Case Law Details
New India Cooperative Housing Society Ltd. Vs ITO (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai dismissed the assessee’s appeal and upheld the applicability of Section 50C of the Income-tax Act, 1961 in relation to the transfer of land by a cooperative housing society. The Tribunal also upheld the jurisdiction exercised by the Principal Commissioner of Income Tax (PCIT) under Section 263 while directing the Assessing Officer (AO) to provide the assessee an opportunity to raise objections regarding the valuation adopted for the property and to refer the matter to the Departmental Valuation Officer (DVO), if required, for determining the value to be adopted for computing capital gains.
The assessee, a cooperative housing society, was one of fourteen co-owners of a parcel of land. Upon transfer of the land, the assessee received its proportionate share of the sale consideration and filed its return declaring nil income after claiming deduction under Section 80P. The assessment was reopened under Section 147, and the Assessing Officer assessed long-term capital gains based on the consideration received by the assessee. Subsequently, the PCIT invoked revisionary jurisdiction under Section 263, holding that the Assessing Officer had failed to apply the mandatory provisions of Section 50C despite the stamp duty valuation being substantially higher than the declared sale consideration. A fresh assessment was thereafter completed by applying Section 50C. The CIT(A) upheld the addition while directing the Assessing Officer to determine the correct valuation of the property and apply the appropriate rate of tax on long-term capital gains.
Before the Tribunal, the assessee argued that the reassessment order had merged with the earlier appellate order, rendering the proceedings under Section 263 invalid. It also contended that Section 50C was inapplicable as the property had been transferred pursuant to a compulsory acquisition for a public purpose and further submitted that similar issues were pending before the jurisdictional High Court. The Revenue, on the other hand, argued that Section 50C contained no exemption based on the nature of the transferee and that the PCIT had rightly exercised revisionary jurisdiction because the Assessing Officer had omitted to apply the mandatory deeming provision.
The Tribunal observed that the reassessment proceedings had dealt only with the determination of the cost of acquisition and had not examined the applicability of Section 50C. Since the issue of Section 50C had neither been considered by the Assessing Officer nor formed the subject matter of the earlier appellate proceedings, the doctrine of merger did not prevent the PCIT from exercising powers under Section 263. Relying on its earlier decisions involving other cooperative housing societies arising from the same transaction, the Tribunal held that the doctrine of partial merger applied and that the Commissioner was empowered to revise matters not considered or decided in appeal.
The Tribunal further held that Section 50C is a mandatory deeming provision applicable where land or building is transferred for consideration lower than the value adopted by the stamp valuation authority. The provision does not create any exception based on the status or nature of the transferee, including transfers to government authorities, provided the statutory conditions are satisfied. Accordingly, the Tribunal found no infirmity in the CIT(A)’s conclusion that Section 50C applied to the transaction.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal is filed by the assessee, challenging the order of the Learned Commissioner of Income Tax (Appeals) [‘Ld. CIT(A)’ for short], National Faceless Appeal Centre (“NFAC” for short), passed u/s. 250 of the Income Tax Act, 1961 (‘the Act’), pertaining to the Assessment Year (‘A.Y.’ for short) 2004-05.
2. The assessee has raised the following grounds of appeal:
“1. The Commissioner of Income-tax – 21, Mumbai (hereinafter referred to as the CIT) erred in issuing the notice dated 13.03.2014 under section 263 of the Act and framing the order dated 24.03.2014 under section 263 of the Act setting aside the assessment order dated 20.12.2011 framed under section 143(3) r.w.s. 147.
2. The National Faceless Appeal Center (hereinafter referred to as the CIT(A)) erred in upholding the action of the Income-tax Officer 25(3)(5), Mumbai (hereinafter referred to as the Assessing Officer) in invoking the provisions of section 50C of the Act and considering the sale consideration at Rs.72,49,435, being 6.1% of the total value of Rs.11,88,43,200, being the adopted by the authority of the State Government for the purpose of payment of stamp duty instead of Rs.4,52,486, being the proportionate share of the appellants on transfer of property under reference.”
