Deeming provision under section 50C is not automatic; revenue must prove higher consideration before addition under section 56(2)(x).

The article examines an ITAT Mumbai matter concerning exercise of revision under section 263 where revenue sought to treat stamp duty value as consideration and direct re-examination including DVO reference and application of the 50C tolerance. It explains that the deeming provision in section 50C does not automatically replace declared consideration absent positive evidence of higher payment, that the onus to prove additional consideration rests with revenue, and that where the variance fell within the prescribed tolerance and DVO support, no addition under section 56(2)(x) was warranted, so revision was set aside.

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Issues: (i) Whether the revision under section 263 of the Income-tax Act, 1961 setting aside the assessment solely on the ground that the Assessing Officer did not make an addition under section 56(2)(x) by treating stamp duty value as consideration (and directing re-examination including reference to DVO valuation and tolerance limit under section 50C) was valid and whether the assessment order was erroneous and prejudicial to the interest of revenue.

Analysis: The facts show purchase price, DVO valuation and stamp duty value for the property; the variance between purchase price and DVO value is 6.06% and between purchase price and stamp duty value is larger. Section 50C and its proviso (110% tolerance) and the statutory mechanism for reference to a Valuation Officer were applied to compare stamp duty valuation, DVO valuation and declared consideration. The tribunal applied precedent on retrospective application of beneficial amendments and authorities holding that (a) the deeming provision in section 50C does not automatically substitute stamp duty value for actual sale consideration in the absence of positive evidence that higher consideration was paid, and (b) the onus to show additional consideration lies on the revenue. Considering the tolerance limit and DVO valuation, the variation fell within the allowable limit such that no addition under section 56(2)(x) was warranted. Having found that revenue failed to discharge the burden of proving that higher consideration had passed, the conditions for exercise of revision under section 263 (erroneous and prejudicial to the interest of revenue) were not satisfied in relation to making an addition on this issue.

Conclusion: Revision under section 263 is set aside in respect of the directed addition; the assessment order passed under section 143(3) r.w.s. 143(3A) and 143(3B) for A.Y. 2018-19 is upheld on the issue of alleged addition under section 56(2)(x), and the appeal is allowed in favour of the assessee.

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