The Kolkata Bench of the Income Tax Appellate Tribunal clarified that the amendment introducing a ten-percent tolerance under section 50C of the Income Tax Act applies retrospectively. Consequently, the addition of Rs 9,94,312 made on the basis of an eight-point-five percent valuation gap for assessment year 2014-15 was ordered deleted, shaping future handling of deemed sale consideration disputes.
Background & Facts
The Dispute
The appellant, S M Enclave Pvt. Ltd., sold a parcel of land during AY 2014-15. The sale consideration declared in the return of income filed on 27.09.2014 was Rs 1,16,98,876. The stamp duty valuation authority had adopted a higher value, leading the Assessing Officer (AO) to add income under section 50C, treating the stamp duty value as the full consideration.
Key Facts
- 27.09.2014: Return of income filed, total income declared Rs 16,78,118.
- 29.12.2016: AO issued assessment order under s.143(3), total income fixed at Rs 35,16,430 with additions of Rs 12,38,130 (short-term) and Rs 6,00,184 (long-term) under s.50C.
- The appellant requested referral to the District Valuation Officer (DVO); the AO referred but completed assessment before receiving the DVO report.
- During appellate proceedings, the DVO valued the land at Rs 1,26,93,188, creating a difference of Rs 9,94,312 (8.50%) compared with the appellant's declared value.
- The Addl/JCIT(A) noted that the 8.50% gap exceeded the then-applicable 5% tolerance and that the 10% tolerance became effective only from 01.04.2021.
- 09.09.2025: Addl/JCIT(A) order limited the addition to Rs 9,94,312 and partially allowed the appeal.
- 10.08.2026: Hearing concluded before the ITAT.
- 01.09.2026: ITAT pronounced its order.
Procedural History
- 27.09.2014: Return of income filed by the appellant.
- 29.12.2016: AO assessment order passed under s.143(3).
- (Date not specified): Appeal filed before the Additional Commissioner of Income Tax (Appeals) [Addl/JCIT(A)].
- 09.09.2025: Addl/JCIT(A) order dated under s.250, partially allowing the appeal and restricting addition to Rs 9,94,312.
- 10.08.2026: Hearing concluded before the Income Tax Appellate Tribunal, Kolkata Bench.
- 01.09.2026: ITAT order pronounced, allowing the appeal and directing deletion of the addition.
The Parties' Positions
- Appellant (S M Enclave Pvt. Ltd.): Contended that the amendment introducing a ten-percent tolerance under the third proviso of s.50C is retrospective; therefore the 8.5% difference falls within the permissible limit and no addition should be made.
- Respondent (Chowringhee Square / Revenue Department): Argued that at the time of the assessment the applicable tolerance was five percent; the 8.5% gap exceeds this limit and the addition must stand.
Relief Sought
The appellant sought deletion of the addition of Rs 9,94,312 made under section 50C and a recomputation of total income without that addition, with proportional allocation between short-term and long-term assets as per the DVO valuation.
