ITO WARD 17(2)(1), MUMBAI, MUMBAI vs. LATE BOMI NAVROJI ADAJANIA (EXECUTOR FIRDAUS HOMI MASANI), MUMBAI

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ITA 4399/MUM/2025Status: DisposedITAT Mumbai22 June 2026AY 2019-2013 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that an adjustment under Section 50C of the Act cannot be made while processing the return under Section 143(1) as it deprives the assessee of their statutory right to object to the stamp duty value. The adjustment made by the AO was unsustainable.

What were the facts?

The Assessing Officer (AO) made an adjustment of Rs. 3,91,01,000/- under Section 50C of the Income-tax Act in the intimation processed under Section 143(1) after the assessee's death. The CIT(A) directed the AO to delete this adjustment.

What were the issues?

Whether an adjustment under Section 50C can be made during the processing of a return under Section 143(1) without affording the assessee an opportunity to object to the stamp duty valuation.

Which sections of the Income-tax Act were involved?

Section 50C,Section 143(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: HON’BLE SANDEEP GOSAIN & HON’BLE JAGADISH

For Respondent: Shri Swapnil Choudhari ( SR

आदेश / ORDER

PER SANDEEP GOSAIN, JUDICIAL MEMBER: This appeal is filed by the Department against the order of Ld. NAFAC, ADDL.CIT(A)-3, HYDERABAD vide DIN: CPC/1920/A2/2012308346 dated 24-Feb-2025 for the Assessment Year 2019-20. The Department has raised the following grounds of appeal:

ITA 4399/MUM/2025 LATE BOMI NAVROJI ADAJANIA (EXECUTOR FIRDAUS HOMI MASANI)  Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in directing to the Assessing Officer to delete the adjustment made without appreciating the provisions of section 50C of the Income-tax Act, 1961  Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in directing to the Assessing Officer to delete the adjustment made of Rs. 3,91,01,000/- in intimation U/s. 143(1) of the Income-tax Act, dated 02.12.2020 with regard to the computation of Long Term Capital Gains on the grounds that the assessee was not given opportunity  Whether on facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the additions made without giving an opportunity to the Assessing Officer to ascertain the correct value of the property by valuation done through Department Valuation Officer  The appellant craves leave to add, alter, vary, modify, substitute or amend any of the grounds of appeal

2.

At the very outset, we noticed that there is a delay of approximately 65 days in filing the appeal before us. Considering the entire factual position as explained before us, and also keeping in view the principles laid down by the Hon’ble Supreme Court in the case of Collector, Land Acquisition, Anantnag & Anr. vs. Mst. Katiji & Ors., wherein it has been held that where substantial justice is pitted against the technicalities of non-deliberate delay, substantial justice is to be preferred, we are of the view that the principle of advancing substantial justice is of prime importance. Hence, considering the explanation put forth by the assessee, who has justifiably and properly explained the delay that occurred in filing the appeal, and considering the expression “sufficient cause” liberally, we are inclined to condone the delay in filing the appeal before us. Consequently, the delay is condoned and the appeal is admitted for hearing on merits.

ITA 4399/MUM/2025 LATE BOMI NAVROJI ADAJANIA (EXECUTOR FIRDAUS HOMI MASANI) 3. The concise and unified ground raised by the Revenue relates to challenging the order of the Ld. CIT(A) in directing the AO to delete the adjustment of Rs. 3,91,01,000/- made in the intimation under Section 143(1) of the Act. Therefore, we have decided to adjudicate these grounds through the present consolidated order.

4.

As per the facts of the present case, late Mr. Bomi Navroji Adajania had filed his return of income for the year under consideration, and the said return was processed by the AO under Section 143(1) of the Act vide intimation dated 02.12.2020, computing the total income after making additions/adjustments of Rs. 3,91,01,000/- under Section 50C of the Act.

5.