3. Brief facts of the case are that the assessee is a cooperative housing society and owned common properties along with 13 other cooperative housing societies vide a conveyance executed in favour of the assessee and the other cooperative housing societies by Bombay Housing Board where the assessee was owner of 6.1% of the common property being land admeasuring 6567.6 sq. mtr. bearing plot NO.4A/7 and CTS No.194A/2 situated in JVPD Scheme at East West Road No.3, Village – Juhu, Taluk – Andheri. The assessee has sold the said land along with other cooperative societies to Vasundhara Cooperative Housing Society Ltd. which belongs to Maharashtra Cadre of IPS and received a consideration of Rs.74,14,920/- as per registered agreement dated 14.05.2003 and after deducting expenses incurred on development and maintenance of the plot an amount of Rs.74,17,895/- was credited in the ratio of ownership rights of 14 society members in their books of accounts. The assessee being one of the co-owners received a share of Rs.4,52,486/-. The assessee filed its return of income dated 24.09.2004 declaring total income at “Rs.Nil” after claiming deduction u/s 80P of the Act amounting to Rs.3,55,622/-for the year under consideration. The assessee’s case was reopened u/s 147 of the Act for the reason that the assessee has not declared Rs.4,52,486/- in its return of income. The Learned Assessing Officer (“Ld. AO” for short) passed the assessment order u/s 143(3) r.w.s 148 of the Act dated 20.12.2011 determining the total income at Rs.4,52,486/- after making an addition towards Long Term Capital Gains (“LTCG” for short) on the said amount received as consideration, against which the assessee was in appeal before the first appellate authority who vide order dated 31.12.2013 had partly allowed the assessee’s appeal filed by the assessee with the direction to the Ld. AO to determine fair market value as on 01.04.1981 after duly giving benefit of indexation and to determine the capital gain or loss accordingly. The assessee contends that the Ld. AO has not passed the order giving effect of the Ld. CIT(A). In the interim, the Ld. PCIT issued notice u/s 263 of the Act dated 13.03.2014 and vide order dated 24.03.2014 set aside the assessment order dated 20.12.2017 as being erroneous and prejudicial to the interest of the Revenue for the reason that the Ld. AO has failed to invoke the provision of section 50C of the Act, according to which there is a huge difference in the valuation amounting to Rs.11,88,43,200/- as determined by the Stamp Duty Authorities against the total consideration of Rs.77,14,920/-. The Ld. AO passed the assessment order dated 23.02.2015 u/s 143(3) r.w.s. 263 of the Act determining total income at Rs.64,35,650/- after computing capital gain at Rs.72,49,435/- reduced by the indexation cost of acquisition amounting to Rs.8,13,820/-.
4. Aggrieved, the assessee was in appeal before the first appellate authority who vide order dated 05.12.2024 upheld the addition made by the Ld. AO with the direction to determine the valuation of the property and to adopt the applicable rate of taxation on LTCG.
