ACIT-6(1)(1),MUMBAI, MUMBAI vs. M/S CLASSIC ELECTRICALS LTD., GRANT ROAD (W) , MUMBAI,

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ITA 3308/MUM/2026Status: DisposedITAT Mumbai23 September 2026AY 2014-1512 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 dismissed the Revenue's appeal. The Tribunal found that the assessee had provided assessment orders for AYs 1991-92 and 1992-93, which were part of the Revenue's own records. These earlier assessment orders showed that the transactions relating to the purchase of these properties had already been examined by the Department. During those earlier assessments, the transactions were referred to the Departmental Valuation Officer (DVO), and additions were made towards undisclosed consideration based on the DVO's reports. Therefore, the subsequent registration in FY 2013-14 did not alter the factual position that the acquisition transactions had taken place in the earlier period and had been scrutinized by the Department. The registration in FY 2013-14 was considered a completion of formalities for properties already acquired, not a new acquisition. The Tribunal held that the Ld. CIT(A) had correctly considered the relevant assessment records and made a finding consistent with the Department's own records. The Revenue's reliance on Sumati Dayal v. CIT was not advanced as it could not displace established documentary material from the Department's own assessment records. The absence of specific evidence in the current proceedings did not render irrelevant the earlier assessment orders where the same transactions were considered. Thus, the Ld. CIT(A)'s order was upheld.

What were the facts?

The Revenue appealed the CIT(A)'s order deleting an addition of Rs. 5,08,88,700 for Assessment Year 2014-15. The assessee, M/s. Classic Electricals Ltd., registered six properties in its name on April 26, 2013, with an agreement value of Rs. 52,36,800 and a stamp duty value of Rs. 5,61,25,500. The assessee claimed the properties were purchased in FY 1990-91, with registration and stamp duty paid only in FY 2013-14 due to unavoidable circumstances. The Assessing Officer (AO) questioned the genuineness of this claim due to the long delay and lack of contemporaneous evidence, such as bank statements or primary payment receipts. The AO made an addition under Section 56 read with Section 50C of the Income Tax Act, 1961.

What were the issues?

1. Whether the Ld. CIT(A) erred in deleting the addition of Rs. 5,08,88,700 by failing to appreciate the assessee's lack of primary evidence (bank statements, payment receipts) for the alleged acquisition of properties in FY 1990-91 and 1991-92 (Section 56 and Section 50C of the Act). 2. Whether the Ld. CIT(A) erred in over-relying on audited financial statements and ignoring the Field Inspector's report, which indicated the assessee was not in actual possession and municipal records remained in the original developer's name (Section 56 and Section 50C of the Act). 3. Whether the Ld. CIT(A) failed to apply the 'Test of Human Probabilities' as laid down in Sumati Dayal vs. CIT, by not questioning the 26-year delay in registering property titles (Section 56 and Section 50C of the Act). 4. Whether the Ld. CIT(A) erred in holding that no transfer or purchase occurred in FY 2013-14, when legal recognition of rights and discharge of stamp duty in that year constitute the effective date of the transaction for tax purposes in the absence of earlier payment proof (Section 56 and Section 50C of the Act). 5. Whether the Ld. CIT(A) erred in law by dismissing the applicability of Section 56 in its entirety, failing to consider the transaction as a device to circumvent taxability of the difference between fair market value and declared consideration (Section 56 of the Act). Assessee's Contention: The properties were purchased in FY 1990-91, with registration and stamp duty paid only in FY 2013-14 due to unavoidable circumstances. The CIT(A) correctly deleted the addition as capital gains are chargeable to the seller, not the purchaser, and Section 56(2)(vii) and 56(2)(x) were not applicable to a company in AY 2014-15. Revenue's Contention: The assessee failed to provide primary evidence for the acquisition in FY 1990-91. The delay in registration was not credible. The CIT(A) erred by relying on financial statements and ignoring the inspector's report and the test of human probabilities. The registration in FY 2013-14, along with stamp duty payment, should be considered the effective date of the transaction. Section 56 was applicable. Relied on Sumati Dayal vs. CIT.

Which sections of the Income-tax Act were involved?

Section 56,Section 50C,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, MUMBAI

Before: SHRI NARENDER KUMAR CHOUDHRY, JM & SHRI ARUN KHODPIA, AM

For Appellant: Shri Gautam Thakkar
For Respondent: Shri Ajay Soneji, Sr. DR
Hearing: 01.07.2026

आयकर अपीलीय अिधकरण �ायपीठ मुंबईम�। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JM & SHRI ARUN KHODPIA, AM I.T.A. No. 3308/Mum/2026 (Assessment Year: 2014-15) ACIT-6(1)(1), Mumbai M/s. Classic Electricals Ltd. Room No.504, 5th Floor, Aayakar 33, Huges, 3rd Floor, NS Patkar Marg, Vs. Bhavan, Churchgate, Opp. Prempuri Asharam Grant Road Mumbai-400020 (W) Mumbai-400007 PAN: AAACC5735F Revenue- अपीलाथ� / Appellant Assessee-��थ�/ Respondent :

Assessee by : Shri Gautam Thakkar Revenue by : Shri Ajay Soneji, Sr. DR Date of Hearing : 01.07.2026 : 23.09.2026 Date of Pronouncement

O R D E R Per Arun Khodpia, AM: The captioned appeal is preferred by the revenue, directed against the order of the Commissioner of Income Tax Appeals-4, Mumbai [in short, “the Ld. CIT(A)”], dated 28.01.2026 for the Assessment Year (AY) 2014-15, arises from the assessment orders under section 143(3) of the Income Tax Act, 1961 [in short, “the Act”] dated 09.12.2016, passed by DCIT, Ciecle-7(2), Mumbai [in short, “the Ld. AO”].

