreme Court’s decision in Suraj Lamp & reliance on the Hon’ble Supreme Court’s decision in reliance on the Hon’ble Supreme Court’s decision in Industries (P.) Ltd. vs. State of Haryana Industries (P.) Ltd. vs. State of Haryana [2012] 340 ITR 1 (SC). The [2012] 340 ITR 1 (SC). The Ld. CIT(A) held that in the absence of a registered conveyance deed Ld. CIT(A) held that in the absence of a registered co Ld. CIT(A) held that in the absence of a registered co in 2013, no title passed to the assessee until the year of registration in 2013, no title passed to the assessee until the year of registration in 2013, no title passed to the assessee until the year of registration (AY 2018-19). Consequently, the Ld. CIT(A) dismissed the appeal, 19). Consequently, the Ld. CIT(A) dismissed the appeal, 19). Consequently, the Ld. CIT(A) dismissed the appeal, holding that the curative provisos regarding the tolerance band had holding that the curative provisos regarding the tolerance band had holding that the curative provisos regarding the tolerance band had no retrospective application to the f no retrospective application to the facts of the case. acts of the case. The Ld. CIT(A) rejected the contention of the assessee observing as under: rejected the contention of the assessee observing as under: rejected the contention of the assessee observing as under: “5.2.3 I have examined the facts of the case. In the case of the 5.2.3 I have examined the facts of the case. In the case of the 5.2.3 I have examined the facts of the case. In the case of the appellant it is held that section 56(2)(x) is applicable as the appellant it is held that section 56(2)(x) is applicable as the appellant it is held that section 56(2)(x) is applicable as the appellant has purchased immovable property for a consideration appellant has purchased immovable property for a consideration appellant has purchased immovable property for a consideration less than that of the Stamp Duty value by an amount exceeding less than that of the Stamp Duty value by an amount exceeding less than that of the Stamp Duty value by an amount exceeding fifty thousand rupees. The fact that he had booked the flat in ty thousand rupees. The fact that he had booked the flat in ty thousand rupees. The fact that he had booked the flat in 2013 or that part payments have been made prior to AY 2018 2013 or that part payments have been made prior to AY 2018 2013 or that part payments have been made prior to AY 2018-19 Bharatkumar Haridas Mehta Bharatkumar Haridas Mehta AY is of no relevance as transfer of property has occurred in the AY is of no relevance as transfer of property has occurred in the AY 2018-19. As held by the Hon’ble Supreme Court in the case of Suraj As held by the Hon’ble Supreme Court in the case of Suraj As held by the Hon’ble Supreme Court in the case of Suraj Lamp & Industries (P.) Ltd. vs. State of Haryana [2011] 14 & Industries (P.) Ltd. vs. State of Haryana [2011] 14 & Industries (P.) Ltd. vs. State of Haryana [2011] 14 taxmann.com 103 (SC)/[2011] 202 Taxman 607 (SC)/[2012] 340 taxmann.com 103 (SC)/[2011] 202 Taxman 607 (SC)/[2012] 340 taxmann.com 103 (SC)/[2011] 202 Taxman 607 (SC)/[2012] 340 ITR 1 (SC)[11- -10-2011] transfer of immovable property by way of 2011] transfer of immovable property by way of sale can only be by a deed of conveyance (sale deed). In the sale can only be by a deed of conveyance (sale deed). In the sale can only be by a deed of conveyance (sale deed). In the absence of a absence of a deed of conveyance (duly stamped and registered deed of conveyance (duly stamped and registered as required by law), no right, title or interest in an immovable as required by law), no right, title or interest in an immovable as required by law), no right, title or interest in an immovable property can be transferred. Thus, the agreement to sale in 2013 property can be transferred. Thus, the agreement to sale in 2013 property can be transferred. Thus, the agreement to sale in 2013 and payments made prior to AY 2018 and payments made prior to AY 2018-19 would be of no 19 would be of no consequence if transfer b consequence if transfer by way of deed of conveyance duly y way of deed of conveyance duly stamped and registered as required by law had not occurred. stamped and registered as required by law had not occurred. stamped and registered as required by law had not occurred. Further, it is held that 1st and 2nd proviso to section 56(2)(x) has Further, it is held that 1st and 2nd proviso to section 56(2)(x) has Further, it is held that 1st and 2nd proviso to section 56(2)(x) has no applicability in the facts of the case of the appellant. no applicability in the facts of the case of the appellant. no applicability in the facts of the case of the appellant. 5.2.4 In view of the above, it is 5.2.4 In view of the above, it is held that the case of the appellant held that the case of the appellant falls squarely under section 56(2)(x) and thus the addition by the falls squarely under section 56(2)(x) and thus the addition by the falls squarely under section 56(2)(x) and thus the addition by the AO is hereby confirmed. Grounds of appeal
1 to 4 are hereby AO is hereby confirmed. Grounds of appeal 1 to 4 are hereby AO is hereby confirmed. Grounds of appeal 1 to 4 are hereby dismissed.”
