10% Section 56(2)(x) Tolerance Limit for Property Valuation Retrospective: ITAT Mumbai

 

NFAC Vs NRB Developers (ITA No.5352/Mum/2024 & 5218/Mum/2024)

Facts:

1.  During the alleged assessment year, the assessee registered a property from M/s Lotus Griha Nirman Pvt Ltd, covering approximately 6,180 sq. ft. in the proposed commercial building “Lous Link Square,” for a total consideration of Rs.8,19,00,000/-.

2.  At the time of registration, there was a difference of Rs.9,04,37,500/- between the set forth value and the stamp duty value. The issue was referred to the DVO for valuation of the alleged property; however, no valuation report was provided to the assessee during the assessment proceedings.

3.  Consequently, the assessment was on 30/09/2021, with an addition of Rs.9,04,37,500/- made under section 56(2)(x).The assessee then filed an appeal before the Ld. CIT(A).

4.  The Ld. CIT(A) received a valuation report dated 23/03/2022 (No. DVO-1/mum/CGT/2021-22/402). The difference between NRB Developers the DVO’s valuation and the set forth value, amounting to Rs.81,19,625/-, was considered for addition. The Ld. CIT(A) restricted the addition to this amount, and the assessee’s appeal was partially allowed. Both the revenue and the assessee, being aggrieved by the appeal order, have filed appeals.

5.  The assessee contended that, as this difference is less than 10%, they are entitled to the benefit under section 56(2)(x)(b)(B) of the Income Tax Act, thereby necessitating the deletion of the differential value confirmed by the Ld. CIT(A).

Note: The amendment to section 56(2)(x) of the Act brought in Finance Act, 2020 increased the tolerance limit from 5% to 10% with effect from 01/04/2021 under section 56(2)(X)(b)(B).

ITAT Mumbai held as below:

1.  The issue is squarely covered by the order of the co­ordinate bench of ITAT-Mumbai in the case of Glory Shipmanagement Private Limited vs CIT (Appeals) ITA No.3149/MUM/2023, date of pronouncement 30/01/2024and also the decision of the co-ordinate bench of ITAT-Kolkata in the case of Sandeep Kumar Poddar v. ITO, Wared-44(1), Kolkata ITA No.484/Kol/2022date of pronouncement 13/03/2023.

2.  These judgments consistently established that amendments which are clarificatory or curative in nature, such as the increase in the tolerance limit, should be given retrospective effect to rectify existing ambiguities or hardships.

3.  The provision of Section 56(2)(x)(b)(B), which introduced the 10% tolerance limit, indeed has retrospective effect and is applicable to the impugned assessment year 2018-19.

The copy of the order is as under:

1740467806-M52Ujn-1-TO