5. Aggrieved, the assessee is in appeal before us, challenging the impugned order of the Ld. CIT(A).
6. The Learned Authorized Representative (“Ld. AR” for short) for the assessee contended that the assessment order dated 20.12.2011 is non-existent after the passing of the Ld. CIT(A) order dated 31.12.2013 as per the principles of doctrine of merger of the appellate order. The Ld. AR further argued that the impugned notice u/s 263 of the Act dated 13.03.2014 of the Act was bad in law for the reason that the assessee has filed an appeal against the reassessment order and hence the subsequent order u/s 263 of the Act and the consequential reassessment order is bad in law. The Ld. AR raised another contention that section 50C of the Act is not applicable in assessee’s case where it is a compulsory acquisition of property by the government authorities for which no capital gain would arise on such sale and relied on the decision of the Hon’ble Apex Court in the case of BC Srinivasa Shetty 1981 AIR 972. The Ld. AR without prejudice stated that the provision to section 50C(1) of the Act would be applicable in the present case. Further, the Ld. AR brought to our attention, that in the case of other cooperative housing societies identical issue on whether section 50C of the Act would be applicable for property earmarked for public purpose in the development plan and whether the Ld. PCIT was right in invoking the revisionary jurisdiction u/s 263 of the Act as per Explanation 1(c) of the Act said provision, was pending before the Hon’ble Jurisdictional High Court and reason which the addition ought not to be made in the hands of the assessee society. The Ld. AR also challenged the reassessment proceeding as being bad in law and relied on the decision of the Tribunal in the cases of Westlife Development Ltd. vs. PCIT (2017) 88 taxmann.com 439 (Mumbai) and Shobhit Goel (HUF) vs. PCIT in ITA No.2611/Del/2024 decided on 27.02.2025 where it was held that the primary proceeding can be challenged in the collectoral proceeding u/s 263 of the Act. The Ld. AR also relied on a catena of decisions in support of his contention that provision of section 50C of the Act would not be applicable in the present case.
7. The Learned Departmental Representative (“Ld. D.R.” for short), on the other hand, controverted the said fact and contended that the Ld. PCIT had rightly invoked the revisionary jurisdiction in the assessee’s case where the assessment order was held to be erroneous in so far as it is prejudicial to the interest of the Revenue for not invoking section 50C of the Act for the purpose of determining capital gain. The Ld. DR further contended that there is no exemption provided in section 50C of the Act as claimed by the assessee and in that case the stamp duty determined by the Stamp Valuation Authority should be held as the actual value of the consideration as per section 50C of the Act. The Ld. DR relied on the order of the lower authorities.
8. We have heard the rival submissions and perused the materials available on record. It is observed that the reassessment order was with regard to the ascertaining the cost of acquisition of the property against which the assessee preferred an appeal before the Ld. CIT(A). Whereas the issue related to the revisionary proceeding was solely with regard to invoking of section 50C of the Act which was not the subject matter before the Ld. AO nor before the Ld. CIT(A) in the reassessment proceeding. It is also not disputed that the Ld. AO made an addition on LTCG only with regard to the dispute as to the cost of acquisition where the assessee’s claim was that it had received a total consideration of Rs.4,52,486/-out of the total sale consideration received on transferring the plot of land, the assessee’s share being 6.10% and that the registered valuer’s report FMV as on 01.04.1981 was Rs.28,81,500/- and the proportionate value for the assessee’s 6.10% share worked out to Rs.1,75,772/- where the assessee’s share of cost value with indexation worked out to be Rs.8,13,820/- resulting in a capital loss of Rs.3,61,334/- as per the assessee’s contention. The Ld. AO rejected the assessee’s computation stating that the assessee has not furnished any evidence as to the cost of acquisition supported with any documentary evidences thereby determining the LTCG to be Rs.4,52,486/-. This clearly indicates that the issue of invoking section 50C of the Act being a deeming provision which is mandatory, where there is a transfer of land or building being a capital asset for a consideration lower than the stamp duty value in which case the value determined by the Stamp Duty Authority shall be deemed to be the full value of consideration for the purpose of computing capital gain u/s 48 of the Act, was not dealt with by the Ld. AO during the reassessment proceeding. Hence, there is no iota of doubt that the Ld. AO during the reassessment proceeding has neither enquired nor decided this issue and neither was the same a subject matter before the appellate authority against the reassessment order. Hence, the jurisdiction of Ld. PCIT in invoking the revisionary powers u/s 263 of the Act is well within the provisions of law and the same cannot be faulted with. We, therefore, reject the assessee’s contention of challenging the jurisdiction of Ld. PCIT invoking section 263 of the Act and also the consequential assessment order passed by the Ld. AO and upheld by the Ld. CIT(A), though the same is not a matter of dispute directly before us. Pertinently, the co-ordinate Bench of the Tribunal in the case of the other cooperative housing societies’ cases have decided this issue against the assessee on the same transaction without any change in facts and circumstances. We deem it necessary to cite the relevant extract of the decision of the Tribunal in the case of Vithal Nagar Co-Operative Housing Society Ltd. vs. Commissioner of Income-tax [2017] 88 taxmann.com 890 (Mumbai) herein under for ease of reference:
