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

Mr Pragalanadane from the ERI Scheme Moggappair, West Chennai, sold a property in Chennai for Rs 94 lakh during AY 2017-18. However, the guidance value for stamp duty purposes listed the property at Rs 1.93 crore.

So even though Pragalanadane paid stamp duty on the Rs 1.93 crore value to the Tamil Nadu government, he only received Rs 94 lakh from the buyer in his bank account. This discrepancy raised a red flag with the Income Tax Department system and subsequently a Section 50C tax notice was sent to him to tax the differential amount of Rs 99 lakh (Rs 1.93 crore-Rs 94 lakh).

Additionally, on March 28, 2018, Pragalanadane filed his ITR declaring a total income of Rs 28.54 lakh. When questioned by the tax department about the property sale, he claimed that all the money was received via banking channels and the sale deed was registered following a prior 'Agreement to sell'.


The Income Tax Assessing Officer (AO) disagreed with his argument, stating that the agreement for sale was not registered and lacked legal validity. Feeling wronged, Pragalanadane appealed to CIT (A), who upheld the AO's Section 50C action decision, reasoning that since the 'agreement to sell' was not registered, it couldn't be considered valid.

Still unhappy, Pragalanadane took his case to ITAT Chennai. On June 2, 2026, ITAT Chennai's B Bench heard his case and on July 8, 2026, passed a judgement in his favour. Advocate S.P.Chidambaram represented Pragalanadane in ITAT Chennai.

According to Mihir Tanna, Associate Director, S.K Patodia LLP, in this case there was a substantial gap between the date on which both parties agreed to transfer property and the date on which final payment of consideration and agreement to sell was executed.

Tanna explained that under Section 50C, if transfer of property is done with the consideration below stamp duty value, both parties usually pay tax on the difference amount.

According to Tanna property sellers usually face issues when there is substantial change in stamp duty value after entering agreement to sell as the income tax provisions safeguard both parties in such cases by considering stamp duty value as on the date of agreement to sell provided part consideration received in bank.

For those who are unaware, Section 50C says that when you sell any property if the sale price is less than the state government's stamp duty value of the same land, then it will be assumed that you sold the land for the stamp duty value and then accordinly taxed usually under capital gain heads of income. So this means even if you actually sold the land below stamp duty price, you still need to pay income tax as if you sold the land at stamp duty value. In the case as discussed in this article, Pragalanadane sold the land for Rs 94 lakh but Tamil Nady government stamp duty valuation of this land was Rs 1.93 crore.

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

Keep reading to know the details of the case and understand why he won

Summary of the judgement and why the taxpayer won

Chartered Accountant Suresh Surana explained to ET Wealth Online that the Chennai Bench of the ITAT, in this case, dealt with the applicability of Section 50C where the date of agreement to sell and the date of registration of the sale deed were different. The assessee, an individual engaged in real estate business, had entered into an agreement to sell certain plots on July 11, 2013 for a total of Rs 94 lakh. Out of this, Rs 48.50 lakh was received through RTGS on the date of agreement itself, and the balance Rs 45 lakh was also received through RTGS on March 23, 2015, before execution of the registered sale deed on March 7, 2017.

Also read: Rs 80 lakh tax demand quashed: ITAT Mumbai says stamp duty value not applicable to life interest in family trust

During reassessment proceedings, the Assessing Officer noted that although the sale deed was registered for Rs 94 lakh, the stamp duty/guideline value on the date of registration was Rs 1.93 crore. Accordingly, the AO invoked Section 50C and made an addition of Rs 99.06 lakh, as the difference between the registered sale consideration and the stamp duty value as on the date of registration.

The assessee argued that since the sale consideration had already been fixed under an earlier agreement and a large amount already received through banking channels, the stamp duty value should be considered as on the date of the agreement to sell and not the date of registration.

However, the AO and CIT(A) rejected this contention mainly on the ground that the agreement to sell was not registered.

Surana says that the ITAT Chennai allowed the assessee's appeal and held that the benefit of the provisos to Section 50C could not be denied merely because the agreement to sell was unregistered.

The tax tribunal noted that Section 50C clearly states that if the date of agreement deciding the sale price differs from the registration date, the stamp duty value on the agreement date can be used, as long as part or the entire payment has been received through prescribed banking channels by that date.

In this case, the sale price was fixed on the agreement date of 11 July 2013 and a substantial payment was received through RTGS on that date. The balance was also received through RTGS before the sale deed was registered.

Surana says: "Therefore, the statutory conditions under the provisos to Section 50C were satisfied."

Why did Pragalanadane win this case?

Surana says that Pragalanadane won the case because the ITAT Chennai found that the transaction was supported by documentary evidence. The registered sale deed itself recorded that the money had been received via RTGS.

The tax tribunal held that an agreement to sell does not necessarily have to be registered for the purpose of claiming the benefit of the provisos to Section 50C, as the registration of such agreements is not mandatory legally.

Surana says: "Once the agreement, fixation of consideration and receipt of payment through banking channels were established, the benefit could not be denied merely on technical grounds."

Surana explains that the rationale of ITAT Chennai's ruling is that Section 50C is intended to tax undervaluation of property transactions, but its provisos protect genuine transactions where sale consideration is fixed earlier and registration takes place later, by which time, stamp duty values may increase.

According to Surana, ITAT Chennai also relied on the Madras High Court ruling in CIT v. Vummudi Amarendran, wherein the provisos to Section 50C were held to be curative and beneficial in nature and therefore applicable retrospectively.

Accordingly, since the assessee had fixed the consideration earlier and received payment through banking channels, the stamp duty value as on the date of the agreement to sell had to be considered. The addition made by the AO under Section 50C and sustained by the CIT(A) was therefore deleted.