ITAT Allows 10% Variation in Property Value for AY 2017-18 Under Section 56(2)(vii)(b)
The present appeal is being filed by Harneetkaur Baljeetsingh Saluja (petitioner), a resident of Andheri (West), Mumbai, against the Income Tax Officer (respondent) in the Income Tax Appellate Tribunal (ITAT), Mumbai. The case is related to the Assessment Year (AY) 2017-18. The appeal is filed challenging an order dated 16-05-2025, passed by the Learnt Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi.
The issue started when the Income Tax Officer (AO) reopened Ms. Harneetkaur’s assessment under Section 147 read with Section 144B of the Income Tax Act. The AO noticed that the property she purchased had two different values: one declared purchase value by the assessee, i.e., Rs. 81,75,000 and value as per the stamp duty authority, i.e., Rs. 88,69,500. There was a total difference of Rs. 694,500 between the two values. The AO treated this difference as “income from other sources” under Section 56(2)(vii)(b) of the Income Tax Act.
The petitioner challenged this decision in the CIT(A) at NFAC, arguing that the difference between the declared value and the stamp duty value was only 8.5%, which is within the 10% tolerance limit allowed under Section 50C. Therefore, according to the law, no addition should be made to the income. She also emphasised that this 10% tolerance limit was introduced later by amendment in 2018 and 2020, but she argued that it should apply retrospectively to earlier years as well. However, the CIT(A) rejected her appeal, saying the 10% margin rule was introduced only from April 01 2021, and since her case is associated with the assessment year 2017-18, the benefit of the 10% margin cannot be allowed.
Then the woman filed an appeal in the ITAT Mumbai; however, on the hearing day, she did not appear. But the bench decided to proceed with the hearing since the matter was limited and all documents were already available. The tribunal heard the previous ruling related to the case and found that the Multiple benches of ITAT across India (Delhi, Chennai, and Mumbai) had already ruled that the 10% tolerance limit is “curative in nature.” The tribunal also cited previous judgements related to the same matter [Maria Fernandes Cheryl vs ITO (Mumbai ITAT), DCIT vs SGP Exim Pvt. Ltd. (Chennai ITAT) and Global Shoes & Accessories vs CIT (Delhi ITAT)] and also higher court decisions such as CIT vs Ansal Landmark Township Pvt Ltd (Delhi HC) and CIT vs Vummudi Amarendran (Madras HC). All these rulings supported the idea that if the difference between the purchase price and the stamp duty value is within 10%, then no tax should be added to the income, and this also applies to previous assessment years, such as 2017-18.
In its final ruling, ITAT Mumbai ruled that the difference between the actual purchase price and the stamp duty value was only 8.5%. Since it is under the acceptable limit, i.e., 10%, no addition should be made to income under Section 56(2)(vii)(b).