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Facts
The Revenue filed an appeal against the CIT(A)'s order deleting additions made by the AO concerning capital gains. The AO substituted stamp duty value for actual consideration under Section 50C and denied deduction under Section 54F for reinvestment in another property due to the lack of a registered deed.
Held
The Tribunal held that while the AO erred in mentioning Section 56(2)(x) instead of Section 50C, the substance of the issue under Section 50C was discussed. However, since the AO did not refer the valuation to the DVO as requested, the issue under Section 50C is restored to the AO for fresh adjudication. Regarding Section 54F, the Tribunal held that for exemption, mere investment and possession of the new property is sufficient, not necessarily a registered deed, upholding the CIT(A)'s deletion.
Key Issues
Whether the addition made by the AO under Section 50C is sustainable when the valuation was not referred to the DVO, and whether exemption under Section 54F can be denied solely due to the absence of a registered deed for the reinvestment.
Sections Cited
250, 50C, 54F, 56(2)(x), 50C(2)
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Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI
Before: SH. SATBEER SINGH GODARA & MS. ANNAPURNA GUPTA
PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER:
Present appeal has been filed by the Revenue against order passed by the ld. Commissioner of Income- Tax(Appeals)/ NFAC, Delhi [hereinafter referred to as “Ld.CIT(A) under section 250 of the Income Tax Act, 1961 ("the Act" for short) dated 24.11.2023 pertaining to the Asstt.Year 2016-17.
ITO vs. Rajni Gupta - A.Y. 2016-17 2. At the outset it was pointed out by the Ld.DR that the issue raised in the present appeal relates to two different aspects of computation of income under the head capital gains, one pertaining to substitution of the actual consideration received with the stamp duty value of the property sold, in terms of section 50C of the Act and the other relating to denial of claim of deduction/ exemption of the capital gain earned by making investment made in another property as per section 54F of the Act. That while the AO had invoked section 50C of the Act and also denied exemption claimed by the assessee u/s 54F of the Act, the Ld.CIT(A) had allowed assesses appeal on both the counts, deleting entire addition made by the AO on account of the same. That the grievance of the Revenue arises from the said order of the Ld.CIT(A) on both the issues, raised vide grounds of appeal which read as under:
“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting addition of Rs. 1,36,61,528/- u/s 541 without going into the merits and eligibility for claiming deduction u/s 54F.
On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in deleting addition of Rs.2,07,81,500/- without going into the merits of the case.
3. The Ld. CIT(A) has only referred to the date/AY in which section 56(2)(x)(b) was brought on the statute but failed to discuss the merits of the case. The case is clearly covered u/s 50C of the I.T.Act as AO has rightly held throughout the assessment proceedings. By merely ITO vs. Rajni Gupta - A.Y. 2016-17 mentioned the wrong section at the end of the order will not dilute the substance of the issue involved.
4. The appellant craves leave to add, alter or amend any/all the grounds of appeal before or during the course of bearing of the appeal.”
We have heard both the parties and also gone through the orders of the authorities below.
The facts relating to the issue are the assessee had returned to tax capital gains earned on sale of an immoveable property during the year computing the same by taking the actual consideration received of Rs.1,01,01,100/-. The AO noted the stamp duty value of the same to be greater than the actual consideration, being Rs.3,68,82,600/- and therefore invoking section 50 C of the Act, substituted the actual consideration with the stamp duty value, resulting in the difference thereof of.Rs.2,67,81,500/- being added to the income of the assessee. The assessee had also claimed deduction/ exemption of the capital gains u/s 54F of the Act on account of investment made in another property of Rs.1.50 Crs., which was denied by the AO since the reinvestment was found to be not by way of a registered deed.
ITO vs. Rajni Gupta - A.Y. 2016-17 5. The Ld.CIT(A) found that the AO invoked the provisions of section 56(2)(x) of the Act while making addition of the difference between the stamp duty value of the property and actual consideration received by the assessee and, finding that no addition could have been made in terms of the said section, he deleted the addition of Rs. 2,67,81,500/-.
As for claim of deduction u/s 54F of the Act, he held that it was sufficient if the assessee shows to have made investment and acquired possession of the property, which he noted was demonstrated in the facts of the present case. Thus the Ld.CIT(A) deleted both the additions made in the hands of the assessee.
As per ground No.2 and 3 raised by the Revenue, challenging the deletion by the Ld.CIT(A) of the addition made of Rs.2,67,81,500/-by the AO by substituting the actual consideration with the stamp duty value of the property, the argument of the Revenue is that section 56 (2)(x)(b) of the Act was wrongly mentioned by the AO while making the addition ,though his entire order discusses and even mentions the applicability of the provisions of Section
The Ld. Counsel for the assessee in response countered by stating that the assessee when confronted with the fact of stamp duty value of the property being in excess of the actual sale consideration, had submitted to the AO that in the present scenario in the Delhi NCR region where the property was located, the actual market value of the property was much lower than the valuation adopted by stamp valuation authority. That a request had been made by the assessee to refer the valuation of the property to the DVO in terms of section 50C(2) of the Act, which was not agreed to by the AO stating that the request had been made at the fag end of the assessment proceedings when it was getting time barred. He drew our attention to page 7 of the assessment order pointing out the above. He contended that having not accepted the assesses request for referring the valuation to DVO which was admittedly in accordance with law, the addition made by the AO in any case was not sustainable.
ITO vs. Rajni Gupta - A.Y. 2016-17 9. We have noted that with regards to the contention of the Ld.DR that the Ld.CIT(A) had wrongly deleted the addition holding that the AO had invoked incorrect section 56(2)(x) of the Act, the Ld.Counsel had nothing much to say in rebuttal to the argument of the Ld. DR that the same was only a typographical mistake and the AO had dealt and discussed in the entire proceedings/order the applicability of section 50C of the Act to the issue. Also we have gone through the order of the AO and we find the contention of the Ld. DR to be correct in this regard. Therefore, we agree with the Ld. DR that mere mentioning of 56(2)(x) by the AO while making addition on account of difference in the stamp duty value and the actual consideration received by the assessee to the capital gains earned by it would not vitiate the addition in its entirety when the AO had clearly discussed and confronted the assessee with the applicability of Section 50C of the Act, the correct position of law in the regard , during assessment proceedings.
Having said so, the Ld. Counsel for the assessee has argued that the addition in any case is not sustainable since the AO had not acceded to the assessee’s valid request for referring the valuation of the property sold to the DVO in ITO vs. Rajni Gupta - A.Y. 2016-17 terms of the provision of Section 50C(2) of the Act. Considering that we have found the Ld. CIT(A) to have deleted the addition of Rs. 2,67,81,500/- incorrectly and noting the fact pointed out by the Ld.Counsel for the assessee of the AO not having referred the valuation of the property to DVO in terms of section 50C(2) of the Act, we restore the issue back to the AO to adjudicate the same afresh after obtaining report of valuation of the property from the DVO. The AO is directed to decide the issue after affording due opportunity of hearing to the assessee, and confronting it with all material gathered.
The grounds of appeal 2 & 3 are, therefore, allowed for statistical purposes.
12. Ground No.4 raised by the Revenue is against the allowance by the Ld.CIT(A) of assesses claim of exemption u/s.54F of the Act, which was denied by the AO. Admittedly, the claim was denied for the reason that the investment made in the new property was not evidenced by way of a registered deed. The fact that the assessee had made investment of Rs.1.50 Crores in the new property is not disputed, but on the contrary, we find that this fact is ITO vs. Rajni Gupta - A.Y. 2016-17 recorded in the assessment order. The assessment order also records the fact of the assessee having entered into an MOU with the seller of the property. Even the Ld. CIT(A) has recorded the fact of the assessee having made the impugned investment and taken possession of the property also. We are aware that Courts have consistently held that for claiming exemption u/s.54F of the Act the investment in a new property need not to be evidenced with the registered deed and mere fact of investment having been made and possession taken of the property is sufficient to claim the said exemption. The Hon’ble Delhi High Court held so in the case of Balraj Vs CIT 254 ITR 22 (Delhi), and the proposition reiterated by the coordinate benches of the ITAT in the following cases: i. Basheer Noorullah Khan, Bangalore vs Commissioner of Income Tax (Appeals dated 31-07-2019 ii. ACIT vs Sanjay Choudhary dated 23-01-2023
13. These facts have been established by the assessee before the Ld. CIT(A) and which are not in dispute before ITO vs. Rajni Gupta - A.Y. 2016-17 us. We see therefore no infirmity in the order of the Ld. CIT(A) holding the assessee eligible to claim of exemption u/s.54F of the Act, which we find is in accordance with law as interpreted in various judicial decisions.
Ground of appeal No.4 raised by the Revenue is, therefore, dismissed.
In effect, appeal of the Revenue is partly allowed for statistical purposes.
Order pronounced in the open court on 09.05.2025