PALLAVI RAJESH DATTANI,PORBANDAR vs. INCOME TAX OFFICER WARD 2(3), PORBANDAR

आयकर अपीलीय अिधकरण, राजकोट �यायपीठ, राजकोट। In The Income Tax Appellate Tribunal, “SMC” Rajkot Bench, Rajkot Before Dr. Arjun Lal Saini, Accountant Member आयकरअपीलसं./ITA No. 462/RJT/2026 (�नधा�रणवष�/Assessment Year: (2011-12) Pallavi Rajesh Dattani, Income Tax Officer, Ward 2(3), Aayakar Bhawan, Porbandar, Giriraj, Jaherpir Area, Near Dena Vs. Gujarat, 360575. Bank, Porbandar, Gujarat 360575 �ायीलेखासं./जीआइआरसं./PAN/GIR No.: AGAPD0633L (अपीलाथ�/Assessee) (��यथ�/Respondent) Assessee by : Shri Sagar Shah, Ld. AR Respondent by : Shri Abhimanyu Singh Yadav, Ld. Sr. DR Date of Hearing : 07/05/2026 : 24/07/2026 Date of Pronouncement ORDER Per, Dr. Arjun Lal Saini, AM:

Captioned appeal filed by the assessee, pertaining to assessment year (AY) 2011-12, is directed against the order passed under section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 21.01.2026 by the National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income Tax (Appeals) [in short ‘Ld.CIT(A)’] which in turn arises out of an assessment order passed by the Assessing Officer (in short ‘assessing officer’) u/s 143(3) r.w.s. 147 of the Act dated 19.12.2018.

ITA No.462/Rjt/2026 (Assessment Year 2011-12) Pallavi Rajesh Dattani v. ITO (1)On the basis of facts and circumstances of the case, the learned Income-tax Officer, Ward-2(3), Porbandar has erred in law as well as facts while passing the order and, therefore, the order is required to be quashed. (2)On the basis of facts and circumstances of the case, the learned Income-tax Officer, Ward-2(3), Porbandar has erred in law in not accepting the request of the assessee to refer the matter to the Departmental Valuation Officer or to accept the valuation report obtained from the Government approved valuer well before sale of the property and even the learned Income Tax Officer failed to appreciate that sale of property is at more price than the amount shown as realizable value in valuation report. The property's realizable value as per valuation report placed on record amounts to Rs.29,96,500/- and whereas the sale is at consideration of Rs.31,94,725/-which is more than the realizable value of the property and, therefore, the learned Income-Tax Officer's act is prejudicial and the addition made is required to be deleted. (3)On the basis of facts and circumstances of the case, the learned Income-tax Officer, Ward-2(3), Porbandar has erred in law as well as on facts in arriving at the figure of addition to be made at Rs 7,33,846/-. In fact, the addition is to be made on the basis of proportionate amount of consideration received by the assessee and not the total value of the property. On one side the assessing officer has stated that the assessee has received only a sum of Rs.26,63,600/- as against the consideration price of Rs.31,94,725/- whereas the addition is made fully in the case of the assessee being the amount of difference as per the alleged valuation amount u/s. 50C as compared to the actual consideration. Therefore, the addition is incorrectly made and required to be deleted. (4)On the basis of facts and circumstances of the case, the learned Income-tax Officer, Ward-2(3), Porbandar has erred in law as well as on facts in not appreciating the fact that the sale made by the assessee is a distressed sales and the valuation made was submitted to the court for obtaining the probate and, therefore, once valuation is accepted by the court of law supported by an independent valuer should be accepted by the assessing officer too and if not satisfied even the assessing officer is free to refer the matter to the DVO which he has not done in spite of the facts that the assessee specifically made a request for that too and, therefore, the addition made by the assessing officer is required to be deleted. (5)On the basis of facts and circumstances of the case, the learned Income-tax Officer, Ward-2(3), Porbandar has erred in law as well as on facts in making an addition of amount of stamp duty paid since the actual consideration received is less and, therefore, the addition made is required to be deleted. (6)On the basis of facts and circumstances of the case, the learned Income-tax Officer, Ward-2(3), Porbandar has erred in law as well as on facts in initiating the penalty proceedings u/s. 271(1)(c) of the I.T. Act. (7)On the basis of facts and circumstances of the case, the learned Income-tax Officer, Ward-2(3), Porbandar has erred in law as well as on facts in charging the interest u/s. 234A, B & C of the Act.

