ITAT Mumbai rules against taxing single co-owner for full stamp duty value difference

A husband and a wife bought a flat jointly for Rs 60 lakh, however, the stamp duty value stood at Rs 94.8 lakh, leading to a difference of Rs 34.8 lakh. The amount was added to the husband's income alone by the tax office, despite him having a lower ownership in the property. ITAT Mumbai has delivered a ruling which could have significant takeaways for property owners.

Can one co-owner alone be made liable to pay tax on the difference between the property’s purchase price and stamp-duty value? ITAT Mumbai has delivered a significant ruling in a similar case, which could have significant takeaways for property owners, especially couples who jointly own a property.

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has said that just because a property is jointly owned with a spouse or another family member, it does not mean that one co-owner can entirely be made liable to pay tax on the difference.

ITAT Mumbai made the remarks while hearing the case of a Mumbai taxpayer who had bought a flat with his wife in Chembur in 2017 for Rs 60 lakh. In their case, the actual purchase consideration was Rs 60 lakh, while the stamp-duty value of the property stood at Rs 94.8 lakh, resulting in a difference of Rs 34.8 lakh.

Despite the property being jointly owned by the couple, the tax officer added the full Rs 34.8 lakh difference to the husband’s income because the wife’s case “escaped scrutiny”. The husband approached the tribunal against this order by the Commissioner of Income-tax in July 2025.

In 2017, the Mumbai man, along with his wife, had bought a property for Rs 60 lakh while the stamp duty value determined by the registering authority was Rs 94.81 lakh. As per the assessment proceedings initiated by the tax officer, the husband had filed the ITR for the year under consideration but did not offer the difference between the stamp duty value and the transaction value, i.e. Rs 34,81,500.

The tax officer said that this amount was liable to be charged to tax under Section 56(2)(x)(b) of the Income Tax Act.

Aggrieved by the order, the man filed an appeal before the tribunal, contending that he, along with his wife, jointly purchased the flat with an ownership ratio of 41.08% in his favour and 58.92% in the case of his wife (also the first named owner in the registered sale deed).

It was further submitted that the stamp duty value is generally decided after presuming that the occupation certificate (OC) and other necessary amenities are available in the area. However, the builder, in this case, did not obtain OC, and other basic amenities too were not available. So, fair market value of the property was lower.

The tribunal found that the tax officer was not justified in making the Rs 34.8 lakh addition in the hands of the husband alone, ignoring the fact that the property was jointly held by him with his wife having specific shares.

“Merely for the fact that no action was taken by the Department in the case of his wife for taxing the difference to the extent of her share, there could be no justification to add the entire difference in hands of the assessee (husband),” it said.

Moreover, the husband had also requested that the valuation be referred to a departmental valuation officer (DVO). Finding merit in this argument, the tribunal stated that once the stamp-duty valuation was specifically disputed and a valuation report had been furnished, the I-T officer ought to have referred the matter to the DVO.

The ITAT order underscores that where spouses jointly own a property in documented shares, each individual’s tax liability must be assessed separately and one owner cannot be taxed merely because the other was not examined, Ruby Singh Ahuja, Senior Partner and Advocate-on-Record at the Supreme Court at Karanjawala & Co, told ET Wealth Online.

With this, she suggested that joint purchasers should clearly record their ownership shares and contributions, preserve consistent payment, loan and tax records, and verify the title, approvals, Occupation Certificate, RERA and society records where applicable, outstanding dues and valuation evidence.

Kshitij Bishnoi, Partner at CMS Induslaw, explained that the property was jointly held in specified shares, and the Income Tax Department had simply not proceeded against the wife on hers. “The Commissioner took the view that taxing only the husband's 41.08% would leave Rs 20,51,300 unassessed, and that this was not an equitable outcome. In substance, that is an administrative convenience argument. But liability attaches to the person who received the property, to the extent that person received it.”

ITAT Mumbai set aside the appellate order and sent the matter back to the I-T officer for reconsideration. The husband shall be afforded a reasonable opportunity of being heard, it added.

However, this is a remand. The tribunal has sent the matter back to the Assessing Officer for fresh consideration and has not determined the taxable amount. What it settles is the approach the authorities were required to take and did not.

Sale Deed: Start with the sale deed. It should record each co-owner's share expressly rather than leaving it to be worked out later from bank statements. Each co-owner should then fund that share from their own account, in the ratio recorded.

“Where the money moves from one account, or moves between the co-owners first, you invite the argument that the recorded ratio is not the real one. TDS should be deducted separately, with each buyer filing their own Form 26QB in their own proportion,” Bishnoi advised.

Ready Reckoner Rate: Before signing, check the ready reckoner rate for the specific building, wing and floor, not the locality average. If the negotiated price sits well below it, you want to know that before execution rather than 3 years later.

Where there is a genuine reason for the gap, and there very often is in this market - no occupation certificate, amenities that were promised and never delivered, litigation, access problems - document it at the time.

Both co-owners should report the transaction consistently in their own returns, Bishnoi added further. The registering authority reports these transactions, and they flow into the Annual Information Statement, so any mismatch between two co-owners will surface on its own.