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Facts
The assessee purchased an immovable property through an e-auction conducted by Oriental Bank of Commerce for ₹1,75,74,000, while the stamp duty was paid on a value of ₹2,37,75,745. The Assessing Officer added the difference of ₹62,01,745 as income from other sources under section 56(2)(x) of the Income Tax Act, 1961, which was upheld by the CIT(A).
Held
The Tribunal held that sales conducted under SARFAESI Act are statutory recovery proceedings and are typically distress sales discovered through competitive bidding. The deeming provisions of section 56(2)(x) should not be applied in a mechanical manner to a bona fide SARFAESI auction purchase, especially when section 35 of SARFAESI Act gives it overriding effect. Furthermore, the Assessing Officer should have referred the matter to the Departmental Valuation Officer when there was a substantial variation between the stamp duty value and the actual consideration.
Key Issues
Whether the difference between the stamp duty value and the auction purchase price of a property acquired under SARFAESI Act can be taxed under section 56(2)(x) of the Income-tax Act, 1961?
Sections Cited
143(3), 144B, 56(2)(x), 35
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI JAGADISH
Per: SHRI JAGADISH, A.M.: 1. This appeal filed by the assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals), Mumbai dated 10.10.2025 for Assessment Year 2020–21 arising out of the assessment framed under section 143(3) r.w.s. 144B of the Income-tax Act, 1961 (in short “the Act”). The assessee filed this appeal on following grounds:-
Ashok Lalchand Jain “1. On the facts and circumstances of case and in law, the Ld. CIT has erred in confirming the Assessment Order passed by the Ld. AO under section 143(3) r.w.s.144B of Income Tax Act which is passed against the principal of natural justice.
On the facts and in the circumstances of the case and in law, the Ld. CIT has erred in confirming the addition of Rs.62,01,745/- under section 56(2)(x) made by the Ld. AO being the difference between the stamp duty value of Rs.2,37,75,745/- and the agreement value of Rs.1,75,74,000/- although the assessee had purchased the property under the Securitization and Reconstruction of Financial Asset Enforcement of Security Interest Act (SARFAESI Act), 2002.
On the facts and in the circumstances of the case and in law, the Ld. CIT has erred in confirming the addition made by the Ld. AO without considering the fact that the assessee had purchased the property from the Oriental bank of Commerce under the SARFAESI Act and there cannot be a deemed profit under the Income Tax Act.
On the facts and in the circumstances of the case and in law, the Ld. CIT has erred in confirming the addition made by the Ld. AO without referring the case to the Departmental Valuation Officer as there is a huge difference between the stamp duty value and the agreement value.
The Appellant craves leave to add amend and or delete any of the above grounds of Appeals.”
2. The brief facts of the case are that the assessee purchased an immovable property situated at Jyoti Plaza through e-auction conducted by Oriental Bank of Commerce for a consideration of ₹1,75,74,000/-. The stamp duty was paid on the stamp duty value of ₹2,37,75,745/-. During the course of assessment proceedings, the Assessing Officer observed that there was a difference of ₹62,01,745/- between the stamp duty value and the purchase consideration. Invoking the provisions of section 56(2)(x) of the Act, the Assessing Officer treated the differential amount as income from other sources and made the Ashok Lalchand Jain addition. Aggrieved, the assessee preferred appeal before the Ld. CIT(A), who confirmed the action of the Assessing Officer.
The Ld. Authorised Representative submitted that the impugned property was purchased by the assessee under the SARFAESI Act through bank-conducted e-auction. It was contended that the sale certificate issued by the bank clearly establishes that the transaction was a statutory recovery sale. The Ld. AR submitted that where property is acquired in a distress sale conducted by a secured creditor under the SARFAESI Act, the deeming provisions of section 56(2)(x) should not be invoked. It was further argued that section 35 of the SARFAESI Act gives overriding effect over other laws. The Ld. AR also contended that the Assessing Officer ought to have referred the matter to the Departmental Valuation Officer considering the substantial variation between the stamp duty value and the actual consideration.
The Ld. Departmental Representative relied upon the orders of the lower authorities and submitted that the provisions of section 56(2)(x) are mandatory where the stamp duty value exceeds the consideration beyond the permissible limit and therefore the addition was rightly made.
We have heard the rival submissions and perused the material available on record. The undisputed fact is that the assessee purchased the property through e-auction conducted by Oriental Bank of Commerce under the provisions of the SARFAESI Act and a sale certificate was issued by the bank in favour of the assessee.
The issue for our consideration is whether the difference between the stamp duty value and the auction purchase price can be brought to tax under section 56(2)(x) of the Act in the peculiar facts of the present case.
Ashok Lalchand Jain 7. It is well settled that sales conducted under the SARFAESI Act are statutory recovery proceedings undertaken by secured creditors for realization of dues. Such sales are normally distress sales where the price is discovered through competitive bidding under regulatory supervision. In such circumstances, the possibility of colourable device or deliberate undervaluation between private parties which section 56(2)(x) seeks to address is significantly diluted. Further, section 35 of the SARFAESI Act provides overriding effect to its provisions over other laws to the extent of inconsistency. When a secured creditor sells the property through a transparent auction mechanism and issues a statutory sale certificate, the price so discovered carries evidentiary value of fair market discovery in the given distressed circumstances.
In the present case, the Revenue has not brought any material on record to demonstrate that the auction process was not genuine or that the consideration paid by the assessee was understated beyond what emerged through competitive bidding. In our considered view, the deeming fiction under section 56(2)(x) cannot be applied in a mechanical manner to a bona fide SARFAESI auction purchase.
We also find merit in the alternate contention of the assessee that the Assessing Officer has not made any reference to the Departmental Valuation Officer despite substantial variation between stamp duty value and actual consideration. The stamp duty valuation is only a presumptive yardstick and cannot ipso facto override the actual auction price discovered in a statutory sale, particularly in distress recovery proceedings.
Considering the totality of facts and the legal position discussed above, we are of the view that the addition of ₹62,01,745/- made under section 56(2)(x) of the Act is unsustainable. Accordingly, the Assessing Officer is directed to delete the addition.
Ashok Lalchand Jain 11. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 20/02/2026
Sd/- Sd/- (NARENDER KUMAR CHOUDHRY) (JAGADISH) Judicial Member Accountant Member Mumbai, Dated: 20/02/2026 Ashwani Rao Sr. Private Secretary Copy of the order forwarded to: 1. Appellant 2. Respondent 3. The CIT 4. The CIT (Appeals) 5. The DR, I.T.A.T.