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Facts
The assessee, a promoter and developer, filed a return declaring a total income. The AO observed that the assessee sold flats where the agreement value was less than the stamp duty value. This difference was added back to the total income under Section 43CA of the Act.
Held
For flats 705 and 502, the difference between stamp duty value and agreement value was within the 10% tolerance limit. For flat B-703, the matter was restored to the AO to refer the valuation to the DVO.
Key Issues
Whether the addition made under Section 43CA is sustainable when the difference between stamp duty value and agreement value is within the tolerance limit, and whether the valuation for flat B-703 needs to be referred to the DVO.
Sections Cited
43CA, 250, 143(3), 270A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Harish Hari Gandhi vs Assistant Commissioner of Income Shop No.1, Gokul Monarch, Tax, Circle 33(1), Mumbai Room No. 949, 9th floor, Kautilya Thakur Complex, Kandivali (East), Mumbai-400101 Bhawan, G-Block, Bandra (E), PAN:AADPG1721F Mumbai-400051 APPELLANT RESPONDENT Assessee by : Shri Paras Savla, Respondent by : Shri Ritesh Misra (CIT DR) Date of hearing : 28/01/2026 Date of pronouncement : 03/02/2026 O R D E R Per: Anikesh Banerjee (JM): The instant appeal of the assessee filed against the order of the Ld. Commissioner of Income Tax ADDL/JCIT(A), Thiruvanantpuram [for brevity ‘the Ld.CIT(A)], order passed under section 250 of the Income Tax Act 1961 (for brevity ‘the Act’) for assessment year 2017-18, date of order 10.09.2025. The impugned order emanated from the order of the Ld. Assistant Commissioner of Income Tax
The brief facts of the case are that the assessee is a promoter and developer and individual capacity filed the return declaring total income Rs.46,86,740/-. The case was selected under CASS for complete scrutiny. The Ld. AO found that during impugned assessment year the assessee sold the number of flats of his project. It is observed by the Ld. AO that the stamp duty value as on date of booking and agreement value related to flat no.705, 502 and B-703 & total value of difference comes amount to Rs.18,57,820/-. The alleged differential amount was added back with the total income as per provision of section 43CA of the Act. The aggrieved assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) upheld the impugned assessment order. Being aggrieved assessee filed an appeal before us.
The Ld. AR argued and invited our attention in assessment order page 2 the relevant noting of the impugned assessment order is reproduced as below:
3.1 On perusal of the above details, it is seen that in the case of Flat Nos. 705, 502, & B-703, the agreement value is less than the stamp value of the properties, which attracts the provisions of section 43CA of the Act. Vide notice u/s. 142(1) dated 14.12.2019, the assessee was asked to offer explanation on this issue. The assessee in its reply took the plea of amended provisions of section 43CA/50C which states that if the value adopted or assessed or assessable by the authority for the purpose of payment of stamp duty does not exceed 105% of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purpose of computing profits and gains/section 48 be deemed to be the full value of the consideration. The issue raised by the assessee is not acceptable because of the fact that the said provisions were inserted in the Act w.e.f. 01.04.2019 and it was not with the retrospective effect. The present issue pertains to the A.Y. 2017-18 and hence assessee contention is not acceptable. In view of the above discussion, the difference of amount is added to the total income of theassessee by invoking the provisions of section 43CA of the Act. Hence, Rs. 18,57,820/- in respect of properties namely, Flat Nos. 705, 502, & B-703 is added to the total income of the assessee on account of agreement value being less than the value adopted by the Stamp valuing authority by invoking the provisions of section 43CA of the Act. Penalty u/s. 270A of the Act is initiated separately for under-reporting of income.”
