2024 (9) TMI 1781 - AT - Income Tax

Addition u/s. 56(2)(x) - difference in value as per Stamp Duty Authorities and as per Agreement - Scope of amended provisions of section 56(2)(x)(b) of the Act - HELD THAT - As per the amended provisions of section 56(2)(x)(b) since the excess of stamp duty value over the purchase consideration i.e. Rs. 5, 58, 000 is less than the 10% of the consideration i.e. Rs.9, 00, 000 therefore the provisions of section 56(2)(x)(b) of the Act are not applicable. As per the learned DR the amendment mentioned above does not apply to the year under consideration i.e. the assessment year 2018-19 and is prospective in its application. A similar issue came up in Sandeep Kumar Poddar 2023 (3) TMI 666 - ITAT KOLKATA wherein as following case of Maria Fernandes Cheryl 2021 (1) TMI 620 - ITAT MUMBAI decided the issue in favour of the taxpayer and held that amendment of increasing the tolerance band from 5% to 10% under section 56(2)(x) of the Act shall be applicable retrospectively as the amendment is clarificatory/curative in nature. Since in the present case excess of stamp duty value over the purchase consideration is less than 10% of the consideration we are of the considered view that the provisions of section 56(2)(x)(b) of the Act are not applicable to the present case. Assessee appeal allowed.

Summary

ISSUES:

Whether the addition under section 56(2)(x)(b) of the Income Tax Act, 1961, can be made on the difference between stamp duty value and actual consideration for immovable property when the excess is less than 10% of the consideration.Whether the amendment by Finance Act, 2020 increasing the tolerance limit from 5% to 10% under section 56(2)(x)(b) is applicable retrospectively or prospectively.Whether the assessee's claim that the difference in value arose due to an error in the area stated in the sale agreement can negate the addition under section 56(2)(x)(b).Whether the failure to furnish the sale agreement or sale deed justifies confirming the addition under section 56(2)(x)(b).

RULINGS / HOLDINGS:

On the applicability of section 56(2)(x)(b), the Court held that since the excess of stamp duty value over the purchase consideration (Rs. 5,58,000) is less than 10% of the consideration (Rs. 9,00,000), "the provisions of section 56(2)(x)(b) of the Act are not applicable" and therefore the addition is deleted.The amendment increasing the tolerance limit from 5% to 10% under section 56(2)(x)(b) by the Finance Act, 2020 is "clarificatory/curative in nature" and must be applied retrospectively to the assessment year under consideration.The Court did not accept the contention that the difference arose due to an error in the area stated in the agreement as sufficient to negate the addition, but this became academic given the retrospective applicability of the 10% tolerance band.The finding that the assessee neither furnished the sale agreement nor sale deed was noted but held irrelevant in light of the retrospective application of the amended tolerance limit, thus the addition was set aside.

RATIONALE:

The Court applied the statutory framework of section 56(2)(x)(b) of the Income Tax Act, 1961, which deems excess of stamp duty value over consideration as income from other sources if it exceeds the higher of Rs. 50,000 or 5% (later 10%) of the consideration.Reliance was placed on coordinate bench decisions interpreting the Finance Act, 2020 amendment as retrospective, emphasizing the amendment's "curative" character to mitigate hardship arising from small bona fide variations between sale consideration and stamp duty valuation.The Court analogized the retrospective application of the amendment under section 56(2)(x)(b) with similar retrospective interpretations of amendments to sections 50C and 43CA, which also deal with valuation differences in immovable property transactions.The Tribunal underscored that the tolerance band increase reflects a pragmatic approach acknowledging "various bona fide reasons explaining the small variations" and that such amendments serve as "remedial measures" to prevent unjust invocation of anti-avoidance provisions.No dissenting or differing opinion was expressed; the Court followed established coordinate bench precedents without doctrinal shift.