Shreyas Naynesh Modi Vs ITO (ITAT Mumbai)
The Special Bench of the ITAT Mumbai was constituted to decide whether the 10% safe harbour limit under Section 56(2)(x) of the Income Tax Act applies not only to the stamp duty value (SDV) but also to the fair market value (FMV) determined by the Departmental Valuation Officer (DVO).
The assessee, an individual, filed a return declaring income of ₹8,06,960 for AY 2018–19. During scrutiny, it was found that the assessee purchased a flat for ₹2.65 crore, while the stamp duty valuation was ₹3.79 crore. A valuation report obtained by the assessee valued the property at ₹2.50 crore. Upon the assessee’s request, the matter was referred to the DVO, who determined the FMV at ₹2.81 crore. The Assessing Officer added ₹16.13 lakh as income under Section 56(2)(x), being the difference between the DVO valuation and the purchase consideration.
The assessee contended that the difference between the purchase price and DVO valuation was within 10%, and therefore the safe harbour provision should apply. It was argued that once the DVO valuation replaces the SDV, the safe harbour tolerance should also apply to such valuation. The CIT(A) rejected the claim, holding that the safe harbour provision introduced by the Finance Act, 2018 was applicable only from AY 2019–20.
