Sold property at low price but seller wins tax case

In a case that highlights the importance of proper documentation, Mr. Pragalanadane from Chennai successfully challenged a tax assessment imposed by the Income Tax Department, resulting in a win at the ITAT Chennai. The crux of the dispute revolved around a property sale where the seller received significantly less than the stamp duty value stipulated by the government.

Pragalanadane had sold a property for Rs 94 lakh in 2017-2018, but the tax authorities assessed the stamp duty value at Rs 1.93 crore. This led to a tax demand of Rs 99 lakh under Section 50C of the Income Tax Act, which mandates the tax treatment of properties sold below the stamp duty value.

The seller argued that the agreement to sell, executed on July 11, 2013, should have determined the stamp duty value rather than the later registered sale deed on March 7, 2017. The ITAT Chennai disagreed, ruling that the agreement to sell's lack of registration did not invalidate the application of Section 50C. The court further emphasized that the statutory conditions under Section 50C were met as part of the consideration was received through banking channels well before the sale deed was registered.

The ruling underscores the significance of maintaining clear documentation in real estate transactions and the legal validity of an agreement to sell, even if it remains unregistered.