ITA No.462/Rjt/2026 (Assessment Year 2011-12) Pallavi Rajesh Dattani v. ITO 3. Succinctly, the factual panorama of the case is that assessee before me is an Individual and has not filed her return of income u/s 139 of the Income tax Act, 1961 for the assessment year 2011-12. As per information available with this office, the assessee has sold a property for a consideration to the tune of Rs.39,26,915/-. The case was reopened after necessary approval obtained from Pr. Commissioner of income tax, Jamnagar on 08.03.2018. Accordingly, notice u/s 148 of the Income tax Act, 1961 was issued by the Income tax officer, Ward 2(5), Jamnagar on 19.03.2018 which was duly served upon the assessee by post. The assessee has filed her return of income u/s 148 on 10.10.2018, declaring the total income at Rs.2,14,150/- and submitted the acknowledgement of the same along with statement of income, profit & loss account, Balance Sheet, capital account, ledger account of building and construction, bank book of Bank of Baroda account, books of accounts for the A.Y. 2010-11 and copy of sale deed, the same has been verified and kept on record. On going through the sale deed and submission made by the assessee on 10.10.2018 and 23.11.2018, it was noticed that the property in concern, as per sale deed, property belonged to two persons and part payment i.e. ( Rs.20,00,000+ Rs.6,63,600), total Rs.26,63,600/- , received by the assessee is correctly shown by the assessee in her return of income filed. Rest of the amount is received by the person named Mukeshkumar Vrajlal Dattani, who was having lesser share in the said property. But, on going through the property sale deed, it was noticed that the stamp duty paid for sale of the property stands at Rs.1,92,500/- and as per stamp duty valuation, the value of the property comes to Rs.1,92,500 *100/4.9 = Rs.39,28,571/-. There is a difference of Rs.7,33,846/- noticed, which attracts the provision of section 50C of the Income-tax Act, 1961. Further, another Show Cause notice was issued to the assessee on 22.11.2018 which was duly served upon the assessee on 22.11.2018, in response the reply received from the assessee on 23.11.2018 in

ITA No.462/Rjt/2026 (Assessment Year 2011-12) Pallavi Rajesh Dattani v. ITO which the assessee has submitted only sale Deed as a part submission. Further, a Show Cause notice was issued to the assessee on 11.12.2018 asking her to explain the issue attracting the provision of Section 50C of the Act. In response to show cause notice, the assessee has replied on 13.12.2018, stating that, “In the above case, property sold during year in concern is sold due to death of person managing business, Mr. Rajesh Dattani. Property was sold after getting necessary certification from court regarding sale of property where of procurement of probate was fulfilled by party. Detailed valuation report regarding said property was done on 08th November, 2011 by government approved valuer for probate and court procedures where realizable value was adjudged at Rs. 26,96,500/- |-. 4. The assessing officer noticed that as per section 50C of the Act, it is also provided that where the assessee claims that the value adopted or assessed for stamp duty purposes is more than the fair market value of the property, as on the date of transfer and he has not disputed this value before the appellate authorities or the court under stamp duty act then the assessing officer may refer the valuation of such property under transfer to the valuation officer in accordance with Section 55A of the Income tax Act, 1961. As such this sale is a distress sale due to death of bread earner of family there is no doubt that purchaser had upper hand in negotiation deal as well as amount realizable under stress sale is also adjudged at Rs.26,63,600/- by valuer. The submission made by the assessee was not accepted by the assessing officer. The assessing officer noticed that the valuation done by registered valuer, that is, Fair Market Value calculated at Rs.33,29,500/- but the valuation adopted by the assessee is at Rs.31,94,725/-, which is arbitrary and not to be accepted. Therefore, the difference amount i.e. (Rs.39,28,571- Rs.31,94,725) = Rs.7,33,846 was added to the total income of the assessee u/s 50C of the I.T. Act for A.Y. 2011-12.

