Loading judgment…
Facts
The assessee sold two properties during the assessment year 2018-19. The stamp duty valuation of these properties was higher than the actual sale consideration received. The Assessing Officer (AO) invoked Section 56(2)(x) and made an addition for the difference between the market value and sale consideration.
Held
The Tribunal held that the third proviso to Section 50C(1), which provides a tolerance limit for the difference between stamp duty valuation and sale consideration, is curative in nature. Therefore, it should be applied retrospectively from the date of insertion of Section 50C. The difference in this case was within the permissible tolerance limit.
Key Issues
Whether the benefit of the third proviso to Section 50C(1) regarding tolerance in stamp duty valuation applies retrospectively to the assessment year in question?
Sections Cited
56(2)(x), 50C(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SMT BEENA PILLAI, JM & SHRI ARUN KHODPIA, AM
Assessee by : Shri Surji Chheda (Virtually present), AR Revenue by : Dr. Raghvendra P. Chambolkar, Sr. DR 12.02.2026 Date of Hearing : Date of Pronouncement : 20.02.2026 O R D E R
Per Arun Khodpia, AM:
The present appeal preferred by the assessee is directed against the order of Commissioner of Income Tax (Appeal) [in short “Ld. CIT(A)”], dated 18.08.2025 for the Assessment Year (AY) 2018-19, arises from the order u/s 143(3) dated 23.03.2021. The assessee has raised the following grounds of appeal:
“Ground No: 1 The learned CIT(A) has erred in facts and in law to confirm addition of Rs.5,13,339/-u/s 56(2)(X) made by learned AO. Ground No: 2 The learned CIT(A) has erred in facts and in law in not following binding judgment of Rahul Construction v/s DCIT.1543/Pune and erred in ignoring difference in value to the extent of 10%. Ground No: 3 The learned CIT(A) has erred in facts and in law and not Appreciating the fact and law that third proviso in section 50C(1) of the Act as per which the difference in stamp duty valuation and actual consideration should be ignored, if it is less than 10 percent though the said provision has come into effect from 01.04.2019/01.04.2021, it being to be curative in nature the proviso shall apply since the date of insertion of sec.50C of the Act.”
The facts and issues in the present case giving rise to the present appeal are that the assessee has made two transactions of sale of properties during the year under consideration and that the Market Value of the subject properties and the sale consideration received by the assessee are different.
Being the Market Value of properties are higher than the sale consideration shown by the assessee, the ld. AO invoked the provisions of section 56(2)(x) of the Act and have made the addition of the excess of Market Value over the actual sale consideration. The details of properties sold, Market Value and sale consideration are as under:
(i) Sale of flat on 03.11.2017 on actual sale consideration of Rs. 37,00,000/-, whereas the Market Value as per Stamp Duty Authority was Rs. 40,25,647/-. The difference therefore was Rs. 3,25,647/-. 2 Sudhanshu Infrastructures Pvt. Ltd. (ii) Sale of flat on 03.11.2017 on actual sale consideration of Rs. 60,00,000/-, whereas the Market Value as per Stamp Duty Authority was Rs. 61,87,693/-. The difference therefore was Rs. 1,87,693/-.
Accordingly, the total difference between the market price and sale consideration for aforesaid two transactions has been arrived at Rs. 5,13,339/-, which was added to the income of assessee by the ld. AO under section 56(2)(x)(B) r.w.s. 50C(1) of the act. While making the aforesaid addition, the ld. AO referred to the provisions of section 56(2)(x)(B) and concluded that the amendment in in 2019 and 2021 in section 56(2)(x)(B) would apply prospective, so the entire amount of difference being the stamp duty valuation was on higher side shall be added to the income of assessee, without the benefit of tolerance % as introduced in the said sections.
Aggrieved with the aforesaid addition by ld. AO assessee preferred an appeal before the ld. CIT(A). The issue was discussed by the ld. CIT(A) at length and have sustained the addition made by the ld. AO by observing on similar lines, that the 3rd proviso to section 50C(1) was introduced in the Statute effective from 01.04.2019 and further amended w.e.f. 01.04.20221, according to which the value adopted or assessed or assessable by the Stamp Duty Valuation Authority, if does not exceed 100 and 10% of the consideration received or accruing as a result of the transfer the consideration so received or 3 Sudhanshu Infrastructures Pvt. Ltd. accruing as a result of the transfer shall, for the purpose of section 48 be deemed to be the full value of consideration. The ld. CIT(A) further observed that since the inclusion of 3rd proviso to section 50C(1) was infused in the act after the AY 2018-19 (the relevant AY), effective from 01.04.2019 @5% and 01.04.2021 @10%, therefore, such benefit of percentage of tolerance provided in the said proviso, being prospective in nature, would not be available to the assessee, therefore the simple difference which has found on account of higher market value of the property as per Stamp Valuation Authority reduced by the actual sale consideration would be taxable in the hands of assessee. The appeal of assessee was accordingly dismissed.
Being aggrieved with the aforesaid decision of ld. CIT(A), the assessee is in appeal before us.
At the outset, the ld. AR of the assessee submitted that the aforesaid issue has been dealt with by the Co-ordinate Bench of ITAT in the various cases according to which the insertion of 3rd proviso in section 50C(1) of the Act, which is curative in nature has been held to be applied since the date of insertion of section 50C of the Act, therefore the benefit of percentage tolerance provided in the 3rd proviso to section 50C(1) introduced w.e.f. 01.04.2019 and thereafter the enhancement in the said tolerance percentage from 5% to 10% effective from 01.01.2021, would be permissible retrospectively, so would be available to the assessee in present matter relevant for AY i.e. AY 2018-19. Ld. 4 Sudhanshu Infrastructures Pvt. Ltd. AR placed the proposition, as emanating from the following decisions of ITAT, Bangalore/Mumbai/Pune: “The above issue is directly covered in the case of judgment of Sri Sandeep Patil Vs. ITO (ITAT Bangalore) Appeal Number:
and has been observed as follows in the said judgement in para 10.
"We also notice that the Parliament has introduced third proviso in section 50C(1) of the Act, as per which the difference in stamp duty valuation and actual consideration should be ignored, if it is less than 5%/10%. Even though the said provision has come into effect from 1.4.2019/1.4.2021, we notice that the Kolkata Bench of Tribunal has held it to be curative in nature in the case of Chandra Prakash Jhunjhunwala (supra) and accordingly held that the proviso shall apply since the date of insertion of sec. 50C of the Act. Accordingly, the above said reasoning given by the Kolkata bench of ITAT also supports the contentions of the assessee", The copy of the judgement is attached herewith. (Annx 1)
Further Mumbai ITAT has held in the case of M/s. John Fowler (India) Pvt. Ltd. Vs. DCIT (ITA No.7545/Mum/2014 dated 25.1.2017) which pertains to before the amendment that difference upto 10% has to be ignored.and has held as follows:
"We have heard rival contentions and perused the material available on record. We find that the Hon'ble coordinate Bench in in the case of Rahul Constructions Vs. DCIT (Supra) has held as under:- "We find that the Pune Bench of the Tribunal in the case of Asstt. CIT vs. Harpreet Hotels (P) LTd. Vide and relied on by the learned counsel for the assessee had dismissed the appeal filed by the Revenue where the CIT(A) had deleted the unexplained investment in house construction on the ground that the difference between the figure shown by the assessee and the figure of the DVO is hardly 10 per cent. Similarly, we find that the Pune Bench of the Tribunal in the case of ITO vs. Kaaddu Jayghoslz Appasahebh, the Learned counsel for the assessee following the decision of the J&K High Court Sudhanshu Infrastructures Pvt. Ltd. in the case of Honest Group of Hotels (P) Ltd. Vs. CIT (2002) 177 CTR (J&K) 232 had held that when the margin between the value as given by the assessee and the Departmental valuer was less than 10 per cent, the difference is liable to be ignored and the addition made by the AD cannot be sustained. Since in the instant case such difference is less than 10 per cent and considering the fact that valuation is always a matter of estimation where some degree of difference is bound to occur, we are of the considered opinion that the AD in the instant case is not justified in substituting the sale consideration at Rs. 20,55,000/-as against the actual sale consideration of Rs. 19,00,000/- disclosed by the assessee. We, therefore, set aside the order of the CIT(A) and direct the AO to take Rs. 19,00,000/- only as the sale consideration of the property. The grounds raised by the assessee are accordingly allowed. "In the instant case, the difference between the valuation adopted by the Stamp Valuation Authority and declared by the assessee is less than 10%. Therefore, respectfully following the decision of the Hon'ble Coordinate Bench, we hereby direct the AO to adopt the value as declared by the assessee. This ground of the assessee is allowed".
