Paid Rs 6.5 crore and bought a property with stamp duty value of Rs 8.85 crore, got income tax notice for unexplained investment; He fought back won relief in ITAT

When a property buyer from Veera Desai Road, Andheri West, Mumbai purchased a property in Pune for Rs 6.5 crore in AY 2017-18, he got into trouble with the Income Tax Department. The reason for this trouble is the stamp duty valuation for government tax purposes of this property is Rs 8.85 crore. So the Income Tax Department contended that the buyer paid less money than the stamp duty value and thus is liable to pay tax on the differential amount of Rs 2.35 crore (8.85-6.5).

The buyer responded to the Income Tax Department, saying that while the sub-registrar valued the property at Rs 8.85 crore, only Rs 6.5 crore was actually paid to the seller,as documented in the sale deed. He insisted that if anybody has to be held accountable, it should be the seller for selling the property below the stamp duty valuation.

Additionally, the buyer pointed out that the government had amended Section 56 2 (vii) effective from AY 2018-19, which was after his purchase, meaning that the new rules on buying property below stamp duty valuation shouldn't apply to him.


The Income Tax Assessing Officer (AO) rejected all the buyer's arguments and said that since the buyer didn't challenge the stamp duty valuation, it was final, and he must pay tax on the Rs 2.35 crore difference. The AO also raised questions about the source of funds for this property and involved unexplained property investment provision under Section 69B as well.

So the property buyer being unhappy with the assessment order, filed an appeal with the Commissioner of Income Tax (Appeals) [CIT(A)], who ruled in his favour and deleted the Rs 2.35-crore addition. The Income Tax Department feeling aggrieved, challenged the order before the Income Tax Appellate Tribunal (ITAT), Mumbai.

Chartered Accountant Narayan Atal represented the property buyer in ITAT Mumbai. The tribunal heard the case on May 7, 2026 and ruled in the property buyer's favour on May 18, 2026.

The property buyer won mainly because the Income Tax Department had failed to produce any evidence that the buyer had paid more than the Rs 6.5 crore recorded in the sale deed. The tax department relied solely on the higher stamp duty valuation of Rs 8.85 crore to allege that there was an unexplained investment of Rs 2.35 crore under Section 69B.

The ITAT held that a higher stamp duty value alone is not enough to prove that the buyer paid extra money to the seller off the record. ITAT Mumbai also said that Section 69B can be invoked only if the tax department has independent evidence showing that more consideration was actually paid.

ITAT Mumbai also pointed out that Section 50C, which adopts stamp duty value for capital gains purposes, applies only to the seller and can't automatically be used against the buyer.

Also read: Sold property for Rs 94 lakh despite a stamp value of Rs 1.93 crore, received an income tax notice under Section 50C; ITAT Chennai grants relief for this reason

Keep reading to know the details of the case and why the property buyer won the case.

Why the property buyer won

Karanjot Singh Khurana, Partner, DMD Advocates explains why the property buyer won the case:

• No evidence of actual extra payment: The Revenue's entire case rested on the stamp duty valuation gap. There was no statement from the seller, no seized material, no bank trail, and no independent enquiry to show money changed hands beyond the registered consideration.
• Fiction to tax difference between stamp duty value and sale consideration could not be applied to the buyer: Section 50C under the IT Act creates a deeming fiction providing taxation of notional capital gains in cases where the immovable property is sold below circle rates. In such situations, the circle rate value is deemed to be sales consideration, and the seller is required to pay capital gains tax accordingly. The presumption in section 50C is rebuttable but the burden of proof that the actual value is less than circle rates lies with taxpayer who is required to prove this fact to a department valuation officer. The Tribunal observed that that the deeming fiction in Section 50C is confined to the seller's capital gains computation and cannot be expanded into Section 69B to fasten a presumption on the buyer.
• No legislative provision to tax difference in the hands of buyer in AY 2017-18: The judicial precedent relates to the assessment of income for AY 2017-18. In the said assessment year, there was no provision which enabled the revenue to tax the difference between the stamp duty value and sale consideration in the hands of a corporate taxpayer. Thus, in the absence of any enabling provision to tax the difference and any evidence suggesting extraneous consideration, the difference between circle rate and sale consideration could not have been added to income of taxpayer.