“3.20. From the above analysis it is noted that Hon’ble Allahabad High Court took note of judgment of Hon’ble Bombay High Court in the case of CIT v. Ratilal Bacharilal & Sons, [2006] 153 Taxman 86/282 ITR 457 wherein it was held that ‘Doctrine of Merger’ could not have been applied by the Tribunal to that part of the order which was not a subject matter of appeal so as to exclude revisional jurisdiction of the Commissioner of Income Tax under section 263 of the Act. In the given facts of the said case, it was held that since at no stage the issue whether assessee was entitled to claim exemption u/s 10B at all or not, was subject matter of consideration before the appellate authorities, therefore, this question was open to be looked into by the Commissioner, because it is only on the question of “quantum of profit” upon which exemption was claimed, an appeal was filed and only to that extent allowbility of exemption u/s 10B was subject matter of appeal and NOT in its entirety. On the similar lines, judgment relied upon by Ld. Counsel in the case of CIT v. Forteleza Developers [2015] 374 ITR 510/61 taxmann.com 181 (Bom.) is not applicable on the facts of the case before us. In the said case also, issue involved before the AO as well as Ld. CIT(A) was computation of amount of deduction allowable u/s 80IB. Hon’ble High Court primarily and substantially decided the case in favour of the said assessee on merits of the issue. It was observed by Hon’ble High Court that the AO had examined all the conditions prescribed under the law before allowing deduction u/s 80IB(10) and that view was taken by the AO after deliberations and that interpretation placed by the assessee was correct on facts and law. It was briefly observed while concluding the judgment in addition to the above observations that order passed u/s 263 was held to be invalid applying doctrine of merger for the reason that all the facets of the deduction u/s 80IB were under consideration before the AO/CIT(A) and that is why order of AO had merged into order of CIT(A). But, in the case before us, issue of section was 50C was not touched by any of the authorities.
3.21. Turning back to the facts of the case before us, it is noted that AO had touched the issue of computation of capital gains with respect to ascertaining the cost of acquisition of the plot of land sold by the assessee on which capital gain was assessed by the AO, against which the assessee preferred an appeal before the concerned CIT(A) and thus, only this issue i.e. ascertaining the correct amount of cost of acquisition, was subject matter of appeal before the CIT(A). The AO did not touch at all the applicability of mandatory provisions of section 50C nor was so done by the CIT(A). Thus, mandatory provisions of section 50C were not subject matter of appeal before the CIT(A). It is noted by us that provisions of section 50C are deeming provisions and stand on an independent basis de-horse the aspect of determination of cost of acquisition, also because determination of sales consideration, in accordance with the provisions of the statute, is a distinct exercise.
Under these circumstances, it would be too far to stretch the argument based upon an imagination that since cost of acquisition has been determined by the AO, and then it should be presumed that AO has determined the sales consideration also in accordance with law. No such exercise was shown to have been done by the AO. The records also did not indicate any such exercise having been done by the AO. Under these circumstances, there could not have been any appeal on this aspect before the CIT(A). The CIT(A) had also not touched the issue of application of section 50C. In our opinion, according to the ‘Doctrine of Merger’, judgments of lower courts merge into judgments of higher court and after the merger there remains no judgment of the lower courts and therefore, obviously and admittedly, there can be no revision of the judgment which does not even exist. However, in tax statutes like Income-tax Act, 1961, the legislature has not thought it fit to apply ‘Doctrine of Merger’, but ‘Doctrine of Partial Merger’ has been adopted. Thus, once the issue of merger is governed by the provisions of the statute, then, obviously under the income tax proceedings it is the statute which shall prevail over general ‘Doctrine of Merger’. The ‘Doctrine of Partial Merger’ would apply for the purpose of section 263 of the Act, to the extent as explained under the relevant provisions contained in clause (c) of explanation 1 of section 263(1) of the Income-tax Act 1961. This provision has already been discussed in earlier part of our order which clearly provide that powers of the Commissioner under this section shall extend to such matters as had not been considered and decided in the appeal. Thus, going by common sense approach as well as cardinal principles of law as well as judgments of various courts if applied on the facts of this case, clearly suggest that the CIT had requisite powers and jurisdiction u/s 263 to examine the application of provisions of section 50C which were omitted to be applied by the AO and therefore, the argument of the assessee with regard to the ‘Doctrine of Merger’ fails in the given facts of this case.
