Kruti Rajubhai Manvar Vs ITO (ITAT Rajkot)
The Rajkot Bench of the Income Tax Appellate Tribunal (ITAT) heard the assessee’s appeal against the order passed by the National Faceless Appeal Centre (NFAC) under Section 250 of the Income-tax Act, 1961 for Assessment Year 2020-21, arising from an assessment made under Sections 147 read with 144.
The assessee had filed the return declaring total income of ₹7,15,000. Based on information available with the Department, reassessment proceedings under Section 147 were initiated after it was noticed that the assessee had purchased an immovable property. The registered sale deed recorded a sale consideration of ₹1,41,00,000, while the stamp duty valuation adopted by the Stamp Valuation Authority was ₹1,55,28,571, resulting in a difference of ₹14,28,571.
During the reassessment proceedings, the assessee explained that he had acquired only a 25% undivided share in the property jointly with other co-owners. His investment amounted to ₹35,25,000, while the corresponding stamp duty valuation of his share was ₹38,82,142. The assessee also explained the sources of investment, stating that the amount had been funded through ₹30,00,000 received from his father, ₹1,70,000 from his HUF, ₹2,50,000 from his grandmother and the balance from his own funds.
The Assessing Officer observed that the overall difference between the sale consideration and the stamp duty valuation of the property was ₹14,28,571. Considering the assessee’s 25% share, the Assessing Officer computed the proportionate difference at ₹3,57,142 and treated it as income under Section 56(2)(x) of the Act.
The CIT(A) upheld the addition and dismissed the assessee’s appeal.
Before the Tribunal, the assessee reiterated that he had purchased only a 25% undivided share and had fully explained the source of investment. It was further argued that, even assuming Section 56(2)(x) applied, the difference between the sale consideration and the stamp duty valuation of the entire property was approximately 10% of the sale consideration. The assessee submitted that the proviso to Section 56(2)(x) provides that no addition can be made where the difference does not exceed the prescribed statutory tolerance limit of 10%. Accordingly, the proportionate addition of ₹3,57,142 was stated to be unsustainable.
The Departmental Representative relied upon the orders of the lower authorities but was unable to controvert the factual submissions made by the assessee.
After considering the rival submissions and examining the material on record, the Tribunal observed that the difference between the registered sale consideration of ₹1,41,00,000 and the stamp duty valuation of ₹1,55,28,571 was ₹14,28,571. It held that this difference was approximately 10% of the sale consideration and fell within the tolerance limit prescribed under the proviso to Section 56(2)(x).
The Tribunal held that once the variation between the actual sale consideration and the stamp duty valuation falls within the permissible statutory tolerance, no addition is warranted under Section 56(2)(x). It further held that the Assessing Officer was not justified in making a proportionate addition of ₹3,57,142 merely because the assessee held a 25% share in the property.
Accordingly, the Tribunal set aside the orders of the lower authorities on this issue and directed the Assessing Officer to delete the addition of ₹3,57,142 made under Section 56(2)(x). The assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT RAJKOT
Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2020-21, is directed against the order under section 250 of the Income-tax Act, 1961 [hereinafter referred to as ‘the Act’] passed by the National Faceless Appeal Centre [hereinafter referred to as ‘NFAC’], dated 17.03.2026, which in turn arises out of an order passed by assessing officer u/s 147 r.w.s. 144 of the Act, dated 08.02.2025.
2. Brief facts of the case are that the assessee filed the return of income for the Assessment Year 2021-22 declaring a total income of 27,15,000. Based on information available with the Department, it was noticed that the assessee had purchased an immovable property. The sale consideration recorded in the registered sale deed was 21,41,00,000, whereas the stamp duty valuation adopted by the Stamp Valuation Authority was 21,55,28,571, resulting in a difference of Z14,28,571. Consequently, proceedings under Section 147 of the Income-tax Act, 1961 were initiated by issuing notice under Section 148, followed by notice under Section 142(1) of the Act. In response, the assessee explained that he had acquired only a 25% share in the property, which had been jointly purchased along with other co-owners. The assessee’s investment amounted to 235,25,000, against which the corresponding stamp duty valuation was 238,82,142. It was further explained that the investment of 235,25,000 was made out of genuine sources, namely 230,00,000 received from his father, Z1,70,000 from his HUF, 22,50,000 from his grandmother and the balance from his own funds. The Assessing Officer, however, observed that the difference between the sale consideration and the stamp duty valuation of the entire property was 214,28,571. Since the assessee held a 25% share in the property, the Assessing Officer computed the assessee’s proportionate difference at 23,57,142 and treated the same as income under Section 56(2)(x) of the Act.
3. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A), who dismissed the appeal and confirmed the addition made by the Assessing Officer.
4. Dissatisfied with the order of the Ld. CIT (A) assessee is in appeal before this tribunal. At the time of the hearing the Ld. AR submitted that the assessee had purchased only a 25% undivided share in the property and had fully explained the source of investment. It was further submitted that even assuming the provisions of Section 56(2)(x) were applicable, the difference between the sale consideration and the stamp duty valuation of the entire property was only 214,28,571, which is almost equal to 10% of the sale consideration of 21,41,00,000. It was contended that the proviso to Section 56(2)(x) provides that where the difference between the sale consideration and the stamp duty valuation does not exceed the prescribed tolerance limit of 10%, no addition can be made. Since the difference falls within or is substantially covered by the permissible tolerance limit, the addition of 23,57,142 made in the hands of the assessee is unsustainable in law.
5. On the other hand, Ld. AR supported the orders of the authorities below but could not controvert the factual submissions made on behalf of the assessee.
6. We have heard the rival submissions and perused the material available on record. It is an undisputed fact that the difference between the registered sale consideration of 21,41,00,000 and the stamp duty valuation of 21,55,28,571 is 214,28,571. The difference is approximately 10% of the sale consideration, which falls within the tolerance limit prescribed under the proviso to Section 56(2)(x) of the Act. Once the variation between the actual consideration and the stamp duty valuation falls within the permissible statutory tolerance, no addition is warranted under Section 56(2)(x). The Assessing Officer was, therefore, not justified in making a proportionate addition of 23,57,142 in the hands of the assessee merely because he held a 25% share in the property. Accordingly, we set aside the orders of the authorities below on this issue and direct the Assessing Officer to delete the addition of 23,57,142 made under Section 56(2)(x) of the Act.
7. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on this 8th day of July, 2026.