The said intimation was issued after the death of the assessee. Thereafter, Mr. Firdaus Homi Masani, being one of the executors of the deceased assessee, filed an appeal before the CIT(A) against the said intimation/adjustment made by the AO. Consequently, the Ld. CIT(A), vide detailed order dated 24.02.2025, directed the AO to delete the intimation/adjustment made under Section 143(1) of the Act. Aggrieved by the said order, the Revenue has now preferred the present appeal on the grounds mentioned hereinabove.

6.

We have heard the counsels for both the parties, perused the material placed on record, the judgments cited before us, and also the orders passed by the Revenue Authorities. From the records, we noticed that the Ld. CIT(A) had adjudicated the grounds raised before us in its order, and the operative portion of the order of the Ld. CIT(A) is contained in Paras 5.2 to 6 and the same is reproduced herein below:

ITA 4399/MUM/2025 LATE BOMI NAVROJI ADAJANIA (EXECUTOR FIRDAUS HOMI MASANI) 5.2 I have examined the return of income filed, the intimation issued and the statement of facts. In the return of income filed by late Bomi Navroji Adajania for the AY 2019-20 on 27/08/2019 income under the head long-term capital gains was shown at Rs.1,37,06,244/-. In the ROI filed 2 properties are shown to have been sold. For one property the sale consideration was shown at Rs. 2,01,43,198/- and the value as per stamp valuation authority was shown at Rs. 5,43,87,511/-. For another property the sale consideration was shown at Rs. 28,56,802/- and the value as per stamp valuation authority was shown at Rs. 77,13,489/-.

5.3 The long-term capital gain (LTCG) on the sale of properties was computed in ROI after taking into account the sale consideration received. Thus for one of the property which was sold for a consideration of Rs. 2,01,43,198/- after claiming deduction u/s 48 of Act for cost of acquisition etc., at Rs.82,37,960/- the LTCG was computed at Rs.1,19,05,238/-. Similarly in respect of another property which was sold for a consideration of Rs.28,56,802/- after claiming deduction u/s 48 of Act for cost of acquisition etc., at Rs. 10,55,795/- the LTCG was computed at Rs.18,01,006/-. The total of the LTCG on sale of both the properties was thus shown at Rs. 1,37,06,244/-.

5.4 In the intimation issued the full value of consideration received in respect of both these properties as per provisions of section 50C of the Act was taken to be the value of property as per stamp duty valuation. Therefore, in the intimation the computation of capital gain in respect of property sold for Rs. 2,01,43,198/- the full value of consideration was taken at Rs. 5,43,87,511/- and after allowing deducting u/s 48 of Act as claimed the LTCG was computed at Rs. 4,61,49,551/-. Similarly in intimation the computation of capital gain for the in respect of another property sold for Rs. 28,56,802/- the full value of consideration was taken at Rs. 77,13,489/- and after allowing deducting u/s 48 of Act as claimed the LTCG was computed at Rs. 66,57,693/-. The total of the LTCG on sale of both the properties was thus computed at Rs. 5,28,07,244/- in the intimation issued u/s 143(1) of the Act

5.5 In order to have a clear understanding of the issue it would be relevant to examine the relevant part of the ROI wherein the details of long-term capital gains

ITA 4399/MUM/2025 LATE BOMI NAVROJI ADAJANIA (EXECUTOR FIRDAUS HOMI MASANI) are shown. Page no. 5 and 6 of ROI is reproduced below containing the details given for computing capital gains :

5.6 From the above pages it can be seen that there are 3 columns provided in ROI for making entry for working of capital gains. First column (ai) for entering “Full value of consideration received/receivable”. Second column is (aii) for entering “Value of property as per stamp valuation authority”. Third column is (aiii) which states that the “Full value of consideration adopted as per section 50C for the purpose of Capital Gains [in case (aii) does not exceed 1.05 times (ai), take this figure as (ai), or else take (aii)]”. Thus, if the value as per stamp valuation authority is more than 1.05 times of consideration received then as per ROI only value as per stamp valuation authority would be considered as full value of consideration as per provisions of section 50C of the Income Tax Act, 1961. The above proposition mention in ROI to compute capital gains are found to be not exactly accurate.

