2024 (12) TMI 67 - AT - Income Tax

Addition u/s 50C - difference between sale consideration and stamp duty value - Difference was marginally very low i.e. only 2.7% of the sale consideration - HELD THAT - Addition was unwarranted. Since this argument aligns with the judicial principles emphasising that minor deviation does not necessarily reflect an attempt to evade taxes, particularly when the variation is below a threshold limit of 5%. We in this respect rely on the decision of Shaista Irphan Mogul 2021 (8) TMI 270 - ITAT MUMBAI . Accordingly, the addition made u/s 50C is deleted and Ground of the assessee is allowed. Allowability of deduction u/s 54F - Assessee claimed that two flats were constituted a single unit based on architectural plans and interior design - In this regard, architectural certificate was also furnished before the Bench. It is also acknowledged that the assessee has made substantive investment within the prescribed period by depositing in CGAS account, hence, we deem it necessary to allow the instant issue in favour of the assessee considering the judgment of Devdas Naik 2014 (7) TMI 173 - BOMBAY HIGH COURT and accordingly, we direct the AO to delete the impugned addition. Appeal of the assessee is allowed.

Summary

Issues:
1. Addition u/s 50C for the variance between sale consideration and stamp duty value.
2. Allowability of deduction u/s 54F for the purchase of two flats.

Analysis:
1. Addition u/s 50C:
The case involved a dispute over the addition made by the Assessing Officer under section 50C of the Income Tax Act due to the variance between the sale consideration and stamp duty value of the property sold. The Assessing Officer proposed an addition of Rs. 10,21,262 to the total income of the assessee based on this variance. However, the Tribunal found the addition to be unwarranted as the difference was only 2.7% of the sale consideration, which was deemed negligible. Citing judicial precedents, the Tribunal held that minor deviations below a threshold limit of 5% do not necessarily indicate tax evasion. The Tribunal referred to a decision of the Mumbai Bench in a similar case to support its decision. Consequently, the addition under section 50C was deleted, and Ground No.4 of the assessee's appeal was allowed.

2. Allowability of deduction u/s 54F:
The second issue revolved around the allowability of deduction under section 54F for the purchase of two flats, which the assessee claimed constituted a single unit based on architectural plans and interior design. The Assessing Officer had denied the deduction on the grounds that the flats were acquired through separate agreements and failed to meet the statutory conditions. However, the Tribunal considered the architectural certificate provided by the assessee and the substantial investment made within the prescribed period, including depositing funds in the Capital Gains Account Scheme (CGAS). Relying on the judgment in the case of CIT vs. Devdas Naik, the Tribunal directed the Assessing Officer to delete the addition made under section 54F in favor of the assessee.

In conclusion, the Tribunal allowed the appeal of the assessee, overturning the decisions of the lower authorities and ruling in favor of the assessee on both issues.