Difference between stamp duty valuation and sale consideration held within 10% tolerance, leading to deletion of valuation-based addition.

The text explains that where statutory tolerance permits a 10% variance between stamp duty valuation and declared sale consideration, a differential within that tolerance is not taxable as deemed income. Applying the tolerance test to a reported differential of Rs. 3,91,000, which fell within 10% of stamp duty valuation, the earlier addition under the valuation provision was unjustified and therefore deleted, resulting in allowance of the appeal. The legal effect is that valuation differentials within the prescribed tolerance do not attract adjustment as deemed income under the relevant valuation rule.

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Issues: Whether the addition of Rs. 3,91,000 made under section 56(2)(x) of the Income-tax Act, 1961, on account of difference between stamp duty valuation and sale consideration, is sustainable where the difference does not exceed the 10% tolerance limit specified in section 56(2)(x)(b)(ii).

Analysis: The differential between the stamp duty valuation and the sale consideration is Rs. 3,91,000, which is not more than 10% of the consideration. Section 56(2)(x)(b)(ii) provides a tolerance threshold of 10% for differences in valuation. The addition under section 56(2)(x) was predicated solely on the valuation difference; given that the difference falls within the statutory tolerance, the legal basis for treating the differential as income under section 56(2)(x) is absent.

Conclusion: The addition of Rs. 3,91,000 under section 56(2)(x) is deleted; decision is in favour of the assessee.

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