3.22. It was also argued by the Ld. Counsel that in the appeal proceedings of JVPD Association i.e. M/s JVPD Co-operative Housing Association Ltd. (which was formed by these 14 societies to take care of maintenance of the plot), the concerned CIT(A) had given observations about the non applicability of provisions of section 50C upon the impugned transaction and thus, it could be said that these facts were there before the AO when the impugned assessment order in the case of assessee was passed. In this regard, it is noted by us that in the appeal filed by the Revenue against the order passed by the CIT(A) in the case of JVPD Association, the reasoning of the CIT(A) about non-applicability of provisions of section 50C has not been expressly approved by the Tribunal. In fact this issue was not touched by the Tribunal. The Tribunal had held that JVPD Association was not owner of the plot and therefore, there was no question of assessing the capital gain in the hands of JVPD Association. Further, once it was held that JVPD Association was not owner of the plot, then whatever observations were given by the CIT(A) in the case of JVPD Association, that would have no bearing in the hands of present assessee who is admittedly legal owner of the impugned plot of land. Even otherwise, the order passed by the CIT(A) in the case of JVPD Association is not part of the proceedings before the AO who had passed the impugned assessment order. Further, there is nothing on record to show that the Assessing Officer while passing the impugned assessment order had applied his mind and took conscious decision for not applying the provisions of section 50C and that too by relying upon the order of the CIT(A) of JVPD Association. Therefore, under these circumstances, the jurisdiction of CIT in exercising its power u/s 263 is not excluded from examining the applicability of provisions of section 50C in the hands of present assessee.
3.23. Now, we shall deal with other arguments of the assessee with regard to its objections about applicability of provisions of section 50C and more specifically about substitution of amount of sales consideration with the value adopted by the stamp valuation authority for effecting the transfer of impugned plot of land. The objections of the assessee in this regard are twofold. The primary objection of the assessee is that the provisions of section 50C could not have been applied in the year under consideration, since the transaction had already taken place and the second objection is that value adopted by the stamp valuation authority at the time of registration of the conveyance deed could not have been adopted in the year under consideration.
3.24. We have considered all the objections very carefully. It has been contended that impugned plot was not in the exclusive possession of the assessee and that the assessee was not enjoying the usage of the plot for its own purposes for the reasons that its possession was handed over to the Public Works and Housing Department, Government of Maharashtra on 29th of July, 1975. In this regard, it is observed by us that it is admitted case of the assessee that the assessee, along with other 13 society members was legal owner of the said plot of land; title of the said plot was very much held by the assessee and that’s why the assessee had legally entered into an agreement/memorandum of understanding dated 25.01.2000 with the association of officers of Indian Police Services for transfer of impugned plot of land. It is in pursuance of the said agreement/MOU, that the assessee was able to execute a conveyance deed during the year under consideration on 14th May, 2003 for effecting transfer of the legal title of ownership in favour of M/s. Vasundhara C.H.S. Ltd. (i.e. Society of Indian Police Service officers of Maharashtra Cadre). The issue with regard to the dispute in the ownership and assessment of capital gain arose in the hands of JVPD Association i.e. M/s JVPD Co-operative Housing Association Ltd. (which was formed by these 14 societies to take care of maintenance of the plot). The AO of JVPD Association had assessed the resultant capital gain in the hands of JVPD Association by treating it as owner of plot. The issue had reached up to the Tribunal and the Tribunal did not approve action of the Revenue and held that said JVPD Association was not the owner and these 14 societies were coowners of the plot. Relevant part of the observations of the Tribunal contained in its order dated 4th November, 2010 in ITA No.3132/M/2009 is reproduced as under:
