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
