Understanding the ITAT Ruling on Property Valuation Dispute
The property valuation dispute ruling by the Income Tax Appellate Tribunal (ITAT) dated May 12, 2025, offers important clarity on the interpretation of Sections 50C, 56(2)(vii), and 69B of the Income-tax Act, 1961.
What Was the Core Issue?
- The AO invoked Section 69B, suspecting unexplained investment in property.
- AO also used the stamp duty valuation as the benchmark instead of the actual transaction value.
- The taxpayer argued that exceptions to Section 50C and 56(2)(vii) should apply.
- The case hinged on whether stamp duty value alone could be the basis for additions.
Tribunal’s Key Observations
| Point | Finding |
|---|---|
| Section Applied | AO wrongly applied Section 69B instead of examining the context under Sections 50C & 56(2)(vii). |
| Valuation Basis | Tribunal held that actual agreement value must be considered, not just SDV. |
| Burden of Proof | The Assessee successfully proved the transaction’s legitimacy with documents. |
| AO’s Failure | Ignored crucial exceptions and legal interpretation in valuation rules. |
Legal Insight: What Are Sections 50C, 56(2)(vii), and 69B?
- Section 50C: Applies to capital gains—if SDV exceeds sale price, the higher value is deemed as consideration unless proven otherwise.
- Section 56(2)(vii): Pertains to gifts/under-valued property received by individuals or HUFs—triggers tax if property received below SDV.
- Section 69B: Used when AO believes actual investment exceeds what is recorded—typically applies to unexplained money.
ITAT’s position: Section 69B was misapplied here. The case should have been evaluated under Sections 50C and 56(2)(vii) with consideration of exceptions and fair evidence.
What About Section 35AC?
The assessee also claimed deductions under Section 35AC for donations. The Tribunal:
- Remanded the matter back to the AO for document verification.
- Directed a full review of receipts, approvals, and notifications under Section 35AC.
Practical Tip for Taxpayers
Always document the agreed consideration in property transactions and support it with legal agreements, valuation reports, and payment proofs.
Don’t assume SDV is the final say—there are exceptions and judicial precedents that support genuine cases.
Expert View
CA firms and legal experts note that overreliance on stamp duty valuation can lead to unjustified tax burdens. The ruling reinforces that substance over form matters in property taxation.
Summary
ITAT overrules tax authority’s reliance on stamp duty value in a property valuation dispute involving Sections 50C, 56(2)(vii), and 69B. Tribunal ruled in favour of the assessee, affirming that real consideration and proper documentation outweigh stamp-based presumptions. A win for fair assessment principles in income tax.
FAQs
Q1. Can I challenge SDV-based assessments under Section 50C?
Yes. If you have valid documents showing lower consideration, you can invoke exceptions and contest the SDV.
Q2. What happens if the AO wrongly applies Section 69B?
You can appeal and present evidence.
Q3. Is Section 35AC still applicable?
Section 35AC was sunset after March 2017, but legacy claims still arise in reassessment or old cases.