4. We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused the relevant materials on record. aterials on record. The core issue before this Tribunal The core issue before this Tribunal is whether the tolerance band of 5% (subsequently increased to is whether the tolerance band of 5% (subsequently increased to is whether the tolerance band of 5% (subsequently increased to 10%), introduced by the Finance Act to mitigate hardship, operates 10%), introduced by the Finance Act to mitigate hardship, operates 10%), introduced by the Finance Act to mitigate hardship, operates retrospectively. Though the assessee made claim before the lower Though the assessee made claim before the lower Though the assessee made claim before the lower authorities rities that that the the tolerance tolerance band of of 5% 5% is is applicable applicable retrospectively from the date on which the relevant provisions was retrospectively from the date on which the relevant provisions was retrospectively from the date on which the relevant provisions was introduced but said contention of the assessee has not been introduced but said contention of the assessee has not been introduced but said contention of the assessee has not been examined properly by the ld CIT(A) properly by the ld CIT(A). In support of the claim that of the claim that tolerance band of 5/10 % is applicable d of 5/10 % is applicable from the date on which the the date on which the provisions of section 56(2)(x) has been introduced provisions of section 56(2)(x) has been introduced, , the Ld. counsel for the assessee relied on the following decisions: for the assessee relied on the following decisions:
Bharatkumar Haridas Mehta Bharatkumar Haridas Mehta Balkrishan Balkrishan Balkrishan Venkappa Venkappa Venkappa Bhandary Bhandary Bhandary [2024] [2024] [2024] 169 169 169 taxmann.com 76 (Mumbai taxmann.com 76 (Mumbai-Trib.) Maria Maria Fernandes Cheryl v. ITO (International Taxation), Fernandes Cheryl v. ITO (International Taxation), 2(3)(1) [2021] 123 taxmann.com 252 (Mumbai-Trib.) 2(3)(1) [2021] 123 taxmann.com 252 (Mumbai 2(3)(1) [2021] 123 taxmann.com 252 (Mumbai Assistant Commissioner of Income Assistant Commissioner of Income-tax v. Sunil B Dalal tax v. Sunil B Dalal [2022] 145 taxmann.com 313 (Mumbai [2022] 145 taxmann.com 313 (Mumbai-Trib.) Trib.) 4.1 We note that the Tribunal in the case of Sunil B Dalal ( he Tribunal in the case of Sunil B Dalal ( he Tribunal in the case of Sunil B Dalal (supra) has held that tolerance band has to be applicable retrospectively. has held that tolerance band has to be applicable retrospectively. has held that tolerance band has to be applicable retrospectively. The relevant finding of the Tribunal is reproduced as under: The relevant finding of the Tribunal is reproduced as under: The relevant finding of the Tribunal is reproduced as under:
“18. We have carefully considered the rival contentions and We have carefully considered the rival contentions and We have carefully considered the rival contentions and perused the orders of the lower authorities. Referred facts s perused the orders of the lower authorities. Referred facts s perused the orders of the lower authorities. Referred facts shows that Assessee has purchased 7 properties. Sale consideration in all that Assessee has purchased 7 properties. Sale consideration in all that Assessee has purchased 7 properties. Sale consideration in all the properties is 28,78,28,500/ the properties is 28,78,28,500/- and stamp duty value is Rs. and stamp duty value is Rs. 26,96,75,300/ 26,96,75,300/-. Thus difference of Rs. 1,81,53,200/- was made by the LD AO u/s 56(2) (x) of The Act. The LD CIT found that the LD AO u/s 56(2) (x) of The Act. The LD CIT found that the LD AO u/s 56(2) (x) of The Act. The LD CIT found that out of 7 properties in case of 6 properties the difference between the agreed properties in case of 6 properties the difference between the agreed properties in case of 6 properties the difference between the agreed consideration and stamp duty value is approximately 6%. In the 7th consideration and stamp duty value is approximately 6%. In the 7th consideration and stamp duty value is approximately 6%. In the 7th property, such difference was 14.50 %. Therefore, he confirmed the property, such difference was 14.50 %. Therefore, he confirmed the property, such difference was 14.50 %. Therefore, he confirmed the addition of 7th properties and deleted the addition of 7th properties and deleted the addition with respect to 6 addition with respect to 6 properties holding that Proviso to section 50C inserted with effect properties holding that Proviso to section 50C inserted with effect properties holding that Proviso to section 50C inserted with effect from 1-4-2019 by the Finance Act 2018 allowed the tolerance band 2019 by the Finance Act 2018 allowed the tolerance band 2019 by the Finance Act 2018 allowed the tolerance band of 5%. It was held to be applicable retrospectively. Further, by the of 5%. It was held to be applicable retrospectively. Further, by the of 5%. It was held to be applicable retrospectively. Further, by the Finance Act 2020 with effec Finance Act 2020 with effect from 1-4-2021 in the same proviso the 2021 in the same proviso the tolerance band is replaced by increasing it to 10%. Therefore, when tolerance band is replaced by increasing it to 10%. Therefore, when tolerance band is replaced by increasing it to 10%. Therefore, when there is no change in the wording of the proviso but only tolerance there is no change in the wording of the proviso but only tolerance there is no change in the wording of the proviso but only tolerance band is increased it should also apply retrospectively. band is increased it should also apply retrospectively.
