SATYA PAL KHURANA,DELHI V. ACIT, CIRCLE-29(1), NEW DELHI

ITA 451/DEL/2024

AI Insights

This case involves an appeal by Satya Pal Khurana against the order of the Learned Addl./Joint Commissioner of Income Tax (Appeals)-1, Coimbatore, which confirmed the addition of Rs.29,50,000 as long-term capital gains on the sale of a property. The property, a shop previously rented out, was sold under distress to the tenant after unsuccessful eviction attempts. The AO had replaced the declared sale consideration with a higher value based on the stamp valuation authority, citing section 50C of the Income Tax Act. The Tribunal found that the property was sold under distress and directed a reassessment of its fair market value as of the date of the sale agreement.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474596 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAHIL KUMAR BANSAL
• Assessee Lawyers: K SAMPATH; V. RAJKUMAR
• Keywords: Set aside; Sale consideration of property below Jantri Value; Fair market value; Capital Gains
• Section: 144; 50C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’: NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.451/Del/2024 (ASSESSMENT YEAR 2017-18) Satya Pal Khurana, B-37, Kalkaji, New Delhi-110019 PAN-AAJPK3102E Vs. ACIT, Circle-29(1), New Delhi. (Appellant) (Respondent) Assessee by Shri K Sampath, Advocate & Shri V. Rajkumar, Advocate Department by Shri Sahil Kumar Bansal, Sr. DR Date of Hearing 11/02/2025 Date of Pronouncement 27/02/2025 O R D E R PER MANISH AGARWAL, AM: This is appeal filed by the Assessee against the order of Learned Addl./Joint Commissioner of Income Tax (Appeals)-1, Coimbatore date 18/12/2023 in Appeal No. CIT(A), Delhi-10/10485/2019-20 for Assessment Year 2017-18. 2. The assessee has challenged the appellate order on the following grounds of appeal: “On the facts and in the circumstances of the case and in law the Ld. CIT(A) at NFAC, Delhi erred in- i. Dismissing appeal against order passed U/s 144 of the Act without giving reasonable and proper opportunity of hearing: ii. Determining taxable income at Rs.29,50,000/- against return income in a sum of Rs.28,40,840/- 2 ITA No.451 /Del/2024 Satya Pal Khurana vs. ACIT iii. Confirming the addition of Rs.29,50,000/- on account of long term capital gains. The above actions being arbitrary, erroneous and unwarranted must be quashed with directions for appropriate relief.” 3. Brief facts of the case are that assessee is an individual and filed his return of income on 28/10/2017 declaring total income of Rs.28,40,840/-. The case of the assessee was selected for limited scrutiny for the reason of verification of capital gain/loss on property. During the course of assessment proceedings, various opportunities were provided to the assessee which were not complied with, then AO finally issued the show cause which was also remain unattended. Therefore, the AO has completed the assessment ex-parte wherein the sale consideration declared by the assessee at Rs.48,25,000/- from the sale of two properties during the year is replaced by Rs.77,75,000/- being the value adopted by stamp valuation authority in terms of section 50C of the Act in respect to one shop where sale consideration of Rs.15.00 lacs is replaced by 45.50 lacs and, accordingly, made the addition of the differential amount of Rs.29,50,000/-. 4. In first appeal, assessee has filed all the evidences and explained the circumstances under which he could be appeared before the AO. All the evidences were admitted by the Ld. CIT(A), however, has dismissed the claim of the assessee of distress sale and confirmed the addition so made, thus, assessee is in appeal before us. 3 ITA No.451 /Del/2024 Satya Pal Khurana vs. ACIT 5. During the course of hearing, the Ld. AR of the assessee submitted that during the year under appeal, the assessee has sold one shop which was given on rent for since past more 40 years to one Sh. Mohan Lal Sahini. The assessee tried to get the shop vacated, however, upon failing, filed eviction petition before the competent authority and had succeed in the litigation but the tenant had not vacated the premises. Therefore, in the year April,2012, the assessee has decided to sale the said shop to the tenant only as no other person was agreed to buy the said shop. Due to these peculiar facts and compelling circumstances, assesse had left with no other option and agreed to sale the said shop to the tenant for Rs.15,00,000/- and had received Rs.14,50,000/- in month of April, 2012 and balance amount was agreed to be paid at the time of execution of the sale deed. Since, the circle rate of the said property was Rs.44,50,000/- when the sale agreement was executed in 2012, therefore, AO made addition of the differential amount of Rs.29,50,000/-. The AR further submits that the circumstances as explained above clearly shows that the shop was sold under distress sale where the assessee was compelled to sale the shop and, therefore, the circle rate adopted by the Ld. AO based on section 50C could not be applied and fair market value of the property as on the date of April, 2012 looking to the fact of distress sale, when the assessee has agreed to sale the property and received the consideration in part through account payee cheques, deserves to be substituted. For which he prayed that the matter may be sent back to the AO for determination of valuation of 4 ITA No.451 /Del/2024 Satya Pal Khurana vs. ACIT fair market value as on April, 2012 after consider the fact of distress sale. 6. Per contra, the Ld. Sr. DR vehemently supported the orders of the lower authorities and submit that the Assessing Officer has rightly adopted the value of the property based on the circle rates and there is no error in the order of the lower authorities, he thus, prayed for the confirmation of the same. 7. We have heard the rival submissions and gone through the material available on record. We find that the assessee was not in position to get vacant possession of the said property. Despite of the fact that he has got the eviction order from the competent courts also and after making rigorous efforts of getting the vacant possession of the said shop he was not able to get the possession. When the assesse found himself helpless and unable to succeed in getting vacant possession, he left with no other option but to reach for compromise with the tenant. All these facts leads to the conclusion that the property was sold under distress, and, therefore, the circle rate could not be applied more particularly looking to the fact under such circumstances no other person would be interested in buying such type of disputed property. Therefore, it is the duty of the Ld. CIT(A) to refer the matter to the AO for determination of the fair market value of the said property as on the date of agreement to sale in April, 2012 for the purposes of charging capital gain in terms of section 50(2) of the Act. Since, the Ld. CIT(A) has not carried out this exercise, therefore, we set aside the issue to the file of the AO with a 5 ITA No.451 /Del/2024 Satya Pal Khurana vs. ACIT direction that valuation of fair market value be done as on April, 2012 when the assessee has entered into agreement of sale and substitute the such valuation as the fair market value so determined after taken into consideration the fact that sale was under distress and work out amount of long term capital gain. Needless to say that assessee be provided reasonable opportunities of being heard before concluding the matter. 8. As a result, the appeal of the assesse is partly allowed for statistical purposes. Order pronounced on 27/02/2025. Sd/- Sd/- (ANUBHAV SHARMA) (MANISH AGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 27/02/2025 PK/Sr. Ps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI "