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Facts
The Assessee sold a property for Rs. 2,19,00,000/- which was valued at Rs. 2,79,68,500/- by the Stamp Duty Valuation Authority. The AO determined the LTCG at Rs. 16,97,524/- after not accepting the Assessee's valuation report. The Commissioner upheld the AO's order.
Held
The Tribunal found that while the sale consideration was Rs. 2,19,00,000/-, an amount of Rs. 1,00,00,000/- was paid to confirming parties, reducing the attributable consideration to Rs. 1,79,00,000/-. The Tribunal directed the AO to re-compute LTCG using a mid-path FMV of Rs. 17.50/- per sq. mtr. and Cost Inflation Index of 100 as on 01.04.1981.
Key Issues
The primary issue was the correct valuation of the property for LTCG calculation, including the applicable fair market value and cost inflation index, and the impact of payments made to confirming parties.
Sections Cited
250, 54F, 147, 148, 143(3)
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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY
O R D E R
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 06.06.2025, impugned herein, passed by the Ld. Commissioner of Income Tax (Appeals) ADDL/JCIT(A) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2011-12.
Brief facts relevant for adjudication of the instant appeal are that in the instant case, one land/property was sold jointly by various sellers including Assessee herein vide sale deed dated 26.04.2010 on a total consideration of Rs.2,19,00,000/- in favour of M/s. Priyanka Home Realties Pvt. Ltd., whereas market value of the property was Rs.2,79,68,500/- as per Stamp Duty Valuation Authority. Though the Assessee has filed its return of income, however, according to the Assessing Officer (AO) did not disclose this transaction in the ITR and therefore the AO asked the Assessee to explain “as to why the Long Term Capital Gain (LTCG) from sale of land has not been offered to tax”.
Mr. Rajesh Velji Rathod 3. The Assessee in response to the show cause submitted his reply/letter dated 19.07.2013 stating that he has received Rs.22,25,000/- as share from sale consideration of agricultural land of his forefathers and as such which was considered in the hands of HUF as LTCG. The Assessee before the AO also submitted a working sheet of capital gain at Rs. ‘NIL’ on the basis of fair market value as on 01.04.1981 as adopted at Rs.3,30,175/- on the basis of valuation report furnished by the Assessee.
4. The AO though considered the aforesaid claim of the Assessee, however, not being satisfied with the same did not accept the valuation report filed by the Assessee, wherein the fair market value was determined at Rs.25/- per sq. mtr. and adopted the market value at Rs.10 as on 01.04.1981 and determined the Assessee’s share value at Rs.1,32,070/- and the value of the land as per stamp duty valuation at Rs.2,79,68,500/- and while allowing the indexed cost of land @ 10.15% being share of the Assessee to the tune of Rs. 25,958/- ultimately computed the LTCG of Rs.28,12,844/- and by giving benefit of the exemption u/s 54F of the Act to the tune of Rs.11,15,320/-, determined the taxable gain at Rs.16,97,524/- and added to the income of the Assessee.
The Assessee, being aggrieved with the said determination of LTCG by AO, challenged the same by filing first appeal before the Ld. Commissioner, who vide impugned order affirmed the decision of the AO and also rejected the contention of the Assessee “that the AO failed to refer this matter to the DVO in spite of objection raised by the Assessee”, by holding that such objection is not acceptable, as the market value of the property as per stamp duty was Rs.2,79,00,000/- which has been recorded by the AO in its order and therefore the AO did not require to send the matter to DVO.
The Assessee being aggrieved has preferred instant appeal challenging the determination/calculating the capital gain to the tune of Rs.16,97, 524/- made by the AO and affirmed by the Ld. Commissioner. This Court observes that though the Assessee along with other co- shareholders has sold the property on a consideration of Rs.2,19,00,000/- as against the valuation of Rs.2,79,00,000/- as per Mr. Rajesh Velji Rathod Stamp Duty Valuation Authority. However, it is a fact that out of consideration amount of Rs.2,19,00,000/- the Assessee and other co- owners of the properties have also paid the amount of Rs.1,00,00,000/- to the confirming parties, who were initially made the agreement for purchase of said land and therefore in that eventuality, if this Court accept the valuation of the property to the tune of Rs.2,79,00,000/- as per stamp duty valuation, as accepted by the authorities below, the amount of Rs.1,00,00,000/- duly been paid to the confirming parties cannot be ignored and therefore in that eventuality the consideration amount attributable to the Assessee and other co-sharers/owners would be Rs.1,79,00,000/- only. If the cost of acquisition as per valuation report on which the AO has relied on is accepted, the same would be Rs.92,07,734/- and in that eventuality the LTCG would be Rs.86,92,266/- only out of which the Assessee’s share as claimed and considered by the authorities below @ 10.15% would be Rs.8,82,265/- out of total capital of Rs.86,92,266/-.
