Chandra Lalit Sanghvi Vs ITO (ITAT Mumbai)
AO reopened assessment u/s 147 r.w.s. 144B & made addition of ₹81.99 lakh u/s 56(2)(vii)(b) on purchase of property, being difference between actual consideration and stamp duty valuation. The CIT(A) granted partial relief by restricting addition to assessee’s 1/3rd share (₹27.33 lakh), but sustained balance addition.
Before ITAT, the assessee contended that the variation between purchase consideration (₹8.27 cr) and stamp value (₹9.09 cr) was only 9.91%, i.e., within 10% tolerance band introduced through amendments to sec. 50C/56, which are curative & retrospective in nature as held in several tribunal rulings.
The Tribunal followed earlier coordinate bench decisions and held that the 10% safe harbour is curative & applicable retrospectively, since it addresses unintended hardship in anti-avoidance provisions. As the difference was below 10%, provisions of sec. 56(2)(vii)(b) could not be invoked. Accordingly, the addition sustained by CIT(A) was deleted and assessee’s appeal was allowed.
Key Takeaways:
- 10% tolerance band under sec. 50C/56 treated as curative & retrospective by ITAT.
- Minor valuation differences due to estimation cannot trigger anti-avoidance deeming provisions.
- Even for AY 2017-18, additions fail where stamp value variation <10%.
- Strong precedent for property purchase cases involving sec. 56(2)(vii)(b)/50C disputes
FULL TEXT OF THE ORDER OF ITAT MUMBAI
