MUKESH KISHINDAS BATHIJA ,MUMBAI V. INCOME TAX OFFICER 16(3)(1), MUMBAI

ITA 4935/MUM/2025

AI Insights

The case involves Mukesh Kishindas Bathija, the appellant, who contested the decision of the Income Tax Officer and the Commissioner of Income-tax (Appeals) regarding the computation of capital gains for the Assessment Year 2018-19. The primary issues were the non-allowance of the cost of acquisition in the capital gains calculation and the adoption of the stamp duty valuation (SDV) instead of the actual sale consideration. The appellant argued that the property was sold under distress due to its dilapidated condition and ongoing legal disputes, which justified a sale price lower than the SDV. The Tribunal found that the Assessing Officer should have referred the valuation to the Valuation Officer as requested by the appellant and should not have disregarded the valuation certificate provided by a government-approved valuer.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 785916 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2018-2019
• Appeal Filed On: 06-08-2025
• Other Referred Cases: Mohammed Iftekharuddin vs. Income Tax Officer, M/S Ganesh Benzoplast Limited. vs. Income Tax Officer, Income Tax Officer vs. Southern Steel Limited
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANNAVARAN KOSURI
• Assessee Lawyers: HARIDAS BHAT
• Keywords: Capital asset; Sale consideration of property below Jantri Value; Fair market value; Cost of acquisition; Capital Gains; Valuation report; Value adopted by valuation officer
• Section: 37; 50C

