Vipul Otarmal Jain Vs ITO (ITAT Mumbai)
ITAT Mumbai: No Section 56(2)(x) Addition if Difference Within 10%-Tolerance Limit Held Retrospective
The ITAT Mumbai held that no addition under Section 56(2)(x)(b) is warranted where the difference between purchase consideration and fair market value is within 10%, and further ruled that the 10% tolerance limit applies retrospectively.
In this case, the assessee purchased flats jointly, and the AO made an addition of ₹2.61 crore based on stamp duty valuation. However, a DVO valuation determined the fair market value at ₹2.46 crore, resulting in a difference of only about ₹21.31 lakh.
The Tribunal observed:
- DVO valuation must be considered, especially when already obtained in co-owner’s case.
- The difference between FMV and consideration was less than 10%, falling within permissible tolerance.
- Amendment increasing tolerance from 5% to 10% is curative and retrospective.
Relying on precedents (including Maria Fernandes Cheryl), the Tribunal emphasized that:
- Minor variations in valuation are normal and should not trigger deeming fiction.
- Anti-avoidance provisions should not be invoked in genuine transactions with marginal differences.
Result:
- Entire addition u/s 56(2)(x) deleted
- Appeal allowed
10% safe harbour applies retrospectively; small valuation differences cannot be taxed under Section 56(2)(x).
FULL TEXT OF THE ORDER OF ITAT MUMBAI
