Case Law Details
Padmavati Developers Vs ITO (ITAT Mumbai)
The Mumbai ITAT held that the 10% tolerance band introduced under Section 56(2)(x)(b)(B) by the Finance Act, 2020 is curative and retrospective in nature, and therefore applicable even for AY 2018-19. Accordingly, the Tribunal deleted the addition made on account of difference between purchase consideration and stamp duty valuation where the variation was only 7.44%.
The assessee had purchased immovable property for ₹1.50 crore whereas the stamp duty authority adopted a value of ₹1.61 crore, resulting in a difference of ₹11.16 lakh. The AO treated the differential amount as taxable under Section 56(2)(x)(b)(B), holding that the enhanced tolerance limit of 10% introduced by Finance Act, 2020 applied only prospectively from AY 2021-22. The CIT(A) also confirmed the addition on the same reasoning.
Before the Tribunal, the assessee argued that the amendment increasing the safe harbour from 5% to 10% was intended to remove hardship arising from marginal differences between actual consideration and stamp duty valuation and therefore deserved retrospective application. Reliance was placed on several coordinate bench decisions including Sunil B. Dalal, Maria Fernandes Cheryl, Glory Shipmanagement Pvt. Ltd., and NRB Developers.
Accepting the contention, the ITAT observed that the amendment did not create a new tax burden but merely relaxed the rigour of a deeming fiction by recognising practical realities in property valuation. The Tribunal held that minor valuation differences can occur for bona fide reasons and therefore the tolerance band was a remedial and beneficial provision deserving retrospective application.
The Tribunal further clarified that deeming provisions like Section 56(2)(x) must be strictly construed and cannot be extended beyond their legitimate scope. Since the variation between the actual purchase price and stamp duty value was admittedly only 7.44%, which was within the permissible 10% band, no addition could survive. Accordingly, the addition of ₹11.16 lakh was deleted in full.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal filed by the assessee is directed against the order dated 03.02.2026 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “the CIT(A)”] under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] for the Assessment Year 2018-19, arising out of the assessment order dated 19.02.2021 passed under section 143(3) read with sections 143(3A) and 143(3B) of the Act by the National e-Assessment Centre, Delhi[hereinafter referred to as “Assessing Officer”].
2. The assessee has raised the following grounds of appeal before us:
1. THE ORDER IS BAD IN LAW, ILLEGAL AND WITHOUT JURISDICTION
1.1 In the facts and the circumstances of the case, and in law, the appellate order u/s. 250 of the Income-tax Act, 1961 [‘the Act‘] framed and passed on 03.02.2026 by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre [‘Ld. CIT(A)‘] is bad in law, illegal and without jurisdiction, as the same is framed in breach of the statutory provisions of the Act and the scheme and as otherwise also is not in accordance with the law.
1.2 Without prejudice to the generality of the above, the appellate order so passed is bad in law, illegal and void as the same is arbitrary and perverse.
2. VIOLATION OF PRINCIPLES OF NATURAL JUSTICE
2.1 In the facts and the circumstances of the case, and in law, the appellate order so framed is bad in law and illegal, as the same is framed in breach of the principles of Natural Justice.
2.2 Without prejudice to the generality of the above ground, in the facts and the circumstances of the case, the Ld. CIT(A) erred in not granting proper, sufficient, reasonable and fair opportunity of being heard to the Appellant while passing the appellate order.
WITHOUT PREJUDICE TO THE ABOVE:
3. ADDITION OF RS. 11,16,500/- U/S. 56(2)(x)(b)(B) OF THE ACT
3.1 The Ld. CIT(A) erred in confirming the action of the A.O. in making addition of Rs. 11,16,500/-, being difference between the stamp duty value of the property purchased (Rs. 1,50,00,000/-) and the purchase consideration (Rs. 1,61,16,500/-), u/s. 56(2)(x)(b)(B) of the Act.
3.2 While doing so, the CIT(A) erred in not appreciating that the A.O. had:
(i) Based his action on surmises, suspicion and conjecture;
(ii) Taken into account irrelevant and extraneous considerations;
(iii) Ignored relevant material and considerations as submitted by the Appellant;
(iv) the amendments made in 56(2)(x)(b)(B)(ii) by Finance Act, 2018 and Finance Act, 2020 are applicable retrospectively.
3.3 It is submitted that in the facts and the circumstances of the case, and in law, no such addition was called for.
3.4 Without prejudice to the above, assuming – but not admitting – that some addition was called for, the Ld. CIT(A) erred in failing to appreciate that the computation of the addition made by the A.O. was arbitrary, excessive and not in accordance with the law.
