ITAT Mumbai Remands Section 56 Addition on Alleged Undervalued Agricultural Land Purchases

The “B” Bench of the Income Tax Appellate Tribunal, Mumbai, delivered its order on 25 February 2026 in the case of Neelesh Shyamsunder Sable for Assessment Year 2016–17. The appeal concerned a large addition made under Section 56(2)(vii)(b)(ii) of the Income-tax Act for purchase of land at values lower than stamp duty valuation.

Dispute Over Whether Land Was Stock-in-Trade or Capital Asset

The Assessing Officer treated the difference between purchase price and stamp duty value of two land parcels at Bhisengaon, Karjat as taxable income, resulting in an addition of about ₹5.36 crore. The assessee argued that the land was agricultural in nature and held as stock-in-trade in the course of property business, and therefore outside the scope of Section 56 which applies to specified capital assets. Before the CIT(A), the assessee failed to produce books of account and supporting documents to establish the business character of the properties. On this evidentiary ground, the addition was sustained despite acceptance of the legal principle that stock-in-trade is generally excluded from Section 56.

Tribunal Grants Fresh Opportunity for Evidence

The ITAT noted that there was lack of effective representation before the lower authorities and that the substantial tax impact warranted one final opportunity. Without expressing any view on merits, the Tribunal set aside the appellate order and remanded the matter to the Assessing Officer. The AO was directed to re-examine the books of account, verify treatment of the land in financial statements, consider applicability of CBDT Circular No. 1/2011 and relevant precedents, and pass a fresh order after granting reasonable opportunity of hearing.

The appeal was allowed for statistical purposes.