Case Law Details
Smt. Parvathamma Vs ITO (ITAT Bangalore)
Bangalore ITAT Restores Section 50C & Section 54F Issues; CIT(A) Cannot Dismiss Appeal for Non-Prosecution
The Bangalore ITAT held that the CIT(A) was not justified in dismissing an appeal merely for non-appearance of the assessee without examining the issues on merits. The Tribunal observed that the assessee had raised specific objections regarding the application of section 50C and denial of section 54F exemption, which required adjudication on merits.
The assessee had sold a property for ₹1.56 crore, whereas the Assessing Officer adopted the stamp duty value of ₹1.87 crore under section 50C. The Tribunal noted that the assessee had furnished a registered valuer’s report disputing the stamp duty valuation. Once such an objection was raised, the Assessing Officer ought to have followed the statutory procedure and referred the matter to the Departmental Valuation Officer (DVO) instead of mechanically adopting the stamp duty value.
On the claim under section 54F, the assessee contended that the sale proceeds had been invested in the purchase and construction of a new residential house within the prescribed period. The Tribunal noted the assessee’s reliance on the Karnataka High Court decision in CIT v. K. Ramachandra Rao (56 taxmann.com 163), which held that exemption cannot be denied merely because the amount was not deposited in the Capital Gains Account Scheme before the due date, if the investment was otherwise made within the stipulated period.
Considering that the assessee had furnished valuation reports and supporting documents before completion of assessment, the Tribunal restored both issues to the Assessing Officer for fresh adjudication. The AO was directed to examine the objection to section 50C valuation, consider reference to the valuation authorities as required by law, and reconsider the section 54F claim in the light of the Karnataka High Court judgment. The appeal was accordingly allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
Smt. Parvathamma, the Assessee/Appellant, filed ITA No. 2075/Bangalore/2025 for Assessment Year 2016–17 against the appellate order dated 29.07.2025 passed by the National Faceless Appeal Centre, Delhi [Ld. CIT(A)]. By that order, the Ld. CIT(A) dismissed the Assessee’s appeal against the assessment order dated 17.12.2018 passed under section 143(3) of the Income-tax Act, 1961, by the Income Tax Officer, Ward–2(2)(2), Bangalore.
2. The Ld.CIT(A) dismissed the Assessee’s appeal on the ground that, despite being granted six hearing opportunities by email, the Assessee did not respond. The Ld. CIT(A) therefore concluded that the Assessee did not intend to pursue the appeal and confirmed the action of the Ld. Assessing Officer.
3. Briefly stated, the Assessee, an individual, filed her return of income on 23.12.2016 declaring total income of Rs. 2,72,630/-. Her case was selected for limited scrutiny, and notices were issued requiring her to substantiate the computation of capital gains and her claim for deduction under section 54F of the Act.
4. In response to the notices, the Assessee furnished the sale deed, computation of income, bank statement, and property valuation.
5. On examining the documents, the Ld. Assessing Officer concluded that the property was undervalued and that section 50C of the Income-tax Act applied, as the stamp duty guidance value was Rs. 1,87,20,000/-, which exceeded the declared sale consideration of Rs. 1,56,30,000/-. The Assessing Officer further noted that the Assessee had not furnished documentary evidence showing completion of construction before the due date for filing the return, norhad she deposited the capital gain in the Capital Gains Account Scheme before that date. Accordingly, the capital gain was computed by adopting net sale consideration of Rs. 1,87,20,000/-, reducing it by the cost of acquisition of Rs. 19,834/- and the investment in the new property of Rs. 75,95,955/-. The assessment was completed by order dated 17.12.2018.