5.7 Provisions of sub-section (1) of section 50C of the Income Tax Act, 1961 specifies that the value adopted by stamp valuation authority is deemed to be full value of consideration received if the actual consideration received is less than value adopted by stamp valuation authority. However, sub-section (2) of Section 50C of Income Tax Act, 1961 provides that if the appellant objects to the value adopted by stamp valuation authority or value adopted by stamp valuation authority is disputed, then the valuation has to be referred to the Department Valuation Officer (DVO). Thereafter, in case the value determined by the DVO is lower than the value adopted by stamp valuation authority, the value determined by DVO has to be considered for computing capital gain in terms with sub-section (3) of section 50C.

5.8 In view of the provisions of sub-section (2) of Section 50C of the Income Tax Act, 1961 the person filing the return of income has a right to take objection to the value adopted by the stamp valuation authority. In this case late Bomi Navroji Adajania has taken the full value of consideration received for computing capital gains in respect of both the properties despite the value adopted by stamp valuation authority being higher. Therefore, by implication late Bomi Navroji Adajania has taken objection to the value adopted by stamp valuation authority

ITA 4399/MUM/2025 LATE BOMI NAVROJI ADAJANIA (EXECUTOR FIRDAUS HOMI MASANI) for these properties. In view of the fact that provision of section 50C (1) of the Income Tax Act, 1961 is a deeming provision it cannot be applied automatically without giving an opportunity to the person who has filed the return of income.

5.9 In view of above, the adjustment made in intimation u/s 143(1) of the Income Tax Act, 1961 by computing capital gains taking into account the value adopted by the stamp valuation authority for both the properties sold by late Bomi Navroji Adajania cannot be sustained. The Assessing Officer is therefore directed to delete the adjustment made of Rs. 3,91,01,000/- in intimation u/s 143(1) of the Income Tax Act, 1961 dated 02-12-2020 with regard to the computation of long- term capital gains.

5.10 Before parting it would be pertinent to mention that as per the statement of facts given by the appellant the properties sold has an inherent defect as one Mr Baldesing Jaggi has created an encumbrance on the properties. It is also mentioned by the appellant that the properties were sold at a lower rate that market/stamp duty value with an understanding that the vendor would be solely responsible to handle the said encumbrance/hurdle. The above assertion by the appellant may require investigation as the difference in sale consideration and stamp duty valuation is substantial i.e. Rs.3,91,01,000/-. In view of above, the Assessing Officer if deemed necessary, may take appropriate action as required under other provisions of the Income Tax Act, 1961 on the appellant i.e. Mr Firdaus Homi Masani the Executor of Late Bomi Navroji Adjania.

6.0 In the result, the appeal filed by the appellant is allowed.

7.

After considering the submissions raised by both the parties and after hearing them at length, we found that initially the return filed by the assessee was processed under Section 143(1) of the Act and additions/adjustments of Rs. 3,91,01,000/- were made on account of the fact that late Mr. Bomi Navroji Adajania, for the year under consideration, had shown LTCG of Rs. 1,37,06,244/- in the return of income. It was mentioned in the return of income that two properties owned by the

ITA 4399/MUM/2025 LATE BOMI NAVROJI ADAJANIA (EXECUTOR FIRDAUS HOMI MASANI) assessee were sold. In respect of one property, the sale consideration was shown at Rs. 2,01,43,198/-, whereas the value adopted by the Stamp Valuation Authority was shown at Rs. 5,43,87,511/-. For the other property, the sale consideration was shown at Rs. 28,56,802/-, whereas the value adopted by the Stamp Valuation Authority was shown at Rs. 77,13,489/-.

8.