LIBERTY
The Appellant craves leave to add, alter, delete or modify all or any the above ground at the time of hearing.
3. Brief facts of the case are that the assessee is a partnership firm. The assessee filed its return of income for A.Y. 2018-19 on 25.08.2018declaring total income at Rs. Nil/-. The return of income was processed under section 143(1)(a) of the Act on 01.02.2019. Subsequently, the case of the assessee was selected for scrutiny under CASS and statutory notice under section 143(2) of the Act was issued on 29.09.2019 and duly served upon the assessee. Thereafter, notice under section 142(1) along with questionnaire calling for various details and documentary evidences was issued on 14.01.2020. In response thereto, the assessee furnished details vide reply dated 21.01.2020 including copy of acknowledgement of return of income, computation of income, balance sheet, copy of bank statement, sale deed of the property and other documentary evidences. The Assessing Officer observed that the same were examined and verified considering the reason for selection of the case for scrutiny.
4. During the course of assessment proceedings, on perusal of the sale deed, the Assessing Officer observed that there existed difference between the actual purchase consideration paid by the assessee and the stamp duty valuation adopted by the stamp valuation authority in respect of immovable property purchased by the assessee. The Assessing Officer noted that the assessee had purchased the immovable property from M/s. D.R. Developers & others for consideration of Rs. 1,50,00,000/-, whereas the stamp duty valuation of the said property was Rs. 1,61,16,500/-. According to the Assessing Officer, there was apparent deviation in the purchase consideration vis-à-vis stamp duty valuation and therefore the differential amount of Rs. 11,16,500/- was liable to be brought to tax under section 56(2)(x)(b)(B) of the Act. Accordingly, show cause notice was issued to the assessee requiring it to explain as to why the difference of Rs. 11,16,500/- should not be added to its total income under section 56(2)(x)(b)(B) of the Act.
5. In response to the aforesaid show cause notice, the assessee submitted before the Assessing Officer that under the Finance Act, 2018, purchase value of immovable property would be deemed to be equal to stamp duty value only where the stamp duty value exceeded 105% of the actual consideration. It was further contended that by virtue of Finance Act, 2020, the tolerance limit had been increased from 105% to 110%. The assessee also relied upon various decisions of the Tribunal wherein similar contentions had allegedly been accepted. It was submitted that since the difference between actual consideration and stamp duty valuation was within permissible tolerance limit, no addition under section 56(2)(x)(b)(B) of the Act was called for.
6. However, the Assessing Officer did not accept the explanation furnished by the assessee. The Assessing Officer held that the enhanced tolerance limit of 110% introduced by the Finance Act, 2020 was applicable prospectively from 01.04.2019 and nowhere in the statute had it been provided that the amendment to section 56(2)(x)(b)(B) was retrospective in operation. According to the Assessing Officer, the assessee’s contention that the difference of Rs. 11,16,500/- should not be added to its income did not hold any legal force. Accordingly, the Assessing Officer made addition of Rs. 11,16,500/- under the head “Income from Other Sources” under section 56(2)(x)(b)(B) of the Act and completed assessment under section 143(3) of the Act determining the total assessed income at Rs. 11,16,500/-. Penalty proceedings under section 270A of the Act were also initiated separately.
7. Aggrieved by the assessment order dated 19.02.2021, the assessee preferred appeal before the CIT(A), NFAC, Delhi. During the course of appellate proceedings, various notices were issued to the assessee requiring filing of written submissions through e-filing portal. In response thereto, the assessee furnished detailed written submissions before the CIT(A). The assessee reiterated that it had purchased immovable property for consideration of Rs. 1,50,00,000/- as against stamp duty valuation of Rs. 1,61,16,500/- and therefore the difference between actual consideration and stamp duty value was only 7.44%, which according to the assessee was well within the tolerance band of 10%. The assessee contended that the amendment introduced by the Finance Act, 2020 enhancing the tolerance limit from 5% to 10% was curative in nature and therefore retrospective in operation.
