ACIT Vs Deluxe Recycling India Private Limited (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai bench, in the cross-appeals filed by the Revenue and Deluxe Recycling India Private Limited, delivered a significant ruling on the application of the safe harbour limit concerning the difference between the stamp duty valuation and the actual consideration for property acquisition. The decision primarily addressed Assessment Year (AY) 2020-21.
Issue 1: Retrospectivity of the 10% Safe Harbour Limit
Background of the Valuation Dispute
The assessee had purchased a flat in 2019 for a consideration of Rs. 8,01,61,000. The stamp duty valuation on the date of registration was Rs. 11,32,76,000. The Assessing Officer (AO) initially completed the assessment ex-parte under Section 144, making an addition of Rs. 3,31,15,000 under Section 56(2)(x), representing the difference between the sale consideration and the stamp duty value. The AO did this because the assessment was nearing the time-bar limit, pending the valuation report from the District Valuation Officer (DVO).
Subsequently, the DVO issued a report valuing the property at Rs. 8,73,87,000. This DVO valuation resulted in a difference of Rs. 72,26,000$ from the actual purchase consideration.
Tribunal’s Holding on the Tolerance Band
The key legal dispute was the applicable tolerance band. The Revenue argued that for AY 2020-21, the permissible variation under Section 56(2)(x) was 5/%, as the 10/% limit was introduced by the Finance Act, 2020, with effect from April 1, 2021.