“On appeal, the CIT(A) noticed that conveyance deed was executed between the proposed society of the Police Officers and the 14 society members on 14.05.2003 for a total consideration of Rs. 77,14,920/-and that the 14 members societies agreed to deposit the sale consideration with the assessee in proportion to their ownership in the plot. The amount was so deposited with the assessee society which after deducting the expenses incurred on development and maintenance of the plot credited the balance of Rs. 74,17,895/- in the ratio of the ownership rights to the accounts of the 14 societies members in its books of account. The CIT(A) further found that the memorandum of understanding had been entered into between the 14 members societies and the proposed Vasundhara Co-operative Housing Society and finally conveyance deed was executed on 14.05.2003. On these facts, he held that the Assessing Officer was right in considering the net sale proceeds of Rs. 74,17,895/- for the purpose of working out the capital gains, but held that if the 1.4.1981 value was adopted as the cost of acquisition in terms of section 48, and indexation benefit is also allowed, there would be net capital loss of Rs. 57,65,385/-. In this view of the matter, he deleted the addition of capital gains on protective basis in the assessment of the assessee.
5. The revenue is in appeal to contend that the assessee is practically the owner of the plot and since the monies are still lying with it, not having been handed over to the 14 societies, the Assessing Officer was right in holding that the assessee should be protectively assessed in respect of the capital gains. On the other hand, the learned counsel for the assessee submitted that the assessee was merely holding possession of the plot, that it was not the owner of the plot and there was no transfer of the plot by the assessee and therefore there was no question of any capital gains being assessed in the hands of the assessee on protective basis.
6. On a careful consideration of the facts and the rival contentions, we are inclined to uphold the decision of the CIT(A). It is not the case of the department that the assessee was the owner of the plot and therefore it should be assessed to capital gains. There is no dispute that the plot was owned by 14 different cooperative housing societies in specific shares and that the assessee was merely put in possession of the plot for the purpose of common management. The plot was originally allotted to the 14 co-operative housing societies by the Bombay Housing Board under an indenture dated 26.04.1960 (pages 47 to 74 of the paper book) and in the light of this indenture it cannot be said that the assessee became the owner of the plot. The byelaws of the assessee society, a copy of which is placed at pages 105 to 112 of the paper book, shows that the 14 cooperative housing societies were holding the residential plot, which was part of the land in JVPD scheme. The proportionate share of these societies in the property and their liability to pay the cost of development of the property is also mentioned in the byelaws. There is no document to which our attention was drawn on behalf of the department transferring the ownership of the plot to the assessee society. The finding of the CIT(A) which is not challenged before us is that the conveyance deed was executed by the 14 societies members on 14.5.2003 in favour of Vasundhara Co-operative Housing Society Ltd. formed by the Maharashtra Cadre of IPS. Earlier to this conveyance, there was a memorandum of understanding entered into between these parties on 26.1.2000, a copy of which is at pages 75 to 104 of the paper book. A perusal of the memorandum of understanding shows that it was executed between the 14 cooperative housing societies, the assessee and the promoters of Vasundhara Cooperative Housing Society Ltd. Clause (iii) of the preamble states that the society was formed by the 14 societies and registered under the Maharashtra Co-operative Societies Act to take possession of the property from the managing committees of the 14 cooperative housing societies and to hold and utilise the property for providing suitable utilities and amenities such as play ground, schools, colleges etc. and to do all such acts and things as are of common interest to the 14 societies. The memorandum of understanding does not show the assessee as a owner of the property. Capital gains can arise to a person only if he owns the plot and transfers the same for consideration. The assessee not being the owner of the plot but merely holding possession thereof on behalf of the 14 cooperative societies and managing the same for the common benefit of the member societies cannot be considered as the owner of the property in order to bring the sale price to tax in its hands as capital gains. This is also supported by the accounting entries which show that the respective shares of the 14 housing societies in the sale consideration, after deducting the common expenses, has been divided in proportion to their respective shares in the property and credited to their accounts and shown as deposits in the assessee’s balance sheet. In the absence of any transfer by the assessee, no capital gains can be assessed in its hands even on protective basis.