The LTCG on the sale of the properties was computed in the return of income after taking into account the actual sale consideration received. In this manner, for the property sold for consideration of Rs. 2,01,43,198/-, after claiming deduction under Section 48 of the Act towards cost of acquisition, etc. amounting to Rs. 82,37,960/-, the LTCG was computed at Rs. 1,19,05,238/-. Similarly, in respect of the other property sold for consideration of Rs. 28,56,802/-, after claiming deduction under Section 48 of the Act towards cost of acquisition, etc. amounting to Rs. 10,55,795/-, the LTCG was computed at Rs. 18,01,006/-. Accordingly, the total LTCG on sale of both the properties was shown at Rs. 1,37,06,244/-.

9.

As per the provisions of sub-section (1) of Section 50C of the Act, the value adopted by the Stamp Valuation Authority is deemed to be the full value of consideration received if the actual consideration received is less than the value adopted by the Stamp Valuation Authority. However, sub-section (2) of Section 50C of the Act provides that if the assessee objects to the value adopted by the Stamp Valuation Authority, then the valuation has to be referred to the DVO. Thereafter, the value determined by the DVO has to be considered for computing capital gains in terms of sub-section (3) of Section 50C of the Act. In view of the above provisions, as discussed by us, the assessee had a right to object to the value adopted

ITA 4399/MUM/2025 LATE BOMI NAVROJI ADAJANIA (EXECUTOR FIRDAUS HOMI MASANI) by the Stamp Valuation Authority. Therefore, it was concluded by the Ld. CIT(A) that, by implication, late Mr. Bomi Navroji Adajania had objected to the value adopted by the Stamp Valuation Authority for these properties. The Ld. CIT(A) also observed that since the provisions of Section 50C(1) of the Act are deeming provisions, they cannot be applied automatically without giving an opportunity to the person who had filed the return of income.

10.

Even otherwise, the Coordinate Bench of the ITAT in the case of Amit Sabharwal had held that no adjustment under Section 50C of the Act can be made while processing the ITR under Section 143(1) of the Act. In this regard, a detailed order has been filed, the operative portion of which is contained in Paras 3 to 8 and the same is reproduced herein below:

3.

The relevant facts giving rise to this appeal are that the assessee filed his Income Tax Return (hereinafter, the ‘ITR’) on 25.10.2019 declaring income of Rs.62,43,461/-. The assessee has shown Long Term Capital Gains of Rs.46,23,385/- on the sale of immovable property situated in Noida for sale consideration of Rs.1,58,43,750/- as against the circle rate of Rs.1,94,95,000/- shown in the ITR. The sale consideration and the circle rate as mentioned above of the said property were duly disclosed in the ITR. Keeping in view the provisions of Section 50C of the Act, the Assessing Officer (hereinafter, the ‘AO’)- CPC show caused the assessee under section 143(1) of the Act while processing the said ITR for working out the addition/adjustment of Rs.36,51,250/- by taking the sale consideration & circle rate at Rs.1,94,95,000/- instead of Rs.1,58,43,750/- as shown in the ITR (the difference between circle rate and sale consideration). In response to the show cause notice under section 143(1) of the Act, the assessee filed his objection before the AO-CPC. However, the AO did not take cognizance of the same and do needful as per the law. But he made the addition/adjustment of Rs.36,51,250/- under section 143(1)(a) of the Act. Aggrieved, the assessee filed appeal before the CIT(A)/Addl./Joint CIT(A), who dismissed the appeal observing as under: -

“The assessee is an individual having income under the head business income (as partner), income from other sources and long term capital gain on sale of leasehold residential