The Ld. AR contended that, in respect of Flat Nos. 705 and 502, the difference between the stamp duty value and the agreement value amounted to Harish Hari Gandhi Rs.1,07,375/- and Rs.4,66,668/-, respectively. It was submitted that in both cases, the variation was well within the tolerance limit of 10% of the stamp duty value. The Ld. AR further submitted that the tolerance band prescribed under section 43CA of the Act was introduced with the object of mitigating genuine hardship faced by assessees, and where the difference falls within the permissible limit, the same does not attract the rigours of section 43CA of the Act. Accordingly, it was contended that the assessee is entitled to immunity in the impugned assessment year in respect of the differential amounts arising from the transactions relating to both the flats. In support of the above contention, reliance was placed on the order of the Coordinate Bench of the ITAT, Mumbai ‘G’ Bench, in the case of Gaurav Investment vs. DCIT [(2025) 174 taxmann.com 839 (Mum–Trib)]. The relevant observations of the Tribunal, as contained in paragraph 14 of the said order, are reproduced below: “14. The ratio laid down in the above decision is that the rational for holding newly inserted proviso to sub-section (1) to section 50C of the Act as curative in nature, hence, having retrospective application. In our considered view the same analogy would apply to the provisions of Section 43CA of the Act also since both the sections are similarly worded with the difference being that section 50C is applicable in case of transfer of capital asset being land or building or both and section 43CA is for the transfer of asset (other than capital asset) being land or building or both. We further notice that in Circular 8 of 2018 dated 26.12.2018 containing Explanatory Notes to the provisions of Finance Act 2018 in Para 16 for 'Rationalization of Sections 43CA and 50C it is stated that the proviso containing the tolerance band is inserted in order to minimize hardship in case of genuine transactions in the real estate sector. When the reason behind the introduction of the proviso is read with the ratio laid down by the judicial precedence as discussed here in above on the retrospective applicability of beneficial provision, we have no hesitation in holding that the tolerance band of 10% is applicable in assessee's case for AY 2017-18. In assessee's case the difference between the DVO
Harish Hari Gandhi valuation that is considered for making addition under section 43CA and the sale consideration is less than the tolerance hand as per the proviso to the said section (refer table extracted in the earlier part of this order). Accordingly we hold that in assessee's case no addition under section 43CA of the Act is warranted for the year under consideration.”
Further Ld. AR respectfully relied on the order of the Coordinate Bench of ITAT, Mumbai ‘A’ Bench in the case of DCIT vs Amardeep Constructions reported in (2025) 179 taxmann.com 358 (Mum-Trib) the observations of the Bench contend in relevant paragraph is reproduced as below: “We also find merit in the reasoning of the Ld. CIT(A) that the tolerance limit of 10% introduced by the Finance Act, 2020 to section 43CA is curative in nature and, therefore, applicable retrospectively. We respectfully considering the order of coordinate bench of ITAT-Pune in Sai Bhargavanath Infra v. Asstt. CIT [2022] 144 taxmann.com 168/197 ITD 496 (Pune - Trib.) that the first proviso of Section 43CA inserted by Finance Act, 2020 with effect from 01.04.2021 is applicable retrospectively. Since the variation between the sale consideration and the stamp duty valuation is only 7%, which is within the permissible tolerance limit, the addition made under section 43CA of the Act is also unsustainable. Accordingly, we uphold the findings of the Ld. CIT(A) in deleting both the additions amount to Rs. 18,45,47,050/- made towards alleged undisclosed profit from the project "Anutham," and the addition of Rs.7,43,474/- made under section 43CA of the Act.”
The Ld. AR advanced his arguments in respect of the sale of Flat No. B-703 and contended that the assessee did not accept the valuation adopted by the stamp duty authority. It was submitted that the assessee had specifically requested that the valuation of Flat No. B-703 be referred to the District Valuation Officer (DVO). However, without considering the said request, the Ld. AO proceeded to add the differential amount of Rs.12,83,777/- to the total income of the assessee. The Ld. AR, therefore, prayed that the matter be restored
The Ld. DR, on the other hand, relied upon the orders passed by the revenue authorities.
We have heard the rival submissions and perused the material available on record. In respect of Flat Nos. 705 and 502, we find that the difference between the stamp duty value as on the date of booking and the agreement value is less than 10%, i.e., within the prescribed tolerance limit. Respectfully following the decisions of the Coordinate Bench of the ITAT, Mumbai, in the cases of Gaurav Investment (supra) and Amardeep Constructions (supra), which are squarely applicable to the facts of the present case, we hold that the additions of Rs.1,07,375/- and Rs.4,66,668/- are unsustainable and are accordingly deleted. As regards Flat No B-703, we deem it appropriate to restore the matter to the file of the Ld. AO with a direction to consider the assessee’s submission that the valuation be ascertained by referring the matter to the DVO. Needless to say, the assessee shall be afforded a reasonable opportunity of being heard. The assessment is thus set aside on this limited issue for fresh adjudication in accordance with law.