Coordinate bench in 19. Coordinate bench in case of Maria Fernandes Cheryl (supra) case of Maria Fernandes Cheryl (supra) has already held that the amendment made by Introducing proviso has already held that the amendment made by Introducing proviso has already held that the amendment made by Introducing proviso [Introduction of tolerance band of 5 % and later on 10%] applies with [Introduction of tolerance band of 5 % and later on 10%] applies with [Introduction of tolerance band of 5 % and later on 10%] applies with effect from 1 effect from 1-4-2003 when the provision of section 50C were 2003 when the provision of section 50C were introduced.
Further introduction of tolerance band is for removing the introduction of tolerance band is for removing the hardship in the section. once a statutory amendment is being made hardship in the section. once a statutory amendment is being made hardship in the section. once a statutory amendment is being made to remove an undue hardship to the assessee or to remove an to remove an undue hardship to the assessee or to remove an to remove an undue hardship to the assessee or to remove an apparent incongruity, such an amendment has to be treated as apparent incongruity, such an amendment has to be treated as apparent incongruity, such an amendment has to be treated as effective from th effective from the date on which the law, containing such an undue e date on which the law, containing such an undue hardship or incongruity, was introduced as held by Hon Supreme hardship or incongruity, was introduced as held by Hon Supreme hardship or incongruity, was introduced as held by Hon Supreme Court in CIT v. Alom Enterprises Ltd. Court in CIT v. Alom Enterprises Ltd. [2009] 185 Taxman 416/319 [2009] 185 Taxman 416/319 ITR 306/227 CTR 417 ITR 306/227 CTR 417.
In view of above, 21. In view of above, respectfully following the decision of the respectfully following the decision of the coordinate bench in Maria Fernandes Cheryl (supra) we do not find coordinate bench in Maria Fernandes Cheryl (supra) we do not find 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 any infirmity in the orders of the ld CIT (A) in applying the tolerance 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 band limit of 10 % in the impugned assessment year also and band limit of 10 % in the impugned assessment year also and thereby deletin thereby deleting the addition of Rs. 1,51,20,900/-. Accordingly, . Accordingly, Ground no 2 is dismissed. Ground no 2 is dismissed.” 4.2 Applying the aforementioned legal principles to the instant Applying the aforementioned legal principles to the instant Applying the aforementioned legal principles to the instant case, we find that the variation between the purchase consideration case, we find that the variation between the purchase consideration case, we find that the variation between the purchase consideration and the stamp duty value is approximately and the stamp duty value is approximately 3.98% 3.98%, which is well within the 5% (and later 10%) 5% (and later 10%) tolerance band introduced by the tolerance band introduced by the legislature.
4.3 The insertion of the safe harbor/tolerance band The insertion of the safe harbor/tolerance band The insertion of the safe harbor/tolerance band is a conscious legislative move to recognize that stamp duty valuations are not an legislative move to recognize that stamp duty valuations are not an legislative move to recognize that stamp duty valuations are not an exact science and may vary fr exact science and may vary from actual market prices. Given that om actual market prices. Given that this amendment is remedial and curative, we hold that the benefit this amendment is remedial and curative, we hold that the benefit this amendment is remedial and curative, we hold that the benefit of the tolerance band must be extended to the assessee. Since the of the tolerance band must be extended to the assessee. Since the of the tolerance band must be extended to the assessee. Since the difference in the present case does not exceed the prescribed limit, difference in the present case does not exceed the prescribed limit, difference in the present case does not exceed the prescribed limit, the addition sustained by the Ld. CIT(A) is devoid of legal merit ned by the Ld. CIT(A) is devoid of legal merit and ned by the Ld. CIT(A) is devoid of legal merit accordingly, we delete the same. we delete the same. the appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed. the appeal of the assessee is allowed.