Sanjeev Kumar Kathuria Vs ITO (ITAT Chandigarh)
The dispute in Sanjeev Kumar Kathuria vs ITO (ITAT Chandigarh, order dated 27 February 2025) concerned the determination of the cost of acquisition for computing long-term capital gains (LTCG) on the sale of a residential property. The assessee had sold a property in Assessment Year 2018–19 which had originally been purchased by his father in June 1996. The property was later transferred to the assessee by way of a registered gift deed dated 8 October 2009.
During the assessment, the assessee computed the indexed cost of acquisition by adopting the Fair Market Value (FMV) as on 1 April 2001, in accordance with section 55(1)(b)(2)(ii) of the Income Tax Act, 1961. The Assessing Officer (AO) accepted this computation.
Subsequently, the Principal Commissioner of Income Tax (PCIT) issued a show-cause notice under section 263 of the Act, holding that the AO had not properly examined the computation of indexed cost. According to the PCIT, the assessee’s valuer had manipulated FMV calculations to reduce LTCG liability, and instead, the value adopted for stamp duty purposes in 2009 at the time of gift deed registration should have been taken.
The PCIT relied on a 2017 Land & Development Office (LDO) Delhi circular prescribing land rates and further contended that the valuation report was defective. She thus invoked section 263, holding the AO’s order to be erroneous and prejudicial to the interests of the Revenue.