Judgement Text

"IN THE INCOME-TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI BEENA PILLAI, JUDICIAL MEMBER & SMT.RENU JAUHRI, ACCOUNTANT MEMBER ITA No.4935/MUM/2025 (A.Y.2018-19) Mukesh Kishindas Bathija Flat No. 11, Vasant Vihar, 14th Road, Khar West, Bombay- 400052. Vs. Income Tax Officer 16(3)(1) Aayakar Bhawan, Mumbai-400020. \u0001थायी लेखा सं./जीआइआर सं./PAN/GIR No:AAKPB0134E Appellant .. Respondent Appellant by : Shri Haridas Bhat Respondent by : Shri Annavaran Kosuri- Sr. AR Date of Hearing 08.10.2025 Date of Pronouncement 31.10.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 11.06.2025 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Year [A.Y.] 2018-19. Printed from counselvise.com P a g e | 2 ITA NO. 4935/mum/2025. 2. The grounds of appeal are as follows: “GROUND I a) On the facts and circumstances of the case, and in Law, The CIT(A) erred in confirming the disregarding of cost of acquisition while calculating the capital gain. b) On the facts and circumstances of the case and in law the CITA and AO failed to appreciate that: i The appellant has submitted the Valuation report as on 1/4/2001 for calculation of cost of acquisition. ii. AO totally disregarded the report without any remarks and did not allow any cost of acquisition. iii. The calculation of capital gain without allowing deduction of cost of acquisition is bad at law c) Therefore, the value of Rs. 26,20,000 as per the Valuation Certificate of Government approved registered Valuer A.V Shetty and Associates, to be considered as cost of acquisition since the property was acquired on 01 04.1997 GROUND II a) On the facts and circumstances of the case, and in Law, The CIT(A) erred in confirming the value U/s 50C of the disregarding submission of the appellant b) On the facts and circumstances of the case and in law the CITA and AO failed to appreciate that: i. The property was stressed, entangled with legal case, in dilapidated condition and getting a buyer was impossible at stamp duty valuation. ii. Due to the defects and problems the same was sold at half the stamp duty valuation. iii. The purchaser paid the stamp duty on full value without contesting the same. c) Therefore, your appellant prays that the sales value should be considered as the realized value of Rs.35,50,945/ instead of stamp duty value Rs.73,58,200/ GROUND III On the facts and circumstances of the case, and in Law, The CIT(A) erred in confirming the capital gain by taking the value as per 50C disregarding the request of appellant to refer to the valuation officer The appellant craves leave to add to, alter, and/or amend the above grounds of appeal.” Printed from counselvise.com P a g e | 3 ITA NO. 4935/mum/2025. 3. The brief fact of the case are that the assessee filed return for A.Y. 2018- 19 on 27.07.2018 declaring total income of Rs. 15,17,610/-. The case was selected for scrutiny on account of mismatch in stamp duty value (SDV) and actual consideration of the immovable property transferred during the year. During scrutiny proceedings, the assessee was asked to explain why SDV of Rs. 73,58,200/- should not be taken for computing the capital gains instead of the consideration amount of Rs. 35,50,945/- as per the agreement. It was explained by the assessee that the impugned property No. 3, GF, Krishna Kunj-2, Main Avenue Santacruz, Mumbai is a disputed property with litigation pending in the court and was also in a dilapidated condition. Hence the assessee had to sell it at 50% of the SDV as buyers were not readily available. Ld. AO did not accept the assessee’s explanation and adopted SDV as the sale value for computing the capital gains. Further, ld. AO did not allow any deduction for cost of acquisition as the assessee could not produce certificate of market value of the property as on 01.04.2001 from the concerned Stamp Registration Officer [SRO]. Accordingly, capital gains from the impugned transaction was computed at Rs. 72,18,200/-. Aggrieved, the assessee preferred an appeal before ld. CIT(A). However, ld. CIT(A) dismissed the assessee’s contentions and upheld the order of ld. AO. Further aggrieved, the assessee has filed an appeal before the Tribunal. Printed from counselvise.com P a g e | 4 ITA NO. 4935/mum/2025. 4. Before us, ld. AR made elaborate submissions with regard to both the issues relating to the computation of capital gain i.e i. Not allowing the cost of acquisition as per valuation certificate ii. Adoption of SDV instead of referring the matter to the DVO. 4.2 It has been argued by the ld. AR that since the property had been acquired before 01.04.2001, the value had to be determined as on this date for which a certificate from government approved valuer- M/s. A.V. Shetty and Associates was submitted before the ld. AO. However, Ld. AO did not accept this certificate on the ground that a certificate from concerned S.R.O. was required to be furnished for ascertaining the value as on 01.04.2001. Therefore, ld. AO proceeded to compute the capital gain by taking the cost of acquisition as ‘Nil’ which is preposterous as the cost of acquisition cannot be Nil under any circumstances. 4.3 Similarly, with regard to the sale consideration, the assessee had submitted copies of the suit pending at the city civil court to demonstrate that the property was disputed. Vide written reply dated 23.02.2020, filed during the course of assessment proceedings, the assessee had submitted that in case the ld. AO does not accept the sale consideration shown by him, the matter be referred to the Departmental Valuation Officer [DVO] for determination of Fair Market Value. However, ld. AO rejected the assessee’s submissions and computed the capital gains on the SDV by invoking provisions of section 50C of the Act. Printed from counselvise.com P a g e | 5 ITA NO. 4935/mum/2025. 