ITA No.462/Rjt/2026 (Assessment Year 2011-12) Pallavi Rajesh Dattani v. ITO 5. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the action of the Assessing Officer, therefore assessee is in further appeal before this Tribunal. 6. Learned Counsel for the assessee, argued that assessee under consideration has sold the property, as distressed sale due to financial difficulties and the property has been sold after taking the valuation from the registered valuer, which is reproduced below:

ITA No.462/Rjt/2026 (Assessment Year 2011-12) Pallavi Rajesh Dattani v. ITO

Therefore, Ld. Counsel submitted that assessee had sold the property in needy and distress, due to financial difficulties, hence the addition should not be made in the hands of the assessee. 7. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which I have already noted in my earlier para and is not being repeated for the sake of brevity. 8. I have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. I note that as per the information available from the Income Tax Officer, the assessee has sold a property for consideration to the tune of Rs. 39,26,915/- and 6

ITA No.462/Rjt/2026 (Assessment Year 2011-12) Pallavi Rajesh Dattani v. ITO the assessee has not filed her return of income u/s 139 of the Income Tax Act, 1961.The assessee’s case was re-opened after necessary approval obtained from Pr. Commissioner of Income Tax, Jamnagar on 08.03.2018. On going through the sale deed (enclosed from Page No. 21 to 46 of paper book) and submission made by the assessee, on 10.10.2018 and 23.11.2018, it was noticed that the property in concern belonged to two peoples and part payment, that is, Rs. 20,00,000/- and Rs. 6,63,600/-, total Rs. 26,63,600/- received by the assessee is correctly shown by the assessee in her return of income filed. The rest of the amount is received by the person named Mukeshkumar Vrajlal Dattani who was having less share in the said property. The bifurcation of the consideration received is tabulated herein below as under:

As per the allegation of the assessing officer, ongoing through the property sale deed, it was noticed that the stamp duty paid for sale of the property stands at Rs. 1,92,500/-and as per stamp duty valuation, the value of the property comes to Rs. 1,92,500 *100/4.9 Rs. 39,28,571/-. There is a difference of Rs. 7,33,846/- (Rs. 39,28,571- Rs. 31,94,725) noticed, which attracts the provision of section 50C of the Income-Tax Act, 1961 amounting to Rs. 7,33,846/-. Further, another show cause notice was issued to the assessee on 20.11.2018 which was duly served upon the assessee on 22.11.2018, in response the reply was received from

ITA No.462/Rjt/2026 (Assessment Year 2011-12) Pallavi Rajesh Dattani v. ITO the assessee on 23.11.2018, in which the assessee has submitted sale Deed. Further, another Show Cause notice was issued to the assessee on 11.12.2018 asking her to explain the issue attracting the provision of Section 50C of the Act.In response to Show Cause notice, the assessee has replied on 13.12.2018, stating as follows: "In the above case, property sold during year in concern is sold due to death of person managing business Mr. Rajesh Dattani, Property was sold after getting necessary certification from court regarding sale of property where of procurement of probate was fulfilled by party." 9. A detailed valuation report regarding said property was done on 8th November 2010 by the government approved valuer for probate and court procedures (enclosed in paper book from Page No. 47 to 58) where realizable value was adjudged at Rs. 26,96,500/-, however, in the current scenario, the sale deed, is executed at Rs. 31,94,725/-. However, during the whole assessment proceedings, the assessing officer has failed to make reference to the DVO to ascertain the correct valuation. Thus, assessee’s claim of not accepting the valuation placed on records of the government approved valuer for probate and Court procedures is not valid. As per section 50C of the Act, the following provisions should be noted in this context, which are as follows: "it is also provided that where the assessee claims that the value adopted or assessed for stamp duty purposes is more than the fair market value of the property as on the date of transfer and he has not disputed this value before the appellate authorities or the court under stamp duty Act then the assessing officer may refer the valuation of such property under transfer to the valuation officer in accordance with section 55A of the Income tax Act, 1961." 10.Therefore, ld.Counsel submitted that as such this sale is distress sale due to death of bread earner of family and there is no doubt that purchaser had upper hand in negotiation deal as well as amount realizable under stress sale is also adjudged at Rs. 26,63,600/- by valuer. Further, the property sold dated 28.01.2011 was because of the sudden demise of the husband of the assessee,

