ISHWARBHAI GORDHANBHAI PRAJAPATI ,AHMEDABAD V. INCOME TAX OFFICE WARD 3(3)(5) AHMEDABAD, AHMEDABAD

ITA 1344/AHD/2025

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The case involves Ishwarbhai Gordhanbhai Prajapati, who appealed against the order of the Commissioner of Income Tax (Appeals) confirming an addition of Rs. 18,10,640 to his income under section 56(2)(x) of the Income Tax Act, 1961. The addition was based on the difference between the purchase price of agricultural land and its stamp duty valuation, which was treated as non-agricultural land due to a proposed draft town planning scheme by the Ahmedabad Urban Development Authority (AUDA). The Tribunal examined the nature of the land, the applicable jantri rates, and the evidence provided by the assessee, ultimately deciding in favor of the assessee by recognizing the land's agricultural status and rejecting the application of section 56(2)(x).

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 783534 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2018-2019
• Appeal Filed On: 23-06-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C DHARANI NATH
• Assessee Lawyers: SULABH PADSHAH
• Keywords: Set aside; Sale consideration of property below Jantri Value; Fair market value; Capital Gains; Principle of natural justice
• Section: 50C

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद \u0011ायपीठ “SMC“,अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “ SMC ” BENCH, AHMEDABAD ] ] BEFORE DR. BRR KUMAR, VICE PRESIDENT AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकर अपील सं /ITA No.1344/Ahd/2025 िनधा \u000fरण वष\u000f /Assessment Year : 2018-19 Ishwarbhai Gordhanbhai Prajapati 43, Killol Co-op. Housing Society Nr. Prajapati Society Odhav Road Ahmedabad – 382 415 बनाम/ v/s. The Income Tax Officer Ward-3(3)(5) Ahmedabad – 380 015 \u0013थायी लेखा सं./PAN: ABJPPB 8281 C (अपीलाथ\u0017/ Appellant) (\u0018\u0019 यथ\u0017/ Respondent) Assessee by : Shri Sulabh Padshah, AR Revenue by : Shri C Dharani Nath, Sr.DR सुनवाई की तारीख/Date of Hearing : 15/09/2025 घोषणा की तारीख /Date of Pronouncement: 04/11/2025 आदेश/O R D E R PER SIDDHARTHA NAUTIYAL, JM: The present appeal has been preferred by the Assessee against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 21/05/2025 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Year (AY) 2018-2019. 2. The assessee has raised the following grounds of appeal: “Your appellant being aggrieved by the order passed by the learned Ld. Commissioner of Income-tax (Appeals) [hereinafter referred to as 'Ld. CIT Printed from counselvise.com ITA No.1344/Ahd/2025 Ishwarbhai Gordhanbhai Prajapati vs. ITO Asst. Year : 2018-19 2 (Appeals)'], Income tax Department, National Faceless Appeal Centre (NFAC) presents this appeal against the same on the following amongst other grounds: 1. The Ld. CIT (Appeals) has erred in facts and on law in confirming the action of AO making addition of Rs 18,10,640/- invoking the provisions of Section 56(2)(x) of the Act. On facts and circumstances of the case, the provisions of Section 56(2)(x) are just not attracted in case of Appellant and entire addition made being incorrect and illegal is ought to have been deleted. The same be held now. 2. The Ld. CIT (Appeals) has erred in confirming the addition made of Rs 18,10,640/- without appreciating the fact that the consideration paid by Appellant is higher. than prevailing jantri rate applicable to agriculture land at that time. It is submitted that the land purchased by Appellant is an agriculture land only and additional Jantri collected merely because of Proposed Draft TP Scheme announced by AUDA. On facts and circumstances of the case, the entire addition made wrongly interpreting provisions of Section 56(2)(x) of the Act and being completely illegal and unjustifiable be deleted in the interest of justice. The same be held accordingly. 3. The Ld. CIT (Appeals) has erred in not appreciating the fact that the land purchased by the appellant was an agriculture land on the date of purchase and not at all N.A. Land at that time. On facts and circumstances of the case, by no stretch of imagination, the provisions of Section 56(2)(x) be applied in this case considering land purchased as N.A. Land and the addition made being totally wrong and baseless be deleted accordingly. 4. The lower authorities has failed in appreciating the fact that the consideration paid by Appellant to the seller party has been duly accepted by income tax authorities in case of seller and there is no addition on this count in case of seller invoking provisions of Section 50C or any other provisions of the Income tax Act. It is therefore submitted that once consideration paid has been accepted in case of seller, the same is ought to have been accepted in case of buyer applying principal of natural justice. Thus, the addition made applying Section 56(2)(x) being unwarranted and unjust be deleted accordingly. 