4.2 Ld. AR has further placed reliance on several decisions of the co-ordinate benches on the applicability of section 50C of the Act. Some of the cases relied upon are as under: i. Mohammed Iftekharuddin vs. Income Tax Officer, ITAT, Hyderabed \"A\" Bench, ITA No. 748/Hyd/2019 wherein it has been held as under: On review of the DVO report, it is evident that the property sold by the assessee was landlocked with no access road, and due to a civil court decree, the assessee's vendors had no legal title, forcing a distress sale to Smt. SR-who alone had access to the road. The assessee's objections citing legal and physical constraints were ignored by both the AO and DVO without any speaking orders. ii. M/S Ganesh Benzoplast Limited. vs. Income Tax Offcier, ITAT, 6351/Mum/2017 wherein the co-ordinate bench held as under: In respect of the addition under section 50C, the assessee contended that the company had become a sick industrial unit with a negative net worth, and the assets were sold under financial distress to reduce costs and repay loans. The asset in question-a depreciable building unit in Chennai-was unused for years and in an unusable condition. Despite the AO noting valuation differences, the fact remains that the sale was made at a realizable value due to severe financial constraints. The BIFR order and financial statements support the claim of distress sale. iii. Income Tax Officer vs. Southern Steel Limited, ITAT, Hyderabad \"A\" Bench, ITA No. 1220/Hyd/2016 wherein the co-ordinate bench observed that the assessee sold the property for Rs. 12 crores, while the Sub-Registrar, Malkajgir valued it at Rs. 21.88 crores for stamp duty purposes. Accordingly, the AO invoked Section 50C and computed LTCG based on the higher value, rejecting the assessee's claim of a distress sale. However, the assessee was declared a sick Printed from counselvise.com P a g e | 6 ITA NO. 4935/mum/2025. company by BIFR or 8th May 1997, with IDBI appointed as the operating agency under section 17(3) of the ICA, 1985. The sale was part of a rehabilitation effort to revive the company. Considering the financial distress and the nature of the transaction with a government-controlled corporation, application of section 50C is not justified. 5. Ld. DR, on the other hand, has strongly relied on the orders of the lower authorities. He has submitted that the cost of acquisition had to be computed based on value of the property as on 01.04.2001, which was not provided by the assessee. Further, section 50C had been rightly invoked for computing capital Gains as the SDV was nearly double the sale consideration as per the sale deed and there was no evidence to prove that it was a distress sale. 6. We have heard the rival submissions and perused the material placed on record. At the outset, we note that section 50C provides as under: “50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed \"[or assessable] by any authority of a State Government (hereafter in this section referred to as the \"stamp valuation authority\") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed [or assessable] shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer: [Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer: Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account for through such other electronic mode as may be prescribed\"], on or before the date of the agreement for transfer:] Printed from counselvise.com P a g e | 7 ITA NO. 4935/mum/2025. [Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and [ten] per cent of the consideration received or accruing as a result of the transfer, the consideration soreceived or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration.] (2) Without prejudice to the provisions of sub-section (1), where- (a) the assessee claims before any Assessing Officer that the value adopted or assessed [or assessable] by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed for assessable] by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub- section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. [Explanation 1].-For the purposes of this section, \"Valuation Officer\" shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). [Explanation 2.-For the purposes of this section, the expression \"assessable\" means the price which the stamp valuation authority would have, notwithstand-ing anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty.] (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed [or assessable] by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed for assessable] by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.] In view of the provisions of this section, in case the adoption of SDV is objected by the assessee and a request is made for referring the valuation to the valuation officer, as has been done in the present case, we are of the considered opinion that the AO ought to have referred it to the DVO. Printed from counselvise.com P a g e | 8 ITA NO. 4935/mum/2025. Further, we are of the view that if the assessee had submitted a certificate from registered valuer in respect of the cost of acquisition as on 01.04.2001 and the same was not acceptable, ld. AO should have obtained the same from the SRO instead of simply adopting ‘Nil’ value for cost of acquisition. Thus, on both counts, the action of ld. AO and CIT(A) is not justified. We, therefore, deem it appropriate to remand back the matter to the ld. AO for making a reference to the Valuation Officer u/s. 50C for determining the Fair Market Value on the date of sale as also to ascertain the cost of acquisition as on 01.04.2001. 7. In the result, appeal of the assessee is allowed for statistical purposes. Order Pronounced in Open Court on 31.10.2025 Sd/- Sd/- (BEENA PILLAI) (RENU JAUHRI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Place: Mumbai Date 31.10.2025 Anandi.Nambi/STENO आदेश की \u0015ितिलिप अ\u001aेिषत/Copy of the Order forwarded to : 1. अपीलाथ\b / The Appellant 2. थ\b / The Respondent. 3. आयकर आयु\u0011 / CIT 4. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण DR, ITAT, Mumbai 5. गाड\u001b फाईल / Guard file. Printed from counselvise.com P a g e | 9 ITA NO. 4935/mum/2025. स ािपत ित //True Copy// आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण/ ITAT, Bench, Mumbai. Printed from counselvise.com "