ITAT Scraps Rs 11.35 Lakh Tax on Buyer, Rules in Favour of Homebuyer

The Income Tax Appellate Tribunal (ITAT) Kolkata has ruled in favour of a homebuyer. Scrapping a tax of Rs 11.35 lakh on her. In a case where the circle rate in the area had increased by the time the property was registered.

According to CA Suresh Surana, the Assessing Officer (AO) had added around Rs 11.35 lakh to the homebuyer's taxable income under the head “Income from Other Sources” as the difference between the property's stamp duty value and the agreed purchase consideration exceeded 10% of the consideration.

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However, the ITAT has overturned the AO's order, allowing the homebuyer's appeal. The Tribunal considered the registered purchase agreement and the conveyance deed executed later. And found that the AO had applied the higher stamp duty valuation in force on September 18.

2023, instead of the circle rate applicable on the agreement date.

"The taxpayer had entered into a registered agreement on January 22, 2021, the consideration of Rs 1.235 crore reflected the circle value prevailing at that time, and Rs 91 lakh had already been paid through banking channels," says Surana.

The Indian Tax Authority of Tribunals has issued a landmark ruling that will have far-reaching implications for real estate transactions. The tribunal's decision clarifies the stamp duty calculation for agreements where the agreement date and registration date diverge. This allows for a lower valuation based on the agreement date rather than the higher valuation at registration.

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The homebuyer had contested the assessment before the CIT(A). Arguing that the Assessing Officer had relied on an incorrect date for determining the property's value. However, the CIT(A) had rejected her plea and sustained the addition through an order dated March 31, 2026.

With this ruling, the ITAT has provided relief to the homebuyer, allowing her to avoid paying the additional tax. The decision is a significant win for homebuyers in similar situations. There, the circle rate in the area has increased by the time the property is registered.