ITAT Deletes Rs 7.62 Lakh Addition, Rules Section 56(2)(x) Not Applicable for AY 2017-18

Mr Rajendra Pal Singh Sandhu filed the present case against the ITO, challenging the CIT(A) appellate order dated 21.01.2026, passed under section 250 of the Income Tax Act.

Background of the case

The assessee had purchased a flat in Rohini, Delhi, with his wife in July 2016 for Rs 21.65 lakh. However, the stamp duty value of the property was Rs 36.89 lakh. After considering the difference between the purchase price and stamp duty value, the AO reopened the assessment proceedings and made an addition of 7.62 lakh under section 56(2)(x).

However, the assessee submitted that Section 56(2)(x) has been launched by the Finance Act, 2017 and it is applicable from AY 2018-19 only. The property was bought and registered in July 2016, so the provision did not apply.

The CIT(A) had earlier rejected the addition on the ground that the assessee had not requested for valuation from the DVO in the assessment proceedings.

Tribunal’s Decision

However, the Tribunal pointed out that Section 56(2)(x) clearly applies to properties received on or after April 1, 2017. Since the property in question was purchased and registered prior to that date, the said provision could not be invoked for AY 2017-18.

The Tribunal stated that “deeming fiction as created under Section 56(2)(x) cannot be invoked for the assessment year 2017-18, as the said Section 56(2)(x) shall be applicable from the assessment year 2018-19 onwards.”

Accordingly, the ITAT deleted the addition made by the AO and confirmed by the CIT(A). The appeal was allowed partly.