ITAT Rules in Favor of Assessee: Differential Amounts Within 10% Tolerance Margin Under Relevant Tax Provisions.

The ITAT allowed the appeal in favor of the assessee, ruling that the differential amounts from the purchase of capital assets fell within the statutory tolerance margin of 10% as per sec. 56(2)(vii)(b) and sec. 50C(1) 3rd proviso. The Revenue's argument was dismissed, and the impugned addition was deleted.

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Issues:
The appeal against the National Faceless Appeal Centre's order u/s. 143(3) of the Income Tax Act, 1961 for the assessment year 2014-15.

Substantive Grounds Pleaded by Assessee:
1. The assessee filed the return of income for A.Y. 2014-15, with total income declared at Rs. 7,42,010/-.
2. The AO treated the difference amounts from the purchase of agricultural lands as income from other sources u/s. 56(2)(vii) of the Income Tax Act, 1961.
3. Assessee contended that the properties are agricultural lands and not capital assets, hence section 56(2)(vii) is not applicable.
4. Assessee appealed against the order passed by CIT, seeking deletion of the added sum of Rs. 6,69,100/- to the total income.

Assessee's Grievance:
The assessee challenged the additions made u/sec. 56(2)(vii) totaling to Rs. 6,69,100/- for two capital assets purchased in the relevant previous year.

Details of Capital Assets:
1. Former capital asset purchased at Mouza-Khapa (Khurd), Tehsil-Hingana, Dist. Nagpur for Rs. 69.25 lakhs, with a stamp valuation of Rs. 70.86 lakhs, resulting in an addition of Rs. 1,61,000/-.
2. Latter capital asset at Mouza-Neri (Mankar), Tehsil-Hingana, Dist.-Nagpur purchased for Rs. 62,24,500/-, with a stamp valuation of Rs. 67,32,600/-.

Decision and Rationale:
The Tribunal found that the differential amount did not exceed 10% of the actual sale price, falling within the statutory tolerance margin of 10% as per sec. 56(2)(vii)(b) and sec. 50C(1) 3rd proviso. The Revenue's argument regarding the applicability of the tolerance margin was dismissed, citing a precedent holding it to have retrospective effect. Consequently, the impugned addition u/sec. 56(2)(vii) was deleted, and the appeal was allowed in favor of the assessee.

Conclusion:
The Tribunal allowed the appeal, pronouncing the order on 08.05.2024, in favor of the assessee based on the statutory tolerance margin of 10% for the differential amounts related to the purchase of capital assets.

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