Case Law Details
Sivanand Madas Vs ITO (ITAT Hyderabad)
Adjustment u/s 50C not a Prima Facie Issue- 50C cannot override Title & Valuation Disputes- AO must refer to DVO
Assessee challenged addition of ₹20.81 crore made u/s 50C through processing of return u/s 143(1).
Assessee filed return declaring ₹11.49 crore. CPC processed the return & adopted the stamp duty valuation (₹42.67 crore) instead of actual sale consideration (₹21.86 crore), resulting in total income of ₹32.31 crore & tax demand of ₹6.08 crore. CIT(A) dismissed the appeal, holding that since the stamp duty valuation was under challenge before Telangana High Court, AO should revisit later as per outcome.
Before tribunal, Assessee argued that:
- Adjustment u/s 50C cannot be made in intimation u/s 143(1) since it is not a prima facie adjustment.
- Title of the property itself was disputed in civil litigation.
- Excessive stamp duty valuation was under challenge before High Court.
- Once FMV is disputed, AO must refer matter to DVO u/s 50C(2) instead of blindly adopting stamp value. Reliance was placed on Sunil Kumar Agarwal v. CIT (Cal HC, 373 ITR 82).
Revenue argued that CPC rightly adjusted since the difference was apparent from records & assessee had been given opportunity through intimation.
Tribunal held that:
- While CPC can make 143(1)(a) adjustments for apparent claims, disputes on FMV under s.50C are not mechanical issues.
- With ongoing civil suit on title & writ before Telangana High Court on valuation, adopting stamp duty value as deemed consideration was improper.
- AO was duty-bound to refer valuation to DVO once assessee disputed stamp duty value.
Accordingly, Tribunal set aside the orders & restored matter to AO for de novo consideration after taking into account court proceedings & by making statutory DVO reference if necessary. Thus, the appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal has been filed by the assessee against the Order dated 29.01.2025 of the learned Addl/Joint Commissioner of Income Tax (Appeals)-6, Delhi, relating to assessment year 2019-2020.
2. The assessee has raised the following grounds in the instant appeal :
1. “The order of the CIT(A)/NFAC is contrary to the provisions of law and therefore is bad in law.
2. The order of the CIT(A)/NFAC is erroneous on facts and in law.
3. The CIT(A)/NFAC erred in upholding the addition made u/s 50C of the Act by CPC.
4. The CIT(A)/NFAC erred in upholding the assessment of capital gains by adopting the SRO value of Rs.42,67,68,750 as deemed value of consideration overlooking the dispute on title.
5. The CIT(A)/NFAC erred in dismissing the appeal.
6. The CIT(A)/NFAC erred in upholding the assessment of income chargeable to tax u/h capital gains by CPC at Rs.31,92,84,693.
7. The CIT(A)/NFAC erred in upholding the assessment of total income by CPC at Rs.32,31,30,100.
8. The CIT(A)/NFAC erred upholding the demand of Rs.6,08,19,592 determined by CPC.
9. Any other grounds that may be urged at the time of hearing.”
3. Brief facts of the case are that, the assessee filed his return for the assessment year 2019-2020 on 24.10.2019 declaring total income of Rs.11,49,92,940/-. The return of income was processed u/sec.143(1) of the Income Tax Act, 1961 on 28.02.2020 and determined the total income of assessee at Rs.32,31,30,100/- by making addition of Rs.20,81,37,160/- under the Head “Income from Capital Gain” towards difference in sale consideration for sale of property and stamp duty value of the property as on the date of registration as per the provisions of sec.50(C) of the Income Tax Act, 1961.
4. The assessee challenged the addition made by the Assessing Officer towards computation of capital gain by considering deemed consideration as per the provisions of sec.50C before the learned CIT(A) and argued that, in the intimation issued u/sec.143(1)(a) of the Act, no adjustment can be made in terms of sec.50C because, the said issue is a debatable issue which requires deliberations on the facts and, therefore, cannot be considered as prima facie adjustment which could be made u/sec.143(1) of the Income Tax Act, 1961. The assessee had also challenged the addition made by the Assessing Officer towards difference in sale consideration as per the registered document and fair market value of the property as per stamp duty valuation as per the provisions of sec.50C of the Act in light of defects in title of the property and also pending litigation before the Court of Law in respect of title and also valuation of the property. The learned CIT(A) after considering the relevant submissions of the assessee and also taking note of relevant facts observed that, valuation adopted by the stamp valuation authority forms the basis of the addition, which is currently under challenge before the Hon’ble High Court of Telangana. The outcome of the writ petition will directly impact the determination of the property’s fair market value and the resulting computation of capital gains. In view of the pending litigation before the Hon’ble High Court, no interference with the order passed by the CPC is warranted at this stage. Accordingly, the appeal is dismissed for statistical purposes with a direction to the Assessing Officer to revisit the matter and take appropriate action in accordance with the decision of the Hon’ble High Court of Telangana as and when it is pronounced.
