Mumbai ITAT Rules Tax Officer Cannot Pin Entire Stamp-Value Gap on One Co-Owner

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has ruled that buying a property jointly does not make one co-owner automatically liable for the entire tax arising from the difference between the purchase price and the property's stamp-duty value.

The ruling was delivered in a case involving a taxpayer who purchased a residential flat in Chembur along with his wife in 2017. The couple bought the flat for an actual purchase consideration of Rs 60 lakh. However, the stamp-duty valuation of the property stood at Rs 94.8 lakh, creating an assessment difference of Rs 34.8 lakh.

Although the Chembur property was held jointly, with the husband owning a 41.08 percent share, the assessing income tax officer added the entire Rs 34.8 lakh difference to the husband's individual taxable income. The assessing officer took this step because the wife's tax assessment had not been taken up for scrutiny.

When the matter went into appeal, the appellate commissioner upheld the officer's decision, arguing that taxing only the husband's proportionate share of approximately Rs 14.3 lakh would leave the remaining balance untaxed.

The Mumbai ITAT rejected this reasoning and ruled in favour of the taxpayer. The tribunal pointed out that the specific ownership shares in the Chembur property were clearly recorded in the purchase documents.

The tribunal stated that the Income Tax Department's failure to take action in the wife's case could not serve as a justification for loading the entire valuation gap onto the husband.