In a significant ruling that brings relief to thousands of homebuyers across Maharashtra, the Income Tax Appellate Tribunal (ITAT) Mumbai has held that when a buyer has booked a property years in advance and paid part consideration through banking channels, the stamp duty value prevailing on the date of allotment/agreement must be considered for the purpose of Section 56(2)(x) of the Income Tax Act, and not the stamp duty value on the date of registration.
The order was passed by the Mumbai Bench “J(SMC)” comprising Judicial Member Shri Anikesh Banerjee and Accountant Member Shri Om Prakash Kant in the case of Purvi Nihal Shah vs ITO Ward 27(2)(1), Mumbai (ITA No.470/Mum/2026) for Assessment Year 2018-19.
Chronological Facts of the Case
- March 2011: The assessee, Purvi Nihal Shah (along with her husband), booked Flat No. 905 on the 9th floor of Gahadhiraj CHS Ltd, Building No. 5, Pant Nagar, Ghatkopar (East), Mumbai from M/s Mishal Construction Pvt. Ltd. An allotment letter was issued on 8 March 2011 at a consideration of ₹82,88,000. She paid ₹7 lakh as advance through two account payee cheques drawn on CITI Bank.
- October 2017: After a gap of over six years, the registered sale agreement was executed on 23 October 2017 for a total consideration of ₹99,00,536.
- Stamp Duty Value at Registration: The stamp duty authorities valued the property at ₹1,11,41,000 on the date of registration.
- Assessment Year 2018-19: During scrutiny, the Assessing Officer added the difference of ₹12,40,464 under Section 56(2)(x)(b)(B) as “Income from Other Sources”, treating it as purchase of property for inadequate consideration.
- The addition was upheld by the CIT(A). Aggrieved, the assessee approached the ITAT.
What Was the Dispute?
Section 56(2)(x)(b)(B) provides that if any person purchases an immovable property for a consideration lower than the stamp duty value by more than ₹50,000 or 10% of the consideration (whichever is higher), the difference is taxable in the hands of the buyer.
The Assessing Officer had compared the sale consideration of ₹99 lakh with the stamp duty value of ₹1.11 crore prevailing at the time of registration in 2017 and made the addition.
ITAT’s Key Ruling
The ITAT admitted additional evidence in the form of a valuation report and the Ready Reckoner value of the property as on FY 2010-11, which showed that the stamp duty value on the date of allotment was only ₹52,99,247.
The Tribunal held that since part payment was made through banking channels in March 2011 and the allotment letter was issued on that date, the date of agreement is 8 March 2011. Therefore, the stamp duty value prevailing on the date of allotment must be considered as per the proviso to Section 56(2)(x)(b)(B).
On that date, the stamp value (₹52.99 lakh) was much lower than the amount ultimately paid by the assessee (₹99 lakh). Hence, there was no question of inadequate consideration. The ITAT set aside the addition and restored the matter to the Assessing Officer for fresh verification of the valuation documents.
Why This Order is Extremely Important for Homebuyers
This ruling is highly significant for homebuyers in Mumbai, Pune, and other parts of Maharashtra who follow a very common practice:
- Booking a flat years in advance (especially in redevelopment projects, SRA schemes, or under-construction buildings).
- Paying a token amount or advance through banking channels at the time of booking/allotment.
- Executing the registered agreement and paying stamp duty much later when the project is nearing completion or possession is given.
In such cases, stamp duty values often rise substantially between the date of booking and the date of registration due to market appreciation, ready reckoner rate revisions, or infrastructure developments in the area.
Prior to this order, many Assessing Officers were mechanically comparing the stamp duty value at the time of registration with the agreement value and making additions under Section 56(2)(x), causing unnecessary harassment and litigation for genuine homebuyers.
The ITAT has now clarified that the relevant date is the date on which the price was fixed and part payment was made through banking channels — that is, the date of allotment or agreement — and not the date of registration. This protects homebuyers from arbitrary tax demands when property prices increase over time, which is a normal market phenomenon.
Bottom Line
This is a well-reasoned order that aligns with the intent of the law. It prevents the tax department from taxing notional gains arising purely due to the passage of time between booking and registration. Homebuyers who have faced similar additions or are likely to face scrutiny on this issue now have strong judicial support in their favour.
Also Read: TATA housing directed to refund money to homebuyer
