Sold property at low price but seller wins tax case
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Before you continue reading How financially free are you? Most people overestimate their financial freedom. Discover your Financial Freedom score through a quick survey Calculate My Score Summary of the judgement and why the taxpayer won Why did Pragalanadane win this case? Mr Pragalanadane from the ERI Scheme Moggappair, West Chennai, sold a property in Chennai for Rs 94 lakh during AY 2017-18. However, the guidance value for stamp duty purposes listed the property at Rs 1.93 crore.So even though Pragalanadane paid stamp duty on the Rs 1.93 crore value to the Tamil Nadu government, he only received Rs 94 lakh from the buyer in his bank account. This discrepancy raised a red flag with the Income Tax Department system and subsequently a Section 50C tax notice was sent to him to tax the differential amount of Rs 99 lakh (Rs 1.93 crore-Rs 94 lakh).Additionally, on March 28, 2018, Pragalanadane filed his ITR declaring a total income of Rs 28.54 lakh. When questioned by the tax department about the property sale, he claimed that all the money was received via banking channels and the sale deed was registered following a prior 'Agreement to sell'.The Income Tax Assessing Officer (AO) disagreed with his argument, stating that the agreement for sale was not registered and lacked legal validity. Feeling wronged, Pragalanadane appealed to CIT (A), who upheld the AO's Section 50C action decision, reasoning that since the 'agreement to sell' was not registered, it couldn't be considered valid.Still unhappy, Pragalanadane took his case to ITAT Chennai. On June 2, 2026, ITAT Chennai's B Bench heard his case and on July 8, 2026, passed a judgement in his favour. Advocate S.P.Chidambaram represented Pragalanadane in ITAT Chennai.According to Mihir Tanna, Associate Director, S.K Patodia LLP, in this case there was a substantial gap between the date on which both parties agreed to transfer property and the date on which final payment of consideration and agreement to sell was executed.Tanna explained that under Section 50C, if transfer of property is done with the consideration below stamp duty value, both parties usually pay tax on the difference amount.According to Tanna property sellers usually face issues when there is substantial change in stamp duty value after entering agreement to sell as the income tax provisions safeguard both parties in such cases by considering stamp duty value as on the date of agreement to sell provided part consideration received in bank.For those who are unaware, Section 50C says that when you sell any property if the sale price is less than the state government's stamp duty value of the same land, then it will be assumed that you sold the land for the stamp duty value and then accordinly taxed usually under capital gain heads of income.
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