ITA 4399/MUM/2025 LATE BOMI NAVROJI ADAJANIA (EXECUTOR FIRDAUS HOMI MASANI) property. Notice u/s 250 was issued on 01.06.2023, which was responded by the appellant on 09.06.2023. During the year, the appellant had sold a residential property in Noida for Rs.1,58,43,750/-. The guideline value of the said property on that date was Rs.1,94,95,000/- , i.e. the minimum value of that property as fixed by the State Government, at which property can be registered. The said property was sold at Rs. 1,58,43,750/-, which was below the guideline value fixed by the State Government. As per Section 50 C of Income Tax Act, "the sale consideration value must not fall below the stamp duty value determined by the Stamp Value Authority. However, the income tax department allows a slight relief of 10% variation." Further, the capital gain was computed on the basis of actual sale consideration. The facts of the case in the light of the grounds of appeal, statement of facts and the submissions made by the appellant were carefully considered. In the instant case, the appellant himself has admitted in the statement of facts that the property was sold below the guideline value. Hence, the appeal of the appellant is Dismissed.”

4.

The Ld. Authorized Representative (hereinafter, the ‘AR’) contended that once the assessee had filed his objection to the show cause notice for proposed adjustment under section 143(1) of the Act, the proper recourse available with the AO was to refer the matter to the DVO for needful valuation and subsequent actions thereafter. However, the AO did not follow the proper procedure, once the same had been objected by the assessee, provided under section 50C of the Act; therefore the AO could not make any adjustment under section 50C(1) of the Act. To buttress the argument, the Ld. AR placed reliance on the decision in the case of Inder Jeet Malik in ITA No. 1024/Del/2022 (order dated 26.07.2022). It was categorically submitted that the present case got squarely covered by the decision of the Co-ordinate Bench in the case of Inder Jeet Malik (supra).

5.

The Ld. Senior Departmental Representative (hereinafter, the ‘Sr. DR’), placing reliance on the finding of the first appellate authority requested for dismissal of the appeal on the reasoning that the said adjustment tantamount to the wrong claim under section 143(1) of the Act.

6.

We have heard both parties at length and have perused the material available on record. The Co-ordinate Bench of Tribunal in the case of Inder Jeet Malik (supra) has held as under:

5.

I have heard the parties and perused the materials on record. The basic issue requiring consideration is, whether the addition made under section 50C(1) can fall within the ambit of adjustments provided under section 143(1)(a) of the Act. It is noticed; the following adjustments can be made while processing the return under section 143(1) of the Act:

ITA 4399/MUM/2025 LATE BOMI NAVROJI ADAJANIA (EXECUTOR FIRDAUS HOMI MASANI) "Assessment. 143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:-- (a) the total income or loss shall be computed after making the following adjustments, namely: - (i) any arithmetical error in the return; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139; (iv) disallowance of expenditure 68[or increase in income] indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under 69[section 10AA or under any of the provisions of Chapter VI-A under the heading "C.-- Deductions in respect of certain incomes", if the return is furnished beyond the due date specified under sub-section (1) of section 139; or ITA No. 1024/Del./2022 AY: 2019-20 (vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return:"

6.

No doubt, in the present case adjustment has been made under subclause (ii) to section 143(1)(a). The expression "incorrect claim apparent from any information in the return" has been explained under Explanation to section 143(1)(a) of the Act and reads as under: "Explanation- For the purposes of this sub-section- (a) "an incorrect claim apparent from any information in the return" shall mean a claim, on the basis of an entry, in the return- (i) of an item, which is inconsistent with another entry of the same or some other item in such return; (ii) in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or (iii) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction;

7.

On a conjoint reading of section 143(1)(a)(ii) along with Explanation it becomes very much clear that the addition under section 50C(1) cannot be in the nature of incorrect claim as provided in Explanation to section 143(1)(a)(ii) of the Act. This is so because, section 50C has to be read as a whole and cannot be restricted to sub-section (1) alone. It is fairly well settled; a deeming provision has to be taken to its logical end. Undoubtedly, section 50C is a deeming provision. Though, sub-section (1) of section 50C ITA No. 1024/Del./2022 AY: 2019-20 provides for substituting the stamp duty value as deemed sale consideration in place of the declared sale consideration, however, sub-section (2) carves out an exception by providing that if the assessee objects to the stamp duty value, the valuation has to be referred to the Department Valuation Officer (DVO) and in case the value determined by the DVO is lower than the stamp duty value, the value determined by

