NFAC Vs NRB Developers (ITAT Mumbai)
Income Tax Appellate Tribunal (ITAT) Mumbai has issued a significant ruling, affirming that the 10% tolerance limit stipulated under Section 56(2)(x) of the Income-tax Act, 1961, for assessing the difference between a property’s declared sale value and its stamp duty value, is applicable retrospectively. This decision, pronounced on February 25, 2025, came in response to cross-appeals filed by the National Faceless Appeal Centre (NFAC) and NRB Developers for the assessment year 2018-19. The Tribunal’s order effectively reduces the addition made in NRB Developers’ property valuation case and remits the matter back to the Assessing Officer (AO) for a precise recalculation based on this retrospective application.
The core of the dispute revolved around NRB Developers’ acquisition of a commercial property in the “Lotus Link Square” building, measuring approximately 6,180 sq. ft., for a total consideration of ₹8.19 crore. The transaction’s genesis dates back to March 30, 2010, when an allotment letter was issued to the assessee following an initial payment of ₹3.5 crore through banking channels. However, at the time of the property’s registration, a substantial discrepancy of ₹9,04,37,500 was identified between the stated purchase value and the stamp duty valuation. This significant difference triggered a reference to the Departmental Valuation Officer (DVO) for an independent valuation. Despite this referral, the DVO’s report was not made available during the initial assessment proceedings. Consequently, the National Faceless Assessment Centre, in its order dated September 30, 2021, proceeded to make an addition of the entire difference of ₹9,04,37,500 to NRB Developers’ income under the provisions of Section 56(2)(x) of the Act.