5. Aggrieved by the order of the learned CIT(A), the assessee is now, in appeal before the Tribunal.
6. CA, Aluru V Sai Sudha, Learned Counsel for the Assessee submitted that, the learned CIT(A) was erred in dismissing the appeal filed by the assessee for statistical purposes with a direction to the Assessing Officer to take appropriate action in accordance with the decision of the Hon’ble High Court of Telangana, even though, the CPC does not have power to make any adjustment towards deemed consideration as per provisions of sec.50C of the Act in the intimation issued u/sec.143(1) of the Act. Learned Counsel for the Assessee referring to the decision of ITAT, Mumbai Bench, Mumbai in the case of Prabha Anil Gandhi, Mumbai vs., ADIT-CPC, Bengaluru in ITA.No.1647/ Mum./2023, Order dated 25.10.2023 submitted that, the issue of consideration of deemed consideration as per the provisions of sec.50C of the Act is a disputed issue and the party has certain rights to object like request for referring the case to the DVO. Therefore, the CPC cannot make addition without giving proper opportunity to the assessee. Learned Counsel for the Assessee referring to the facts of the present case submitted that, although, the learned CPC has given an opportunity to the assessee as claimed by the learned CIT(A) in it’s order, but, the assessee could not notice the opportunity provided by the learned CPC and, therefore, could not respond to the notice issued by the Assessing Officer/CPC. Further, the issue of additions towards capital gains on the basis of deemed consideration as per the provisions of sec.50C is not a prima facie adjustment which can be made while processing the return of income. Further, the subject property transferred by the appellant is under litigation before various Courts including before the Hon’ble High Court for the State of Telangana by way of Writ Petition, which challenges the validity of value determined by the stamp duty authority for payment of stamp duty while registering the property. Since the Assessing Officer-CPC has made adjustment without considering the relevant facts, the addition made by the Assessing Officer-CPC towards capital gains cannot be sustained. Therefore, she submitted that, the addition made by the Assessing Officer should be deleted.
7. MS U Mini Chandran, learned CIT-DR for the Revenue, on the other hand, supporting the order of the learned CIT(A) submitted that, the case law relied upon by the Learned Counsel for the Assessee in the case of Prabha Anil Gandhi, Mumbai vs., ADIT-CPC, Bengaluru (supra), is distinguishable on facts because, in the above case, the findings of the Tribunal are that, in absence of any opportunity to the appellant, no adjustment can be made u/sec.50C of the Act in the intimation issued u/sec.143(1)(a) of the Income Tax Act, 1961. In the present case, going by the facts available on record including para-5 of the learned CIT(A)’s order, it is undisputedly clear that, the ADIT-CPC has issued communication dated 04.06.2020 proposing adjustment u/sec.143(1)(a) of the Act for substitution of the Sub-Registrar Office value in place of actual sale consideration received by the appellant. Further, whether the appellant has availed opportunity or not is not a question that can be considered, but, what is needs to be considered is as per the provisions of sec.143(1)(a) of the Act as amended by the Finance Act, 2016 w.e.f. 01.04.2017, the total income or loss shall be computed, after making the adjustment in respect of any arithmetical error in the return and an incorrect claim, if such incorrect claim is apparent from any information in the return, provided that, no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode. In the present case, the adjustment made by the Assessing Officer towards difference in consideration for transfer of property as per the provisions of sec.50C of the Act is an incorrect claim which is apparent from information available in the return of income. Therefore, the arguments of the Counsel for the Assessee that, the Assessing Officer-CPC does not have power to adjustment is incorrect. The learned CIT-DR further referring to the various facts submitted that, although, the Learned Counsel for the Assessee claims that, there is a dispute on the value of the property, but, what is disputed before the Court of Law is the ownership of the property, but, not the value. Since there is no dispute about the fair market value of the property as determined by the stamp duty authority, the Assessing Officer has rightly made the addition as per the provisions of sec.50C of the Act and further, the learned CIT(A) after considering the relevant facts, has rightly decided the issue. Therefore, she submitted that, the order of the learned CIT(A) should be upheld.