7. We thus affirm the decision of the CIT(A) but for different reasons and dismiss the appeal filed by the revenue with no order as to costs.
3.25. Thus, it is noted from the observations of the Tribunal that impugned plot of land was owned by these 14 society members (present assessee being one of them) with specific shares and said JVPD Association was formed merely for the purpose of common management of the subject property. Subsequently, after the order of the Tribunal, the respective assessing officers of these 14 societies reopened the assessment in the hands of these societies after recording the ‘Reasons’ that the assessee had effected the transfer of the impugned plot of land in A.Y. 2004-05 and therefore, resultant capital gain was to be assessed as income under the head of capital gains in the impugned assessment year. It is noted that during the course of reassessment proceedings, though the assessee filed detailed replies raising objection about the adoption of cost of acquisition at nil, but no objection was raised with regard to the fact that plot was owned by the assessee and its transfer of title of legal ownership has been effected during the year under consideration and consequently the capital gain was liable to be assessed in the year under consideration. Further, when the appeal was filed before the CIT(A), there also no such dispute was raised. The dispute was confined to ascertaining the correct amount of cost of acquisition. Thus, the issue of ownership of the plot, its transfer during the year under consideration and assessability of the capital gain in the hands of assessee in the year under consideration had attained finality and became fait accompli. This issue was no more res-integra. Under these circumstances, the only dispute that could have been raised was with regard to the various aspects related to adoption of correct amount of sales consideration, cost of acquisition of plot and determining the correct amount of capital gain to be taxed in the hands of the assessee.
3.26. It is noted that provisions of section 50C are deeming provisions and mandatory in nature. The application of such provisions is made by operation of law. Exception to these provisions can be made only in accordance with law, as provided in section 50C only. It is noted that AO did not raise any query with regard to application of section 50C, as has been fairly admitted by both the parties during the course of hearing. Under these circumstances, the AO committed a mistake of law and thus, it rendered the order of the AO as erroneous and since non application of section 50C would also amount to under assessment of income and tax payable thereon, therefore, it was prejudicial to the interest of revenue. Thus, in the given facts of the case, it can be undoubtedly said that the impugned assessment order was erroneous and prejudicial to the interest of revenue.
3.27. Further, various objections have been raised by the assessee with regard to the value to be adopted for the purpose of section 50C. In our opinion, these objections are to be examined in the light of merits of the objections and keeping in view of facts of this case and law applicable in this regard. But that exercise can be done only when the impugned transaction is examined through the prism of mandatory provisions of section 50C. It is also worth noting that the case of the assessee did not fall in any of the exception also.
3.28. The assessee had relied upon in this regard upon the judgment of Hon’ble Allahabad High Court in the case of Shimbhu Mehra (supra) in its support. We have gone through the said judgment and find that in the said case, the said assessee had disputed the factum of transfer of the property in the year under consideration. Therefore, the applicability of provisions of section 50C was challenged in the year under dispute. On the other hand, the facts of the case before us are that ‘year’ of the transfer of the plot and taxability of the resultant capital gain has been admittedly to be the year under consideration and issue on that aspect has already been settled as was discussed by us in the earlier part of the order.
