The amendment increasing the tolerance band for real estate transactions under Section 43CA from 5% to 10% is a curative, beneficial provision; therefore, it applies retrospectively to assessment years prior to its enactment to prevent the taxation of minor, bonafide valuation differences.

O R D E R

PER SANDEEP SINGH KARHAIL, J.M.

The Revenue has filed the present appeal against the impugned order dated 28.06.2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals)-50, Mumbai, [“learned CIT(A)”], for the assessment year 2018-19.

2. The solitary grievance of the Revenue is against the retrospective applicability of the amendment by the Finance Act, 2020, to the provisions of the 1st proviso to section 43CA of the Act, whereby the tolerance band was increased from 5% to 10%, to the year under consideration.

3. The brief facts of the case are that the assessee is involved in the business of real estate and construction. During the year under consideration, the assessee derived the income from house property and from business & profession. The assessee filed its return of income on 31.03.2019, declaring a total income of Rs.2,95,31,700/-. The return filed by the assessee was selected for scrutiny, and statutory notices under sections 143(2) and 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, it was noticed that during the year under consideration, the assessee entered into a registered agreement for the sale of immovable properties where the sale consideration was less than the value fixed by the stamp authorities. Accordingly, the assessee was asked to show cause as to why the difference between the sale consideration and stamp value should not be added to its total income under section 43CA of the Act. After considering the submissions of the assessee, the Assessing Officer (“AO”), vide order dated 24.04.2021 passed under section 143(3) of the Act, made an addition of Rs.14,95,43,115/- being the difference between the agreement value and value adopted by the stamp authority and added the same to the total income of the assessee as per section 43CA of the Act.

4. During the pendency of appellate proceedings before the learned CIT(A), upon receipt of the report from the Departmental Valuation Officer (“DVO”), the assessee raised additional ground that the difference between the sale consideration and the value of the immovable properties as determined by the DVO is less than 10% of the consideration received, and therefore, the consideration received should be deemed to be the full value of consideration. In this regard, the assessee placed reliance upon the decision of the Tribunal in its own case for the assessment year 2017-18. The learned CIT(A), vide impugned order, following the decision of the Tribunal in assessee’s own case for the preceding assessment year, deleted the addition made under section 43CA of the Act, by observing as follows: -

“11.3 It is also seen that, 110% of the agreement value is greater than these values arrived at by the DVO in respect of all the three properties. In appellant's own case for the year AY 2017-18, the Hon'ble ITAT Mumbai in ITA No. 5184/Mum/2024 after referring to various judicial precedents on the issue of retrospective application of the tolerance limit of 10% introduced in Proviso to 43CA Says in para 14 of the order.

"When the reason behind the introduction of the proviso is read with the ratio laid down by the judicial precedence as discussed here in above on the retrospective applicability of beneficial provision, we have no hesitation in holding that the tolerance band of 10% is applicable in assessee's case for AY 2017-18. In assessee's case the difference between the DVO valuation that is considered for making addition under section 43CA and the sale consideration is less than the tolerance band as per the proviso to the said section (refer table extracted