8. We have heard both the parties, perused the material on record and the orders of the authorities below. There is no dispute with regard to the fact that the appellant has sold the immovable property admeasuring 8 acres 29.88 guntas for a total sale consideration of Rs.21,86,72,000/-and the stamp duty value of the said property as on the date of registration was at Rs.42,67,68,750/-, on which, appropriate stamp duty has been discharged by the buyers. The appellant has filed return of income and disclosed the relevant capital gain from sale of property by adopting the consideration as per the sale deed and declared capital gain of Rs.11,49,92,940/-. The ADIT-CPC processed the return of income and issued intimation u/sec.143(1) of the Income Tax Act, 1961 on 28.08.2020 and determined the total income of the assessee at Rs.32,31,30,100/- by making addition of Rs.20,81,37,160/- towards difference between the sale consideration of property as per the registered deed and fair market value of the property as on the date of sale by invoking provisions of sec.50C of the Income Tax Act, 1961. These are undisputed facts. Therefore, it is necessary for us to examine the contentions of the Learned Counsel for the Assessee in light of the above undisputed facts.
9. The ADIT-CPC has made adjustment towards computation of capital gains by adopting deemed consideration as per the provisions of sec.50C of the Act and has made addition of Rs.20,81,37,160/- to the total income of the assessee. The contention of the Learned Counsel for the Assessee was that, deemed consideration provided u/sec.50C of the Act is not a prima facie adjustment which can be considered while processing the return of income u/sec.143(1) of the Income Tax Act, 1961. According to the Counsel for the Assessee, the Act itself under the provisions of sec.50C of the Act has provided remedy to the assessee to dispute the value of the property and further the proviso provided u/sec.50C makes it very clear that, if the date of registration of the property and date of the agreement fixing the amount of consideration are different, then, the consideration as per the date of agreement should be considered, for the purpose of provision of sec.50C of the Income Tax Act, 1961. Further, as per the provisions of sec.50C(2) of the Income Tax Act, 1961, the assessee can seek for reference of value of the property to the Valuation Officer. Therefore, once the issue is not a prima facie adjustment which can be considered without any deliberations on the issue, then, such issue cannot be adjusted while processing the return of income.
10. We have gone through the relevant arguments of the Learned Counsel for the Assessee in light of provisions of sec.143(1) of the Income Tax Act, 1961. The provisions of sec.143(1)(a) of the Income Tax Act, 1961 has been amended by the Finance Act, 2016 w.e.f. 01.04.2017 and as per the said provisions, the total income or loss shall be computed after making adjustments in respect of any arithmetical error in the return or an incorrect claim, if such incorrect claim is apparent from any information in the return. On a plain reading of sec.143(1) of the Income Tax Act, 1961, the case of the assessee falls under 143(1)(a) of the Income Tax Act, 1961, i.e., an incorrect claim, if such incorrect claim is apparent from any information in the return because, while filing return of income for any assessment year, the assessee shall furnish relevant details including computation of capital gains from sale of property in light of consideration received as a result of transfer and also deemed consideration as per the provisions of sec.50C of the Income Tax Act, 1961. Once the deemed consideration is apparent from the information available in the return which is further supported by the information furnished in the AIR information i.e., sale deed, then, in our considered view, the arguments of the Counsel for the Assessee that, it is a debatable issue and can be considered only after deliberations with relevant facts, is incorrect and cannot be accepted. Therefore, to this extent, in our considered view, the arguments of the Learned Counsel for the Assessee that, the Assessing Officer is erred in making adjustments towards deemed consideration as per the provisions of sec.50C of the Act while processing the return of income u/sec.143(1) of the Income Tax Act, 1961, is incorrect, devoid of merits and cannot be accepted.
11. Coming back to case law relied upon by the Learned Counsel for the Assessee. The Learned Counsel for the Assessee relied upon decision of ITAT, Mumbai Bench, Mumbai in the case of Prabha Anil Gandhi, Mumbai vs., ADIT-CPC, Bengaluru (supra), where the Tribunal has considered the issue of adjustment made towards deemed consideration as per the provisions of sec.50C of the Act and set-aside the matter to the file of Assessing Officer for de novo consideration on the ground that, the Assessing Officer has made adjustment without providing an opportunity to the assessee. In the present case, going by the facts available on record, the ADIT-CPC has provided an opportunity to the assessee by issuing communication dated 04.06.2020 proposing adjustment u/sec.143(1)(a) of the Income Tax Act, 1961 for substitution of Sub-Registrar Office value in place of actual sale consideration received by the appellant. Although, the Learned Counsel for the Assessee argued that communication issued by the ADIT-CPC is not noticed by the assessee, in our considered view, for the fault of the assessee, the entire assessment proceedings cannot be nullified. Further, whether the assessee has availed the opportunity provided by the Assessing Officer before making adjustment or not is not a question that needs be considered, but, what is needs to be considered is, whether the adjustment made by the Assessing Officer falls under the provisions of sec.143(1)(a) of the Income Tax Act, 1961 or not ? Since the adjustment made by the Assessing Officer falls under the provisions of section 143(1)(a)(ii) of the Income Tax Act, 1961, in our considered view, the argument of the Counsel for the Assessee in light of decision of ITAT, Mumbai Bench, Mumbai in the case of Prabha Anil Gandhi, Mumbai vs., ADIT-CPC, Bengaluru (supra), fails and thus, rejected.