8. Before the CIT(A), the assessee further submitted that section 50C was inserted by the Finance Act, 2002 as a special provision for adopting stamp duty valuation in cases where declared sale consideration was lower than the value adopted for stamp duty purposes. It was submitted that Finance Act, 2018 inserted proviso to section 50C providing that no adjustment would be made where stamp duty valuation did not exceed 105% of the actual consideration and thereafter Finance Act, 2020 enhanced the tolerance limit to 110%. The assessee contended that although the amendment was stated to be prospective, the same being curative and intended to remove hardship deserved to be applied retrospectively. In support of such contention, reliance was placed upon various judicial precedents including the decisions in the cases of
i. Shri Sandeep Patil v. ITO (ITA No.924/Mum/2019)
ii. Chandraprakash Jhunjhunwala v. DCIT (ITA No.2351/Kol/2017)
iii. Maria Fernandes Cheryl v. ITO (123 com 252)
9. The assessee submitted that where the difference between actual consideration and stamp duty valuation was within 10%, the deeming fiction contained in section 50C could not be invoked and the same principle would apply mutatis mutandis to section 56(2)(x)(b)(B) of the Act.
10. The CIT(A), after considering the assessment order, grounds of appeal, facts of the case and submissions filed by the assessee, upheld the action of the Assessing Officer. The CIT(A) observed that the Assessing Officer had rightly applied the provisions of section 56(2)(x) as they existed during the relevant assessment year. According to the CIT(A), the amendment introduced by Finance Act, 2020 enhancing the tolerance limit from 5% to 10% was specifically made applicable with effect from 01.04.2021 and therefore applicable from A.Y. 2021-22 onwards. The CIT(A) further held that the statute had not expressly provided retrospective operation to the amended provision and therefore the amended tolerance limit could not be applied for A.Y. 2018-
11. The CIT(A) accordingly held that no new material or cogent reason had been brought on record by the assessee to interfere with the findings recorded by the Assessing Officer and therefore confirmed the addition of Rs. 11,16,500/- made under section 56(2)(x)(b)(B) of the Act and dismissed the appeal of the assessee.
12. During the course of hearing before us, the learned Authorised Representative reiterated the facts as narrated before the lower authorities and submitted that the sole dispute involved in the present appeal pertains to the addition of Rs. 11,16,500/-made under section 56(2)(x)(b)(B) of the Act on account of difference between the purchase consideration and stamp duty valuation of the immovable property. The learned AR submitted that the assessee had purchased the immovable property for consideration of Rs. 1,50,00,000/- whereas the stamp duty valuation adopted by the stamp valuation authority was Rs. 1,61,16,500/-. Thus, the difference between the actual consideration and the stamp duty valuation worked out to only 7.44%, which was within the tolerance band of 10%.
13. The learned AR submitted that the amendment introduced by the Finance Act, 2020 enhancing the tolerance limit under section 56(2)(x)(b)(B) from 5% to 10% is curative in nature and therefore retrospective in operation and applicable to A.Y. 201819.
14. In support of the aforesaid proposition, reliance was placed upon the following judicial precedents: –
i. ACIT v. Sunil B. Dalal [2022] 145 com 313 (Mumbai-Trib.);
ii. Glory Shipmanagement Private Limited in ITA No. 3149/Mum/2023;
iii. Balkrishna Venkappa Bhandary v. DCIT [2024] 169 com 76 (Mumbai-Trib.); and
iv. NFAC v. NRB Developers [(2025) 211 ITD 728 (Mumbai-Trib.)].
15. The learned AR accordingly submitted that since the variation between the purchase consideration and stamp duty valuation was less than 10%, the deeming fiction contemplated under section 56(2)(x)(b)(B) of the Act could not be invoked and therefore the addition sustained by the lower authorities deserved to be deleted.
16. The learned Departmental Representative (DR) strongly relied upon the orders passed by the Assessing Officer as well as the CIT(A). The learned DR submitted that the amendment introduced by the Finance Act, 2020 enhancing the tolerance band under section 56(2)(x)(b)(B) of the Act from 5% to 10% cannot be treated as retrospective in operation in absence of any express legislative intent to that effect. It was contended that the statute itself specifically provides the effective date of applicability and therefore the amended provision is applicable only prospectively. The learned DR further placed reliance upon the judgment of the Hon’ble Supreme Court in the case of Commissioner of Income-tax (Central)-I v. Vatika Township (P.) Ltd. reported in [2014] 367 ITR 466 (SC) and reiterated the principles governing retrospective operation of taxing statutes and amendments.
17. We have heard the rival submissions and perused the material available on record. The short issue arising for our consideration is whether the addition of Rs. 11,16,500/- made under section 56(2)(x)(b)(B) of the Act, being the difference between the purchase consideration of Rs. 1,50,00,000/- and the stamp duty value of Rs. 1,61,16,500/-, can be sustained where the variation is admittedly only 7.44% of the purchase consideration.