Further, the assessee has also claimed that he has invested Rs.11,50,000/- in purchasing a new flat and in this regard he has already intimated the AO vide letter dated 19.07.2013. Therefore, on the aforesaid aspects, the case of the Assessee as demonstrated seems to be plausible and logical. As the Assessee has also purchased new flat jointly with his brother, in which his share of investment was Rs.11,15,320/-. Thus, on the aforesaid peculiar facts and circumstances, the claim of the assessee is liable to be allowed, however, subject to verification of the alternative claim lodged by the assessee qua purchase of new flat, as intimated to the AO vide letter dated 19.07.2013.
This Court, however in order to cut short the litigation and for substantial justice deem it appropriate to apply the rate of land @ 17.50/- per sq. mtr (psm) for the purpose of FMV, being middle path between the valuation report considered by the AO @ Rs. 10/- psm and value @ Rs. 25/- psm as considered in the Valuation Report filed by the Assessee, as adoption of middle path will sub-serve the purpose of real adjudication and substantial justice and therefore this Court had directed both the Mr. Rajesh Velji Rathod parties to file the relevant calculations of Long Term Capital Gain considering the value of land @ 17.50/- psm for indexation cost and therefor the parties have submitted their respective calculations which are reproduced herein below:
Valuation submitted by the Revenue In pursuance of Order Sheet noting dated 09.10.2025, calculation of long term capital gain by considering the value at the rate 17.50 per square meter is as follows:
The Capital Gain is calculated as under: -
Assessee's share value considering the value @ Rs. 17.50 per Sq. meter Rs. 17.5 x 13207 Rs. 231,122.50/- Indexation ratio= 711/172=4.131 Indexed Cost Rs. 2,31,122,50 X 4.131= Rs. 9,56,992/- Valuation submitted by the Assessee
Note 1: Assessee’s Share in (%) 22,25,000/2,19,00,000 comes to 10.16% (as per Agreement) Note-2: Cost of Acquisition FMV as on 01-04-1981 Considering rate at Rs. 17.50/- per sq. mtr. Assessee's Share in total area 13,207 Sq. Mtrs. (1,29,990 *10.16%) [Valuation report and as per AO] FMV as on 01/04/1981 Rs.2,31,123/-(13,207*17.50)
Note3: Indexed Cost of Acquisition Indexed cost (Rs.2,31,123*711/100) = Rs. 16,43,285/- Note 4: ……………………………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………………………… …………………………………………………………. Note - 5: ……………………………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………………………… ………………………………………………………….
While working out capital gain we are considering indexation as of 01.04.1981, as the property under consideration is inherited property. However, AO is considering Indexation as of 1989-90 as per agreement, which is an aborted agreement. On other hand the AO himself is adopting market rate at Rs. 10/-as per notice dt 24/2/2014, thus AO is not consistent in his stand. ITAT is final fact finding authority therefore may adopt appropriate rate to do complete justice.
From the aforesaid reports, this Court observes that though there is no difference between the FMV in calculations submitted by the parties, however the Revenue considered the Cost Inflation Index @ 172 as of FY 1989-90, whereas the Assessee has taken Cost Inflation Index @ 100 as on or before 1/4/1981 on the pretext that the property under consideration was inherited property in that year particularly. However, AO considered the Indexation as of 1989-90, as per agreement, which was an aborted agreement.
This Court has given thoughtful consideration to the valuations of LTCG submitted by the parties and find logic in the adoption of Cost Inflation Index @ 100 as on 1/4/1981, as the property was admittedly inherited in 1981 by the Assessee being one of legal heirs and there is no logic in adopting the Cost Inflation Index @ 172 on the basis of an aborted agreement (executed during the AY 1989-90). Thus, on the aforesaid analyzations, this Court for just and proper decision of case and substantial justice and fair play is inclined to direct the AO to re-compute the LTCG;
“by considering the amount of Rs.1,79,00,000/-{Rs.2,79,00,000/- minus Rs.1,00,00,000/- paid to the confirming parties} as consideration accrued to actual purchasers as per stamp duty valuation , for calculation of the LTCG and the FMV as on 01-04-1981 @ 17.50/- per sq. mtr and adopting the Cost Inflation Index @ 100 as on 1/4/198, applying the proportionate share in the hands of the assessee and giving relief qua investment of Rs.11,15,320/- made in new property jointly purchased by the Assessee”.
Thus, the AO is directed to compute the LTCG in the aforesaid terms, accordingly.
In the result, the Assessee’s appeal is allowed in the said terms.
Order pronounced in the open court on 21.11.2025.