2024 (8) TMI 931 - AT - Income Tax

Addition u/s 56(2)(x) - purchase value of property is less than the value of stamp authority - Assessee submits that difference in the property value compared to stamp duty valuation is because of distress sale and in the absence of any Co-op Housing Society as well as the location - It is the claim of the assessee that nobody was ready to buy the property as the property is in low lying water logging area - AO referred to the Valuation Officer u/s 55A - HELD THAT -We find that where any person receives any immovable property for a consideration less than the stamp duty value of such property, then the said excess consideration is the income of the assessee. However, as per clause (ii) of that sub-section amount equal to 10% of the consideration is not chargeable to tax. In the present case, the amount of difference between the value determined by the ld. DVO and the transaction value is less than 10% of the consideration. Therefore, no addition is required to be made in the hands of the assessee. The various judicial precedents cited by the AR also supports the case of the assessee. Accordingly, we direct the AO to delete the addition made in the hands of the assessee. Accordingly, the appeal of the assessee is allowed.

Summary

Issues:
1. Appeal against assessment order passed by National Faceless Appeal Centre
2. Discrepancy in property value and stamp duty valuation
3. Addition made under section 56(2)(x) of the Income-tax Act, 1961
4. Interpretation of tolerance limit under section 50C(2) and section 56(2)(x) of the Act

Analysis:
The judgment pertains to an appeal filed by the assessee against the assessment order passed by the National Faceless Appeal Centre, Delhi. The assessee had purchased an immovable property at a lower value compared to the stamp duty valuation, leading to a scrutiny of the transaction. The Assessing Officer referred the matter to the Valuation Officer under section 55A of the Act, who determined the market value of the property within a tolerance limit of 5%. However, the Assessing Officer made an addition under section 56(2)(x) of the Act, which was contested by the assessee before the ld. CIT(A) and subsequently before the Appellate Tribunal ITAT Mumbai.

The crux of the issue revolved around the interpretation of the tolerance limit under section 50C(2) and section 56(2)(x) of the Act. The ld. CIT(A) rejected the assessee's contention that the tolerance limit should apply to section 56(2)(x). The Appellate Tribunal, after considering the rival contentions and judicial precedents cited by the authorized representative, held that where the difference between the value determined by the Valuation Officer and the transaction value is less than 10% of the consideration, no addition is required to be made in the hands of the assessee. The Tribunal directed the Assessing Officer to delete the addition made in the hands of the assessee, thereby allowing the appeal.

In conclusion, the Appellate Tribunal ITAT Mumbai ruled in favor of the assessee, emphasizing that the tolerance limit under section 50C(2) should also be considered while interpreting section 56(2)(x) of the Act. The judgment highlighted the importance of judicial precedents and statutory provisions in determining the tax implications of property transactions.