18. The Assessing Officer has proceeded on the footing that, for A.Y. 2018-19, the tolerance limit of 10% introduced by Finance Act, 2020 was not applicable and that the amendment was prospective. The CIT(A) has also confirmed the said view by holding that the amendment increasing the tolerance limit from 5% to 10% was applicable only from A.Y. 2021-22. The assessee, on the other hand, has submitted that the amendment is curative, beneficial and intended to remove hardship arising from marginal difference between stamp duty value and actual consideration. The assessee has placed reliance on various decisions of the coordinate benches.
19. We find that the issue is squarely covered in favour of the assessee by the decision of the coordinate bench in the case of ACIT v. Sunil B. Dalal(supra). In that case also, the assessment year involved was A.Y. 2018-19 and the issue was applicability of 10% tolerance band under section 56(2)(x). The relevant findings of the coordinate bench are reproduced hereunder:
“18. We have carefully considered the rival contentions and perused the orders of the lower authorities. Referred facts shows that Assessee has purchased 7 properties. Sale consideration in all the properties is 28,78,28,500/- and stamp duty value is Rs 26,96,75,300/- . Thus difference of Rs 1,81,53,200/- was made by the LD AO u/s 56 92) (x) of The Act. The LD CIT found that out of 7 properties in case of 6 properties the difference between the agreed consideration and stamp duty value is approximately 6 %. In the 7th property, such difference was 14.50 % . Therefore, he confirmed the addition of 7 th properties and deleted the addition with respect to 6 properties holding that Proviso to section 50 C inserted with effect from 1/4/2019 by the Finance Act 2018 allowed the tolerance band of 5 % . It was held to be applicable retrospectively. Further, by the Finance Act 2020 with effect from 1/4/2021 in the same proviso the tolerance band is replaced by increasing it to 10 %. Therefore, when there is no change in the wording of the proviso but only tolerance band is increased it should also apply retrospectively.
19. Coordinate bench in case of Maria Fernandes Cheryl (supra)has already held that the amendment made by Introducing proviso [ Introduction of tolerance band of 5 % and later on 10 %] applies with effect from 1/4/2003 when the provision of section 50 C was introduced.
20. Further introduction of tolerance band is for removing the hardship in the section. once a statutory amendment is being made to remove an undue hardship to the assessee or to remove an apparent incongruity, such an amendment has to be treated as effective from the date on which the law, containing such an undue hardship or incongruity, was introduced as held by Hon Supreme Court in Alom Enterprises Ltd. [2009] 185 taxman 416 /319 ITR 306 (SC).
21. In view of above, respectfully following the decision of the coordinate bench in Maria Fernandes Cheryl [ supra] we do not find any infirmity in the orders of the ld CIT (A) in applying the tolerance band limit of 10 % in the impugned assessment year also and thereby deleting the addition of Rs 1,51,20,900/-.
19. The aforesaid decision was thereafter followed by another coordinate bench in the case of Glory Shipmanagement Private Limited(supra). In the said case, the variation between purchase consideration and fair market value was 9.14% and the Tribunal deleted the addition under section 56(2)(x)(b)(B). The relevant findings are as under:
10. Consistent with the view taken by the Tribunal in the above decisions, we hold that the benefit of tolerance band of 10% shall be available to the Appellant for the Assessment Year 2018-19. Since, in the present case, admittedly the variation is purchase consideration and the fair market value is 9.14%, no addition was warranted in terms of Section 56(2)(x)(b)(B)(ii) of the Act. Accordingly, addition of INR 3,86,000/- made by the Assessing Officer, which was confirmed by the CIT(A), is deleted. Accordingly, Ground No. 1 raised by the Appellant is allowed.
20. The coordinate bench in Glory Shipmanagement Private Limited, after reproducing the relevant paras from the decision of Co-ordinate Bench in case of Joseph Mudaliar Vs. Deputy Commissioner of Income Tax : [2021] 130 com 250 (Mumbai – Trib.) 191 ITD 719 (Mumbai – Trib.)[14-09-2021], also examined the statutory scheme of section 50C and section 56(2)(x), and held that the benefit granted to the seller in respect of marginal variation cannot be denied to the buyer where both provisions operate on the same valuation mechanism.
21. In Balkrishna Venkappa Bhandary v. DCIT(supra), the coordinate bench again considered A.Y. 2018-19 and held that where the difference was within 10% tolerance limit, no addition could be sustained under section 56(2)(x).