6. Aggrieved by the assessment order, the Assessee preferred an appeal before the Ld. CIT(A). In the statement of facts,she submitted that she had sold the property to M/s. Reddy Structures Private Limited on 01.12.2015 for Rs. 1,56,30,000/-. She further stated that, on 18.03.2016, she purchased a new residential property for Rs. 71,93,000/- and incurredstamp duty, registration charges, and related expenses, bringing the total cost to Rs. 76,68,265/-. Construction of the new residential house commenced in May 2016 and was completed in June 2017 at a total cost of Rs. 1,20,10,000/-. The Assessee filed her return of income on 23.12.2016 claiming deduction under section 54F of the Act, and she began residing in the newly constructed house on 05.06.2017. She also contended that, although the property was sold for Rs. 1,56,30,000/-under the saledeed dated 01.12.2015, the Ld. Assessing Officer invoked section 50C of the Act by adopting the stamp duty value of Rs. 1,87,20,000/- and rejected her claim for exemption/deduction under section 54F amounting to Rs. 75,95,955/-. The Assessee challenged the applicability of section 50C and submitted bank account details before the Ld.Assessing Officer to demonstrate the commencement and completion of construction of the house property.
7. Relying on 118 ITR 461, the Ld. CIT(A) held that the Assessee was not interested in pursuing the appeal and dismissed it for non-prosecution, without assigning reasons on the merits.
8. The Assessee is in appeal before us and has filed a paper book comprising 54 pages. On the applicability of section 50C of the Act, the Assessee submitted that a valuation report dated 16.11.2018 had been furnished, indicating the fair market value of the property; therefore, the applicability of section 50C was disputed before the Ld. Assessing Officer. Regarding the claim for deduction under section 54F of the Act, it was submitted that the Assessee had utilized the amount for constructing a residential house on a site owned by her within one year from the date of transfer. It was further contended that the issue is squarely covered in the Assessee’s favour by the decision of the Hon’ble Karnataka High Court in CIT v. K. Ramachandra Rao, 56 taxmann.com 163, and that, applying the said decision to the present facts, the Assessee is entitled to the full deduction claimed under section 54F of the Act.
9. The Ld. Departmental Representative strongly stated that the Assessee had not appeared before Ld. CIT(A), who dismissed the appeal for non-prosecution. It was further concluded that the Assessee had not furnished any documentary evidence before the Ld. Assessing Officer, and therefore her claim could not be considered at this stage.
10. We have considered the rival contentions and perused the orders of the lower authorities. In paragraph 1 of the assessment order, relating to undervaluation of the property, the Ld. Assessing Officer adopted sale consideration of Rs. 1,87,20,000/-, though the Assessee had declared a different sale consideration. Since the Assessee had furnished a registered valuer’s report and disputed the adoption of stamp duty value as deemed sale consideration under section 50C of the Act, the Assessing Officer ought to have followed the prescribed procedure, including reference to the DVO. However, no questions were put to the Assessee on these issues. As regards the deduction claimed under section 54F of the Act, the Assessee submitted that all relevant details had been furnished before the Ld. Assessing Officer through communication dated 05.10.2018 uploaded on the e-filing portal, a copy of which is placed at pages 12–13 of the paper book. The Assessee also stated in her response dated 14.11.2018 that the building valuation report would be submitted within five days and thereafter filed the property valuation report on 19.11.2018. Thus, it is evident that the Assessee had objected to the valuation under section 50C before the Ld. Assessing Officer himself. The proper course for the Assessing Officer was therefore to refer the matter to the Valuation Cell for determining the value of the property as on the date of sale.
Further, the Assessee’s claim under section 54F is stated to be covered by the decision of the Hon’ble Karnataka High Court, which holds that the benefit may be available even where the amount was not deposited in the Capital Gains Account Scheme before the due date for filing the return of income.
11. The Ld. CIT(A) was not justified in dismissing the Assessee’s appeal for non-prosecution; he ought to have decided it on merits, particularly when the statement of facts contained the relevant details. Since the Assessee had objected to the valuation and furnished details in support of the claim under section 54F of the Act, the issue is restored to the file of the Ld. Assessing Officer for fresh consideration.
12. In view of the above facts, the matter is restored to the file of the Ld. Assessing Officer with a direction to consider the Assessee’s objection supported by the valuation report filed on 19.11.2018, particularly as the assessment order was passed thereafter on 17.12.2018. The Ld. Assessing Officer shall also reconsider the Assessee’s claim for deduction under section 54F of the Act in accordance with the decision of the Hon’ble Karnataka High Court referred to above.
13. Accordingly, the Assessee’s appeal is allowed for statistical purposes.
Order pronounced in the open court on 18th June 2026.
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