Mumbai ITAT deletes property tax addition under section 56 holding 6.34 percent variance within tolerance limit

The Income Tax Appellate Tribunal in Mumbai deleted a ₹6.27 lakh addition under Section 56(2)(x), ruling that the 6.34% difference between the transaction property value and the stamp duty value falls safely within the beneficial 10% tolerance band for assessment year 2018-19. Section 56(2)(x) taxes the receipt of immovable property without consideration or for inadequate consideration by comparing purchase prices with government-notified stamp duty valuations, subject to statutory tolerance limits designed to account for market estimation variances.

Judicial interpretation applies these tolerance thresholds retrospectively or beneficially to prevent undue additions where deviations are minor. Tax practitioners and property buyers should review property purchase agreements and stamp duty valuations to ensure they reference applicable statutory tolerance thresholds when filing tax returns. Advising clients on potential variances prevents unwarranted scrutiny under income tax provisions.

Bottom line: Proper utilization of statutory tolerance bands shields taxpayers from arbitrary additions on property transactions.