22. The latest coordinate bench decision placed before us is in the case of NFAC v. NRB Developers, wherein the Tribunal has expressly held that the amendment introduced by Finance Act, 2020 increasing the tolerance limit under section 56(2)(x)(b)(B) from 5% to 10% has retrospective effect and applies to A.Y. 201819. The relevant portion reads as under:
6. Upon reviewing the said chart, we find that, with respect to Unit No. 103, the incremental difference exceeds 10%, i.e. 10.01%. The Ld. AR contended that any excess over 10% should be added. In our considered view, we hold that the provision of section 56(2)(x)(b)(B) has retrospective effect and is applicable to the impugned assessment year. Accordingly, we uphold the view adopted by the Ld. CIT(A) in reducing the addition under section 56(2)(x). However, with respect to section 56(2)(x)(b)(B), we remit the matter to the file of the Ld. AO for allowing the assessee the incremental differences as per the said Act for the alleged properties. In the case of Unit No. 103, the excess over 10% shall be considered for addition. Consequently, the appeal of the assessee is allowed.
23. Thus, there is a consistent line of decisions of the Coordinate benches holding that the enhancement of tolerance band to 10% under section 56(2)(x)(b)(B) is curative and beneficial in nature and is applicable to A.Y. 2018-19. The present case stands on a stronger footing since the variation is only 7.44%, which is clearly below 10%.
24. The learned DR has relied upon the judgment of the Hon’ble Supreme Court in CIT v. Vatika Township (P.) Ltd.(supra) to contend that an amendment is presumed to be prospective unless expressly made retrospective. There can be no dispute with the general principle laid down by the Hon’ble Supreme Court. However, the same judgment also carves out an exception in respect of beneficial and curative provisions. The relevant observations of the Hon’ble Supreme Court are reproduced below:
“31. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past… This principle of law is known as lex prospicit non respicit : law looks forward not backward…”
25. The Hon’ble Supreme Court further held:
“33. We would also like to point out, for the sake of completeness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect.”
26. In our considered view, the reliance placed by the Revenue on Vatika Township does not advance the Revenue’s case. In Vatika Township, the amendment under consideration was a proviso to section 113 levying surcharge in block assessment cases, which was held to be onerous and substantive in nature. In the present case, the amendment does not create a new charge, does not enlarge the tax base, and does not impose any fresh burden upon the assessee. On the contrary, it relaxes the rigour of a deeming provision by recognising that minor variations between actual consideration and stamp duty valuation may arise on account of several bona fide factors. The amendment is therefore curative and remedial in nature. The principle in Vatika Township, properly understood, supports the assessee to the extent that beneficial provisions introduced to cure hardship may be given retrospective operation.
27. The scheme of section 56(2)(x)(b)(B) is a deeming provision and therefore has to be strictly construed. The deeming fiction taxes the difference between stamp duty value and actual consideration in the hands of the purchaser. Such fiction cannot be extended beyond its legitimate field. Where the Legislature itself has recognised that marginal variation between declared consideration and stamp valuation should be ignored, such beneficial recognition must be applied in a manner which advances the object of the amendment and avoids unintended hardship. The tolerance band is not in the nature of a substantive exemption granted for the first time. It is a statutory recognition of the practical reality that stamp duty valuation is only a presumptive benchmark and may not, in all cases, represent the true market value with mathematical precision.
28. In the present case, the assessee purchased immovable property for Rs. 1,50,00,000/- and the stamp duty valuation was Rs. 1,61,16,500/-. The difference is Rs. 11,16,500/-, which works out to 7.44% of the purchase consideration. Thus, the variation is admittedly less than 10%. Applying the ratio of the coordinate benches, no addition is sustainable under section 56(2)(x)(b)(B) of the Act.
29. We also find that the CIT(A) has rejected the assessee’s contention only on the ground that the amendment is prospective from A.Y. 2021-22. The CIT(A) has not pointed out any distinguishing feature in the facts of the present case vis-a-vis the coordinate bench decisions relied upon by the assessee. Judicial discipline requires us to follow the consistent view taken by coordinate benches, particularly where the same provision, same assessment year and identical controversy are involved.
30. In view of the foregoing discussion, we hold that the assessee is entitled to the benefit of 10% tolerance band under section 56(2)(x)(b)(B) of the Act for A.Y. 2018-19. Since the difference between the purchase consideration and stamp duty value is only 7.44%, the addition of Rs. 11,16,500/- made by the Assessing Officer and confirmed by the CIT(A) is directed to be deleted.
31. Accordingly, ground no. 3 raised by the assessee is allowed. The other grounds being general and consequential in nature do not require separate adjudication.
32. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 22.05.2026.
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