12. Having said so, let us come back to the dispute in the value of the property. Learned Counsel for the Assessee has referred to various evidences including O.S. filed before the Court of Vacation Civil Judge, Ranga Reddy District at LB Nagar and also the Writ Petition filed before the Hon’ble High Court for the State of Telangana at Hyderabad and argued that, there is a dispute on the title of the property before the Civil Judge of Judicature and also there is a dispute on the value of the property before the Hon’ble High Court for the State of Telangana at Hyderabad, where the assessee has sought relief for refund of excess stamp duty collected by the Stamp Duty Authority for transfer of the property. Learned Counsel for the Assessee had also referred to Certificate issued by the Sub-Registrar, Gandipet, Ranga Reddy District dated 09.06.2022 and argued that, the very same Sub-Registrar who has collected the stamp duty on the value of the property of Rs.42,67,68,750/-, has issued a Certificate with reference to the very same survey numbers of the property which has been sold by the assessee and stated that, the stamp duty value of the property as on 18.04.2018 was at Rs.2 crores per acre and if we consider the said value to the total land sold by the assessee, the value works out to Rs.42,88,43,750/- only. If we consider the above value, the assessee is having only 50% share in the property and the share of the assessee’s consideration works-out to Rs.21,44,21,875/-, which is much below the value adopted by the Sub-Registrar Office at Rs.42,67,68,750/-. These facts has been brought to the notice of the learned CIT(A), but, the learned CIT(A) rejected the contention of the assessee and dismissed the appeal filed by the assessee for statistical purposes with a direction to the Assessing Officer to revisit the matter and take appropriate action in accordance with the decision of Hon’ble High Court for the State of Telangana at Hyderabad in the Writ Petition filed by the assessee as and when it is pronounced. In our considered view, when there is a dispute in the title of the property between the parties, then, obviously, the market value of the property will differ from the market value of the property which is having clear title. Further, when the assessee has challenged the value determined by the Sub Registrar Office for the purpose of payment of stamp duty before the Hon’ble High Court for the State of Telangana at Hyderabad and the matter is subjudice, then, unless the matter is resolved by the Hon’ble High Court for the State of Telangana at Hyderabad, the correct fair market value of the property cannot be determined by any Authority including the Assessing Officer. Since there is a dispute in the title of the property which is still pending before the Hon’ble jurisdictional Civil Court and further, the writ petition filed by the assessee challenging the fair market value of the property determined by the Sub Registrar Office is also pending for consideration before the Hon’ble High Court for the State of Telangana at Hyderabad, in our considered view, the fair market value determined by the Assessing Officer on the basis of Sub Registrar Office value fixed for the purpose of payment of stamp duty, cannot be considered as deemed consideration for the purpose of sec.50C of the Income Tax Act, 1961. Moreover, once the assessee disputes the fair market value determined by the Sub-Registrar Office, then, it is the duty of the Assessing Officer to refer the matter to the DVO for determination of fair market value of the property. In this connection, on similar set of facts, Hon’ble Calcutta High Court in the case of Sunil Kumar Agarwal vs., CIT [2014] 373 ITR 82 (Cal.) held that, making statutory reference to DVO u/sec.50C of the Income Tax Act, 1961 is mandatory even if assessee had never sought such reference before the lower authorities. Since the Assessing Officer has applied deeming provisions as contended u/sec.50C of the Act on the basis of stamp duty value of the property, even though, the assessee has disputed the value of the property in various Forums including before Civil Court and Hon’ble High Court for the State of Telangana at Hyderabad, the issue needs to be set-aside to the file of Assessing Officer for reconsideration. Further, although, the learned CIT(A) indirectly set-aside the issue to the file of Assessing Officer with a direction to the Assessing Officer to revisit the matter and take appropriate action in accordance with the decision of Hon’ble High Court for the State of Telangana at Hyderabad, as and when it is pronounced, in our considered view, there is no clear direction to the Assessing Officer on the issue. Thus, we set-aside the order of the learned CIT(A) and restore the issue back to the file of Assessing Officer for de novo consideration of the issue. The Assessing Officer is directed to reconsider the issue in light of relevant O.S. filed by the parties before the Civil Court and also relevant Writ Petition filed by the appellant challenging the Sub-Registrar Office value determined by the Authorities for payment of stamp duty and also refund of excess stamp duty collected by the Authorities for registration of the property. We further direct the Assessing Officer to decide the issue after exploring all the possible steps which can be taken in this regard including reference to the DVO for determination of the value of the property.
13. In the result, appeal of the Assessee is allowed for statistical purposes.
Order pronounced in the open Court on 22.08.2025.
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