MHADA Leasehold Property Purchase Taxable Under Section 56(2)(x): ITAT Mumbai Distinguishes Section 50C Precedents and Restores Valuation to DVO
Overview of the Dispute
The Mumbai Bench of the Income Tax Appellate Tribunal recently adjudicated a significant matter involving the taxability of a leasehold property transaction under Section 56(2)(x) of the Income Tax Act, 1961. The case — Amit Gajanan Khedekar Vs ITO (ITAT Mumbai) — arose from an addition made by the Assessing Officer (AO) on account of the differential between the stamp duty valuation and the actual consideration paid by the assessee for acquiring rights in a room/tenement situated in a MHADA-constructed building.
The Tribunal's ruling carries considerable significance for assessees involved in MHADA property transactions, particularly on two fronts: first, whether the deeming provisions under Section 50C judgments can shield transactions from the reach of Section 56(2)(x); and second, whether the AO is obligated to refer the valuation question to the Departmental Valuation Officer (DVO) when the addition is premised solely on the stamp duty value.
Background Facts
The assessee — Amit Gajanan Khedekar — acquired rights in Room No. 214, Second Floor, Siddhi Sadan Building, Fitwala Road, Elphinstone Road (West), Mumbai-400013. The transaction involved the purchase of rights in a room/tenement for a consideration of ₹32,50,000/-. The building in question stands on leasehold land owned by the Maharashtra Housing and Area Development Authority (MHADA), and the seller had originally been granted rights over the said property through an allotment letter dated 06.06.2017 issued by MHADA in the seller's favour.
The assessee's return of income for Assessment Year 2018-19 declared a total income of ₹3,06,810/-. The case was selected for compulsory scrutiny to examine the immovable property transaction, and notice under Section 143(2) was issued on 27.09.2020.
Upon examining the documents submitted by the assessee, the AO discovered that the Sub-Registrar had determined the market value of the property at ₹53,35,500/-, thereby creating a shortfall of ₹20,85,500/- compared to the actual consideration paid. Invoking the provisions of Section 56(2)(x) of the Income Tax Act, 1961, the AO treated this differential as income from other sources and made an addition of ₹20,85,500/- to the assessee's total income.
The assessment order was passed under Section 143(3) read with Section 143(3A) and Section 143(3B) of the Act on 15.03.2021. The assessee's appeal before the National Faceless Appeal Centre (NFAC), Delhi — functioning as the Commissioner of Income Tax (Appeals) — was decided on 20.02.2025 through an order under Section 250 of the Act. Aggrieved by the outcome, the assessee preferred the present appeal before the ITAT Mumbai.
Preliminary Issue: Condonation of Delay
Before taking up the matter on merits, the Tribunal addressed a procedural hurdle. The appeal had been filed with a delay of 280 days. The assessee explained the reason for delay through a notarized affidavit executed on 27.03.2026. Although the Departmental Representative raised objections to the assessee's explanation, the Tribunal was satisfied that sufficient cause existed for the delay. Accordingly, the delay of 280 days was condoned and the appeal was admitted for adjudication.