Beneficial amendments should be applied retrospectively unless they impose a burden: ITAT Mumbai
Here is another case before Mumbai ITAT wherein it has been held that the beneficial amendments should be applied retrospectively unless they impose a burden. In this case, ITAT Mumbai Quashes PCIT’s Order regarding Kiran Ashok Desai’s Son’s Assessment. DVO Report Rescue Assessee from Addition Under Section 56(2)(x)
Let us have a Short Overview of the case:
Desai filed his return for A.Y. 2018-19, declaring ₹11.59 lakh as income and claiming a ₹4.77 crore gift from his father as exempt.
He purchased a Mumbai property for ₹4.75 crore, but the stamp duty valuation was ₹5.82 crore, creating a 22.58% difference.
The tax department sought to add ₹53.87 lakh to his income under Section 56(2)(x) based on stamp duty valuation.
PCIT Strikes: The Section 263 Order
On February 15, 2024, the PCIT issued a notice under Section 263, accusing the Assessing Officer (AO) of failing to add ₹53.87 lakh to Desai’s income. The PCIT argued that the AO ignored the reason for scrutiny selection, and since the order was both erroneous and prejudicial to revenue, it needed to be revised. The PCIT set aside the assessment order and directed the AO to re-examine the issue.
ITAT Steps In: What Turned the Case in Desai’s Favor?
Desai challenged the PCIT’s decision, and the ITAT scrutinized the facts carefully. Several key aspects worked in his favor.
The DVO report was a game changer. During a separate scrutiny assessment of Desai’s son, the District Valuation Officer (DVO) determined the property’s fair market value (FMV) at ₹5,03,83,000. This was just 6.06% higher than the purchase price—far below the inflated stamp duty valuation.
The 10% tolerance limit came to the rescue. Although Finance Act, 2020 increased the tolerance limit from 5% to 10%, this applied from A.Y. 2021-22 onwards. However, the ITAT relied on the Supreme Court’s ruling in Vatika Township (P) Ltd., which states that beneficial amendments should be applied retrospectively unless they impose a burden. Since Desai’s price variation fell within the 10% limit, no addition was necessary.
Legal precedents strengthened Desai’s case. The ITAT referred to multiple rulings supporting Desai’s position, including:
• Sai Bhargavanath Infra v. ACIT (Pune ITAT)
• Maria Fernandes Cheryl v. ITO (Mumbai ITAT)
• CIT v. Chandani Bhuchar (Punjab & Haryana High Court)
These cases emphasized that stamp duty valuation alone cannot be used as conclusive evidence to make tax additions unless the department proves that the taxpayer paid an undisclosed higher amount.
The ITAT ruled in favor of Kiran Ashok Desai, stating that the AO’s order was not erroneous and the PCIT had no valid reason to invoke Section 263. Consequently, the original assessment was restored, and Desai’s appeal was allowed.
The Copy Of the order is as under:
