Purchase from Government – No addition under Section 56(2)(x) for purchase below stamp duty valuation: ITAT

 

In a landmark order, ITAT Kolkata in the case of Kanha Villa LLP vs Income Tax Ward 29(1), Kolkata [ITAT Kolkata – “B” Bench, Members: Shri George Mathan (JM), Shri Sanjay Awasthi (AM) – ITA No.: 700/Kol/2025 – Assessment Year: 2020–21 – Order Date: 19.11.2025, has held that no addition under Section 56(2)(x) for purchase below stamp duty valuation is permissible if Purchase is from Government

The issue was whether addition under Section 56(2)(x) for alleged understatement of consideration is justified where property is purchased from a State Government entity?

Let us have a Short Overview of the Case: –

The Assessee LLP engaged in renting and real estate purchased commercial property at Synthesis Business Park from West Bengal Housing Infrastructure Development Corporation Ltd. (WBHIDCO) a State Government entity by paying Rs. 4,76,50,200 whereas the market value of the property was determined at Rs. 11,36,27,400 and the AO treated difference Rs. 6,59,77,200 as deemed income u/s 56(2)(x). Upon challenge by the Assessee, the Tribunal allowed the appeal by upholding the arguments of the assessee interalia that No undervaluation was possible because seller is WBHIDCO (Govt. entity).

This judgement will be helpful in those cases where the transaction is a with a government entity and the transaction value is challenged.

In our view, even the same would be relevant when the  property is purchased by anyone from –

1.Bank auction as the process through online transparent processs.

2.Purchase from MIDC.

3.Transaction done through court order.

The copy of the order is as under:

1763968177-CDudcA-1-TO