3.29. It is further noted by us that the assessee is having few objections with regard to value to be adopted viz the stamp value at the date of aforesaid MOU shall be taken or stamp value as on the date of conveyance deed shall be adopted and one more objection that since the plot was received for police quarters, therefore, it is FMV cannot be taken as per free market value and only discounted value could have been taken as its FMV. We agree with the assessee on this aspect to this extent that these objections need to be dealt with as per law before finally adopting appropriate value u/s 50C. But, as stated by us earlier also that all these objections or any other objection with regard to the manner in which section 50C has to be applied can be dealt with in accordance with law and procedure as has been laid down u/s 50C itself. But that would be possible only when the provisions of section 50C are applied and the impugned transaction is tested through the prism of these provisions. Under these circumstances, we uphold the revision order passed by the CIT order u/s 263 with the liberty to the assessee to raise these objections on the manner and procedure of application of section 50C following due procedure prescribed u/s 50C. In case assessment order has already been passed, then assessee may file these objections before the CIT(A), which shall be duly considered by him and a remand report shall be called from the AO if considered appropriate by the CIT(A), so as to meet principles of nature justice while following the mandate of the law. We direct accordingly. With these directions the order passed by the CIT is upheld and the appeal of the assessee is dismissed.
Now we shall take up ITA No.2363 (Mum.) 2014 in the case Jai Hind Co. Operative Housing Society Ltd. of Assessment Year: 2004-05
4. In this case ground No.1 was not pressed by the Ld. Counsel during course of hearing and therefore same is dismissed.
5. The remaining grounds are identical to ITA No.3656 (Mum.) 2014; no distinction has been made out in facts or in the legal position by either party, therefore, we uphold the order of the CIT u/s 263 and dismiss the appeal of the assessee with the same directions as have been given in ITA No.3656 (Mum.) 2014. The lower authorities are directed to follow our directions given in ITA No.3656 (Mum.) 2014.
Other appeals in ITA No.3881 (Mum.) 2014, ITA No.3882 (Mum.) 2014, ITA No.3883 (Mum.) 2014, ITA No.3657 (Mum.) 2014, ITA No.3658 (Mum.) 2014, ITA No.3655 (Mum.) 2014 & ITA No.3659 (Mum.) 2014.
6. In these appeals, it was informed to us that grounds are identical. No distinction has been made on facts or law, therefore, the lower authorities are directed to follow our direction as given in ITA No.3656 (Mum.) 2014. Accordingly, these appeals are dismissed and the order passed by the Ld. CIT is upheld with the directions as given above.”
9. On the above observation, it is evident that all the issues urged by the assessee in the present case have already been dealt with by the Tribunal in the other assessees’ cases on identical facts and on the same transaction and has held this issue against the assessee. It can be inferred that there is no embargo provided in the statute u/s 50C of the Act which restricts its applicability even when the land is transferred to a government authority provided the basic conditions of the provisions are met. Further, the provision nowhere restricts its operation by reference to the status or nature of the transferee but merely takes into consideration the asset, the transfer and the resultant stamp duty valuation. Also section 50C of the Act enumerates that, when there is a transfer by an assessee of a capital asset being land or building or both which is held as a capital asset and not stock in trade which is dealt in section 43CA of the Act, section 50C of the Act would be applicable and the sale consideration declared by the assessee is said to be less than the value adopted/assessed/assessable by the Stamp Duty Authority for the purpose of determining the stamp duty then the stamp duty value becomes the “deemed” full value of consideration for section 48 of the Act and not the actual sale price. As this issue has already been settled by the decisions of the co-ordinate Benches, by respectfully following the same, we deem it fit to hold that there is no infirmity in the order of the Ld. CIT(A) in upholding the view that section 50C of the Act is applicable in the present case. Further, we direct the Ld. AO to provide opportunity to the assessee to raise objection, if any, with regard to the value adopted by the Ld. AO and refer the same to the Departmental Valuation Officer for determining the valuation of the property which would be deemed to be the full value of consideration for the purpose of computing capital gain. We also uphold the order of Ld. CIT(A) in directing the Ld. AO to adopt the correct rate of taxation on LTCG as per the provisions of law after duly considering all the contentions raised by the assessee.
10. In the result, the appeal filed by the assessee is hereby dismissed on the above terms.
Order pronounced in the open court on 15.05.2026
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