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

the order of ld. AO. Further aggrieved, the assessee has filed an appeal before the Tribunal.

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.

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, 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, 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 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.

“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:] [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.

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.

Order Pronounced in Open Court on 31.10.2025