The copy of the judgement is also attached herewith. (Annx 2&3) The judgement being of Mumbai ITAT is binding and has to be followed as a precedent and as a judicial prudence.
As regarding applicability of 56(2)(vii), we have to state that the reckoner value is just estimation and the difference between the market value and consideration paid is less than 10%. In such a case addition cannot be made as difference is less than 10%. In support of the above proposition that where difference between consideration value and stamp duty value is less than 10%, the same can be ignored, based on our above submissions.
The AO reason for disallowance that, In the case of M/s. John Fowler (India) Pvt. Ltd, the ITAT had dealt with the issue of difference between the figure shown by the assessee in house construction with the figure of the Departmental Valuation Officer and the facts are not identical with that of the assessee's case is without appreciating the whole submission. The above case deal with the difference between the valuation adopted by the Stamp 6
Without prejudice, The Hon'ble coordinate Bench in in the case of Rahul Constructions Vs. DCIT directly deal with the difference between the valuation adopted by the Stamp Valuation Authority and declared by the assessee is less than 10%. The reason for disallowance is not proper and the assesse's case is directly covered as submitted above.”
Per contra, the ld. DR vehemently supported the order of revenue authorities.
We have considered the rival submissions and perused the material available on record and the decisions of Tribunal on the aforesaid aspect relied upon by the ld. AR. In present case on perusal of factual aspect, we find that there were two transactions of sale of properties by the assessee and in both the transactions there was a difference between the Stamp Duty Value of the property and actual sale consideration received by the assessee. As per facts on record the excess of stamp duty value as compared to the sale consideration was high in 1st transaction by 8.08% whereas in 2nd transaction by 3.03%. The assessee has claimed that the benefit of 3rd proviso to section 50C(1), which was inserted effective from 01.04.2019 with 5% tolerance limit, which was further increased to 10% effective from 01.04.2021, would apply retrospectively being curative and beneficial in nature. It was the submission that since the insertion of 3rd proviso was curative in nature for the benefits of assessee, therefore effect of the same would fall back from the date of insertion of section 50C of the Act. 7 Sudhanshu Infrastructures Pvt. Ltd. Such contention of the assessee is supported with the decisions by various Benches of ITAT in cases referred (supra). From the submissions of assessee, we found that the identical issue was decided by the Co-ordinate Bench of ITAT, Mumbai in the case of Maria Fernandes Cheryl V. v/s ITO (International Taxation) in dated 15.01.2021, wherein its categorically held by the Tribunal that the amendment in the scheme of section 50C(1), by inserting the third proviso thereto and by enhancing the tolerance band for differences between the actual sale consideration vis-a-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. 1-4-2003. 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.
We, thus, in terms of aforesaid observations, find substance in the submissions of ld. AR, which are fortified by the decisions of ITAT at various stations(supra). Accordingly, the decision of ld. CIT(A) contrary to the aforesaid decisions of Tribunal does not hold good in the eyes of law, we accordingly set-aside the order of ld. CIT(A) and direct the ld. AO to delete the addition made under section 56(2)(x)(B) r.w.s. 50C(1) of the Act.
In result, the appeal of assessee stands allowed, in terms of our aforesaid observations.
Order pronounced in the open court on 20-02-2026.
Sd/- Sd/- (BEENA PILLAI) (ARUN KHODPIA) Judicial Member Accountant Member Mumbai, Dated : 20-02-2026. *SK, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT
BY ORDER,
(Dy./Asstt. Registrar) ITAT, Mumbai