1 week ago
ITAT clarifies tax tolerance for properties bought below stamp value
A person bought a piece of land for ₹3.91 crore.
Government stamp officials valued the land at ₹6 crore.
This made the tax officer think the buyer had received a large hidden benefit.
A valuation officer later estimated the land’s fair value at ₹4.031 crore.
That made the difference between the price and fair value much smaller.
The difference was about 3%, while the rule discussed by the tribunal allows a 10% gap.
The tribunal said the tax addition could not stand as it was.
However, the ruling does not mean every property bought below its stamp value is automatically tax-free.
A taxpayer bought 2,080.28 square metres of land for ₹3.91 crore in July 2025.
Stamp duty authorities valued the property at ₹6 crore, creating an initial ₹2.09 crore gap.
A Departmental Valuation Officer assessed the property’s fair market value at ₹4.031 crore.
The revised difference of ₹12.10 lakh was about 3% of the purchase price, below the 10% tolerance limit discussed by the ITAT.
The Pune ITAT directed the Assessing Officer to modify the reassessment after verifying the taxpayer’s claim.
- Who
- Aslam Sadule Khan, the taxpayer, and the Income Tax Department’s Assessing Officer were involved in the case.
- What
- The Pune ITAT examined whether the difference between a property’s purchase price and its valuation should be treated as taxable income.
- Where
- The case was heard by the Pune bench of the Income Tax Appellate Tribunal and concerned property in the Panvel area.
- When
- The property was purchased in July 2025; the article does not specify the date of the tribunal ruling.
- Why
- The taxpayer bought the property below its stamp duty valuation, but a later valuation reduced the gap to about 3%, within the 10% tolerance limit discussed in the order.
Tax Authority’s Position
Tribunal’s Position
Whether the valuation gap was taxable
Tax Authority’s Position
The Assessing Officer initially treated the ₹2.09 crore difference between the purchase price and stamp duty valuation as taxable income under Section 56(2)(vii)(b).
Tribunal’s Position
The ITAT found the addition unsustainable after considering the DVO’s valuation, which reduced the difference to ₹12.10 lakh.
Which valuation should guide the assessment
Tax Authority’s Position
The initial assessment relied on the stamp duty authorities’ ₹6 crore valuation.
Tribunal’s Position
The tribunal considered the DVO’s fair market valuation of ₹4.031 crore and directed the Assessing Officer to verify the taxpayer’s claim before modifying the reassessment.
Effect of the tolerance limit
Tax Authority’s Position
The initial approach treated the larger valuation difference as taxable without accepting the taxpayer’s position.
Tribunal’s Position
The ITAT noted that the roughly 3% difference fell within the 10% tolerance limit referred to in the order, including changes that increased the limit from 5% to 10%.
Key facts
- Case
- Aslam Sadule Khan, Raigad Vs. ITO WD-4, Panvel
- Property size
- 2,080.28 square metres
- Purchase price
- ₹3.91 crore
- Stamp duty valuation
- ₹6 crore
- DVO valuation
- ₹4.031 crore
- Difference from DVO value
- ₹12.10 lakh, or about 3% of the purchase price
- Tolerance limit discussed
- 10%, increased from 5% under the provision discussed in the order
Sources
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