ITA 4399/MUM/2025 LATE BOMI NAVROJI ADAJANIA (EXECUTOR FIRDAUS HOMI MASANI) DVO has to be considered for computing capital gain in terms with sub-section (3) of section 50C. Therefore, sub-section (1) to section 50C cannot be considered in isolation. By making an adjustment of the nature contemplated under sub- section (1) to section 50C, that too, by CPC, the Department takes away a valuable statutory right given to the assessee to object to the value determined by stamp valuation authority.

8.

Therefore, such type of adjustment, in my considered opinion, cannot be made under section 143(1)(a) of the Act. This is so because, at the stage of processing of return under section 143(1)(a), if such an adjustment is made, the assessee does not get an opportunity to object, as per section 50C(2) of the Act. More so, when conditions of the 1st and 2nd proviso to section 143(1)(a) are not complied. Therefore, I hold that the addition made by CPC ITA No. 1024/Del./2022 AY: 2019-20 under section 50C(1) of the Act by way of adjustment under section 143(1)(a)(ii) is unsustainable. Accordingly, I delete the addition.”

7.

We are of the considered view that this case is squarely covered by the decision of the Co-ordinate Bench of Tribunal in the case of Inder Jeet Malik (supra). We therefore, following the reasoning given by the Coordinate Bench in the case of Inder Jeet Malik (supra), hold that the no adjustment/addition under section 50C of the Act can be made while processing the ITR under section 143(1) of the Act. Accordingly, we delete the addition of Rs.36,51,250/-. 8. In the result, the appeal of the assessee is allowed.

11.

Therefore, keeping in view the entire facts and circumstances discussed above, and also considering the decision of the Coordinate Bench of ITAT in the case of Amit Sabharwal (supra), we are of the view that adjustment made in the intimation under Section 143(1) of the Act while computing the capital gains by adopting the value determined by the Stamp Valuation Authority for both the properties sold by late Mr. Bomi Navroji Adajania, was not sustainable. Thus, the AO was rightly directed by the Ld. CIT(A) to delete the adjustment made in the intimation under Section 143(1) of the Act. Moreover, we have seen that the Ld. CIT(A), while adjudicating the appeal, had also granted liberty to the AO to take appropriate action, if required, under other provisions of the Income-tax Act, 1961, as applicable on the assessee, Mr. Firdaus Homi Masani.

ITA 4399/MUM/2025 LATE BOMI NAVROJI ADAJANIA (EXECUTOR FIRDAUS HOMI MASANI) 12. Even otherwise, no new facts, circumstances, or documents have been placed on record by the Ld. DR in order to controvert or rebut the lawful findings so recorded by the Ld. CIT(A). Therefore, we see no reason to interfere with or deviate from the findings recorded by the Ld. CIT(A). Hence, we dismiss the grounds raised by the Revenue and uphold the order of the Ld. CIT(A).

13.

In the result, appeal filed by the Department stands dismissed.

Order pronounced in the open court on 22.06.2026.

Sd/- Sd/- JAGADISH SANDEEP GOSAIN ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 22.06.2026 RY-Sr. PS

Copy to: ITO WARD 17(2)(1), MUMBAI, ROOM NO. 234, KAUTILYA BHAVAN, 1 BANDRA KURLA COMPLEX, BANDRA, MUMBAI-400051, MAHARASHTRA LATE BOMI NAVROJI ADAJANIA (EXECUTOR FIRDAUS HOMI MASANI), 2 401, NEW ORIENT HOUSE, MUMBAI GPO, MUMBAI-400001, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE

ITA 4399/MUM/2025 LATE BOMI NAVROJI ADAJANIA (EXECUTOR FIRDAUS HOMI MASANI)

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