ITA No.462/Rjt/2026 (Assessment Year 2011-12) Pallavi Rajesh Dattani v. ITO that is, Mr. Rajesh Dattani, dated 14.10.2005. The assessee, that is, wife of the deceased, had the financial, family and social responsibility of bringing up three children and managing the business run under the name of Gopal Masala by the only bread earner of the family. Hence, to overcome the financial crises, the property was sold under a distress sale and therefore, in such cases, the purchaser has upper hand in negotiation deal as well as amount realizable under stress sale. The copy of the court order regarding the sale of the property where procurement of probate was fulfilled by party and also proving the above stated points is also enclosed from Page No. 59 to 66 of assessee’s paper book. 11. I note that the Court had advised the assessee to place a public notice for the said property which has been published on 26-06-2008 in Divya Bhaskar Newspaper (Rajkot Edition) having wide publicity and in that connection, Court has not received any objection on the value of the property as well as on the facts of the issuing the permission from the Court. The copy of the same is enclosed at page 67 of the paper book. In this connection, I place reliance on the below-mentioned case laws of different Benches: (i). Income-Tax Appellate Tribunal (ITAT), Jaipur in the case of Suman Katta, Jaipur v. DCIT (ITA No. 331/JPR/2017-AY 2012-13) wherein it is held that: "The ITAT held that Section 50C cannot be applied in distress sales where properties are sold under compulsion, such as to repay loans. The Tribunal emphasized that the sale consideration agreed upon under distress reflects the market value and should be accepted for capital gains computation." (ii). Income-Tax Appellate Tribunal ITAT Mumbai in the case of Mary Martis v. ΙΤΟ (ΑΥ 2009-10), ITA No. 977/Mum/13, held as follows: "The ITAT Mumbai acknowledged that Section 50C could cause genuine hardship to owners who have already suffered losses in a distress sale. The tribunal considered the circumstances of the sale and the absence of cush transactions, suggesting that the provisions of Section 50C should be applied judiciously." 9

ITA No.462/Rjt/2026 (Assessment Year 2011-12) Pallavi Rajesh Dattani v. ITO (iii). Income-Tax Appellate Tribunal ITAT Lucknow Bench in the case of ITO vs Shri Hari Om Gupta [ITA No. 222/LKW/2013-AY 2006-07], held as follows:

"The ITAT Kanpur noted that the property was sold under distress to repay a loan, and the sale deed was executed at the instance of the buyer. The tribunal concluded that Section 50C could not be invoked in such a scenario, as the sale was under compulsion and the sale consideration was pre-decided." 12. Besides, the property sold, is a co-owned property by the assessee and Mr. Mukesh Vrajlal Dattani and therefore, the proposed difference of Rs. 7,33,846/- should not be entirely held in the assessee's hands. Therefore, I note that the sale was out of distress and section 50C of the Act would not apply for such transaction. Considering these facts and circumstances, I delete the addition and allow the appeal of the assessee.

Order is pronounced in the open Court Today on 24/07/2026.

Sd/- [ Dr. Arjun Lal Saini ] Accountant Member //True Copy// राजकोट/Rajkot िदनांक/ Date: 24/07/2026 Copy of the order forwarded to : 1. The assessee 2. The Respondent 3. CIT 4. The CIT(A) 5. DR, ITAT, RAJKOT 6. Guard File By order

Assistant Registrar/Sr. PS/P.S. ITAT, Rajkot