Khurana says that it is worth emphasising that the aforesaid position was legislatively amended prospectively with effect from AY 2018-19, vide introduction of Section 56(2)(x). In terms of the said provision, if any person acquires any land and/or building at a value which is lower than circle rates, the difference between the said values is presumed to be income from other sources for the buyer.

Khurana says: "The presumption, however, is rebuttable and the provision contains an enabling mechanism allowing buyer to challenge the aforesaid addition provided the buyer proves to the department valuation officer that the real market value is lower than circle rates."

Summary of the judgement

Chartered accountant Suresh Surana said to ET Wealth Online that this case in ITAT Mumbai dealt with the question about whether the difference between the purchase consideration of a property and the value adopted by the state government's stamp duty valuation authority could, by itself, justify an addition as unexplained investment under Section 69B of the Income-tax Act, 1961.

ITAT Mumbai observed that Section 69B (unexplained investment) can only be invoked only if the Income Tax Assessing Officer (AO) is able to prove the charge through cogent and credible evidence. So the AO needs to prove that the taxpayer has actually invested more money than what he claims to have invested in acquiring the particular asset. So in case of real estate, it usually means the buyer might have paid cash under the table to the builder but on paper shows a smaller amount. So if the AO can catch this act with evidence, Section 69B case can be build.

Surana says: "Mere reliance on the higher stamp duty valuation does not satisfy this statutory requirement under Section 69B."

Also read: Sold land for Rs 7.24 crore, paid no tax, received income tax notice; Know how Google Earth photos and revenue records helped taxpayer to win this case in ITAT Ahmedabad

Moreover, ITAT Mumbai also said that the deeming fiction contained in Section 50C is confined to the computation of capital gains in the hands of the seller and it cannot be extended to presume unexplained investment in the hands of the purchaser. So if anyone has to be caught it is the property seller not the buyer.

The tax tribunal further noted that, for AY 2017-18, there was no provision enabling taxation of such differential amounts in the hands of a company purchasing immovable property, as Section 56(2)(x) extending the provision to "any person" became applicable only from AY 2018-19. Accordingly, Surana says that the addition made under Section 69B was held to be unsustainable in law.

Why the property buyer won

Surana says that the tax tribunal reaffirmed that an addition under Section 69B cannot be sustained merely because the stamp duty value exceeds the actual purchase consideration.

Surana says: "The Income Tax Department must establish, through independent and tangible evidence, that the purchaser has in fact paid consideration over and above the amount disclosed in the registered document."

According to Surana, the tax tribunal further clarified that the legal fiction under Section 50C is limited to determining the sale consideration for computing capital gains in the hands of the transferor and cannot be imported into Section 69B to infer undisclosed investment by the purchaser.

Surana says: "The ruling also recognises that, prior to the introduction of Section 56(2)(x), the statute did not authorise taxation of such differences in the hands of company purchasers."

Consequently, in the absence of evidence of on-money or unaccounted investment, a higher stamp duty valuation alone cannot justify an addition under Section 69B. Thus the property buyer won the case.

When can the tax department invoke Section 69B?

Khurana from DMD Advocates says that Section 69B of the Income-tax Act, 1961 enabled the Assessing Officer to tax the difference between the amount actually expended by the Assessee in acquiring an investment and the sum recorded in the books in a case where the Assessee did not offer any explanation about such difference to the satisfaction of Assessing Officer.

The excess amount expended by the Assessee in acquiring investment/asset was deemed as income only where there was a positive finding, based on cogent and credible material, that the Assessee actually spent more than what is recorded in the books.

The provision presumes existence of unaccounted incomes and enables the Assessing Officer to tax these incomes where the Officer has affirmatively demonstrated the excess investment (over and above the value recorded in books) with tangible evidence like a seller's statement, seized material, third-party confirmation, or some other circumstantial evidence pointing to actual payment of excess sums.

Critically, Khurana sasy that a value adopted by the authorities for payment of stamp duty is by itself is not sufficient evidence to trigger taxation under section 69B. The difference in stamp duty value and actual consideration, in isolation, does not demonstrate existence of extraneous consideration between the parties and does not trigger taxation under section 69B. So, the tax department needs independent proof of extra consideration passing hands and without such evidence, the mere valuation gap should not result in additions under section 69B.