5. Your appellant craves leave to add, alter and/or to amend all or any of the grounds before the final hearing.” 2.1. The assessee has raising the following additional grounds of appeal: “1 The Ld. Assessing Officer has erred on facts and in law in invoking the provisions of section 56(2)(x) of the Income-tax Act, 1961 by mechanically adopting the stamp duty valuation (SDV) of the property in question without referring the matter to the Departmental Valuation Officer (DVO) despite the assessee's specific objection. Printed from counselvise.com ITA No.1344/Ahd/2025 Ishwarbhai Gordhanbhai Prajapati vs. ITO Asst. Year : 2018-19 3 2 The Ld. AO has failed in appreciating the provisions of Section 56(2)(x) read with section 50C(2) of the Act mandates him that once the assessee disputes the correctness of the stamp duty valuation, it is obligatory on the part of the AO to refer the valuation of the property to the DVO. In view of this, the entire addition made of Rs 18,10,640/- without referring matter to DVO for valuation property is unsustainable and bad in law and the same be deleted in the interest of justice.” 3. The brief facts of the case are that the assessee, Shri Ishwarbhai Gordhanbhai Prajapati, filed his return of income for Assessment Year 2018– 19 declaring a total income of Rs. 11,66,770. The assessee derived income from his proprietary business, M/s. Shree Bootbhavani Construction Co., as well as income under the heads “House Property,” “Capital Gains,” and “Other Sources.” During the course of assessment, the Assessing Officer (“AO”) noted that the assessee had jointly purchased agricultural land for a total consideration of Rs. 22,30,320, while the stamp duty valuation of the same property was Rs. 40,40,960. The AO observed that there was a difference of Rs. 18,10,640 between the purchase price and the value adopted for stamp duty purposes. The Assessing Officer invoked the provisions of section 56(2)(x) of the Act and treated this difference as income from other sources, holding that the assessee had received property for consideration less than its fair market value. Consequently, the AO made an addition of Rs. 18,10,640 to the returned income, and computed the total income at Rs. 29,77,410. Being aggrieved by the said addition, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. 4. Before the CIT(A), the assessee submitted that the land purchased was agricultural land and not non-agricultural (N.A.) land, as erroneously assumed by the AO. The assessee submitted that the land fell under a proposed draft Town Planning (T.P.) Scheme of the Ahmedabad Urban Printed from counselvise.com ITA No.1344/Ahd/2025 Ishwarbhai Gordhanbhai Prajapati vs. ITO Asst. Year : 2018-19 4 Development Authority (AUDA), which was not yet finalized. Due to the draft scheme, the Sub-Registrar’s Office had charged higher stamp duty treating the land as N.A. land, although, in reality, the land continued to retain its agricultural character. The assessee further contended that the land was purchased at a rate higher than the prevailing jantri rate applicable for agricultural land, and therefore, no addition under section 56(2)(x) of the Act was justified. The assessee also pointed out that the AO had wrongly assumed a 40% deduction for acquisition by AUDA, whereas no such acquisition had actually taken place, and the purchase deed clearly mentioned ownership of the entire plot. To support his claim, the assessee filed copies of the purchase deed, jantri rate certificate, ledger account of the seller (Jayantibhai Kalubhai) showing payments made since July 2013, and other supporting documents. The assessee submitted that the transaction was genuine and the consideration paid was in accordance with the fair market value of the agricultural land at the time of purchase. 4.1. The CIT(A) examined the facts, written submissions, and case records. The CIT(Appeals) observed that although the assessee had described the property as agricultural land, the very fact that it was covered under a proposed AUDA scheme and that stamp duty was charged at rates applicable to urban land indicated that the land had lost its agricultural character. The CIT(A) noted that the assessee did not provide any evidence regarding the distance of the land from the municipal limits, which could have established its agricultural status. According to the CIT(A), when land is covered by an urban development scheme and the stamp value is determined on the basis of N.A. land rates, it cannot be treated as purely agricultural for the purpose of income-tax assessment. In view of these Printed from counselvise.com ITA No.1344/Ahd/2025 Ishwarbhai Gordhanbhai Prajapati vs. ITO Asst. Year : 2018-19 5 observations, the CIT(A) held that the AO was justified in invoking the provisions of section 56(2)(x) and making the addition of Rs. 18,10,640 towards the difference in value. The CIT(A) accordingly confirmed the addition made by the AO and dismissed the appeal of the assessee. 5. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. 6. We have heard the rival contentions and perused the material on record. The Counsel for the assessee submitted that the land documents clearly establish that the property purchased is agricultural land, and this fact has been consistently mentioned in the registered sale deed and other land records. It was contended that merely because the stamp duty authority levied duty treating the land as non-agricultural (N.A.), owing to the proposed draft T.P. Scheme by the Ahmedabad Urban Development Authority (AUDA), it would not change the actual land use or character of the property. The Counsel pointed out that the assessee had paid a price higher than the prevailing jantri rate applicable for agricultural land, and therefore, there was no reason or justification for invoking section 56(2)(x) of the Act. The Counsel further submitted that the land in question is registered within the “Agricultural Taluka” records, which itself confirms its agricultural nature. He also drew our attention to page 52 of the Paper Book, being an Extract of the Rural Land Record (Form No. 7) dated 19.07.2023, which shows that even after purchase, the land continues to be classified as agricultural land. The Counsel submitted that no conversion proceedings have been initiated or completed to convert the land into non-agricultural use Printed from counselvise.com ITA No.1344/Ahd/2025 Ishwarbhai Gordhanbhai Prajapati vs. ITO Asst. Year : 2018-19 6 even till date. Hence, the land retains its agricultural character in law and in fact. 7. After considering the submissions of both sides and examining the documents on record, we find force in the contentions advanced by the learned Counsel for the assessee. The sale deed and the Form No. 7 extract demonstrate that the land purchased is agricultural and not non-agricultural. The charging of higher stamp duty by the Sub-Registrar’s Office based on a draft AUDA scheme would not, in our view, alter the inherent nature of the land. It is a settled legal position that stamp duty valuation or classification for fiscal purposes does not determine the character of the property under the Income-tax Act. The fact that the assessee has paid consideration higher than the jantri rate applicable to agricultural land further supports that there was no underreporting of value or benefit derived by the assessee that could warrant the application of section 56(2)(x) of the Act. We also note that the Assessing Officer’s assumption that 40% of the land was acquired by AUDA is factually incorrect, as no such acquisition has taken place and the draft T.P. Scheme remains unapproved. Therefore, the addition made by the AO under section 56(2)(x) of the Act by treating the property as non-agricultural and applying non-agricultural rates is not sustainable in law or on facts. Considering the totality of circumstances, including the nature of the land, the evidence produced, and the fact that the assessee has paid more than the jantri value, we hold that the addition of Rs. 18,10,640/- made under section 56(2)(x) of the Act is unwarranted and unjustified. Printed from counselvise.com ITA No.1344/Ahd/2025 Ishwarbhai Gordhanbhai Prajapati vs. ITO Asst. Year : 2018-19 7 7.1. Accordingly, we set aside the order of the learned CIT(A) and direct the Assessing Officer to delete the addition of Rs. 18,10,640/- made under section 56(2)(x) of the Act. 8. In the result, the appeal of the assessee is allowed. Order pronounced in the Open Court on 04 /11/2025 at Ahmedabad. Sd/- Sd/- (DR. BRR KUMAR) VICE PRESIDENT (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 04/11/2025 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS आदेश की \"ितिलिप अ#ेिषत/Copy of the Order forwarded to : 1. अपीलाथ$ / The Appellant 2. \"%थ$ / The Respondent. 3. संबंिधत आयकर आयु& / Concerned CIT 4. आयकर आयु& ) अपील ( / The CIT(A)- (NFAC), Delhi 5. िवभागीय \"ितिनिध , अिधकरण अपीलीय आयकर , राजोकट/DR,ITAT, Ahmedabad, 6. गाड\u000f फाईल / Guard file. आदेशानुसार/ BY ORDER, स%ािपत \"ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad 1. Date of dictation (word processed by H-JM on his computer) : 03.11.2025 2. Date on which the typed draft is placed before the Dictating Member. : 03.11.2025/04.11.25 3. Date on which the approved draft comes to the Sr.P.S./P.S : 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 5. Date on which fair order placed before Other Member : 6. Date on which the fair order comes back to the Sr.P.S./P.S. : 6/11/25 7. Date on which the file goes to the Bench Clerk. : 6/11/25 8. Date on which the file goes to the Head Clerk. : 9. The date on which the file goes to the Assistant Registrar for signature on the order. : 10. Date of Despatch of the Order : Printed from counselvise.com "