ITA No. 3308/Mum/2026 M/s. Classic Electricals Ltd. 2. The grounds of appeal raised by the revenue are as under: “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 5,08,88,700 without appreciating that the assessee failed to provide primary evidence, such as bank statements or contemporary payment receipts, to prove the initial acquisition of properties in F.Y. 1990-91 and 1991-92. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in over-relying on the assessee's audited financial statements while ignoring the Field Inspector's report, which confirmed that the assessee was not in actual possession and that municipal/utility records remained in the name of the original developer. 3. The Ld. CIT(A) failed to apply the Test of Human Probabilities as laid down by the Hon'ble Supreme Court in Sumati Dayal vs. CIT (214 ITR 801), by failing to question the commercial and logical validity of a 26-year delay in registering property titles. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that no transfer or purchase occurred during the year, whereas the legal recognition of rights and the discharge of stamp duty liabilities in F.Y. 2013-14 constitute the effective date of the transaction for tax purposes in the absence of proof of earlier payment. 5. The Ld. CIT(A) erred in law by dismissing the applicability of Section 56 in its entirety, failing to consider that the transaction was a colorable device intended to circumvent the taxability of the difference between the fair market value and the declared consideration. 6. The appellant craves leave to add, amend, alter, or delete any of the above grounds of appeal at or before the time of the hearing.” 3. The brief facts of the case are that, the assessee had registered six properties in its name at Krishna Chambers on 26.04.2013, aggregating to an agreement value of Rs. 52,36,800, whereas the corresponding stamp-duty value was Rs. 5,61,25,500.

4.

The assessee contended that the properties had in fact been purchased in F.Y. 1990-91, though no registration had been effected at that time and stamp duty had also not been paid, due to un avoidable circumstances, the registration and payment of stamp duty took place only during F.Y. 2013-14 (AY 2014-15).

ITA No. 3308/Mum/2026 M/s. Classic Electricals Ltd. 5. During assessment proceedings, the AO required the assessee to furnish details regarding the transactions, including the date and manner of original purchase, agreements, proof of payment and bank statements. The assessee furnished only part of the details and did not produce bank statements or other documentary evidence establishing that the properties had actually been purchased and paid for in F.Y. 1990-91. A further show-cause notice was issued requiring proof of cheque payments and bank statements, but the AO recorded that the requisite purchase proof was not furnished.

6.

The AO consequently questioned the genuineness and substance of the assessee’s claim that the properties had been acquired in 1990-91, particularly in view of their registration only in FY 2013-14 and the absence of contemporaneous evidence regarding payment/acquisition.

7.

For this purpose, the AO referred to judicial authorities concerning the necessity of examining the substance and genuineness of a transaction rather than merely its form, including Sumati Dayal v. CIT, McDowell & Co. v. CTO, Union of India v. Gosalia Shipping P. Ltd., Workmen of Associated Rubber Industry Ltd. v. Associated Rubber Industry Ltd., and Kachwala Gems v. JCIT. The AO particularly relied upon the proposition that payment through an account-payee cheque, by itself, does not necessarily establish the genuineness of a transaction. Accordingly, an addition of Rs. 5,08,88,700/- was made by the AO under Section 56 read with Section 50C of the Act.

ITA No. 3308/Mum/2026 M/s. Classic Electricals Ltd. 8. Being aggrieved with the order of AO, the assessee preferred an appeal before the learned CIT(A) challenging the aforesaid issue / addition by the AO, as discussed. After deliberations the learned CIT(A) allowed the appeal of the assessee by directing the AO to delete the entire addition of Rs. 5,08,88,700/- made under Section 56 with Section 50C of the Act.

9.

The observations of the Ld. CIT(A), while giving the aforesaid finding are as under: “7. DECISION: I have considered the facts of the case, discussion in the assessment order and submission of the appellant. Sole issue before me is the addition of long-term capital gains of Rs 5,08,88,700/- u/s 56 r.w.s. 50C. Appellant company had filed the return of income on 18.09.2014 declaring total income of Rs. 16,31,080/-. The appellant company is engaged in the business of leasing & investment and manufacturing of U.F. molding powder. During the year under consideration, six properties were found to be registered in the name of the appellant as under-

In all the six instances, the stamp duty value was much higher than the agreement value. The difference amount of Rs 5,08,88,700/- was added to the income of the appellant as Long term capital gains u/s 56 rws 50C of the Act, which is contested in appeal. 7.1. As per the registered deed, the appellant is the purchaser of the said properties. The capital gains are chargeable in the hands of the seller and not the purchaser. It is a settled position of law that Section 50C of the Income Tax Act is a deeming provision applicable exclusively to the transferor (seller) for the purpose of computing capital gains. The appellant, being the transferee (purchaser), cannot legally be charged with capital gains on an acquisition. It is evident that the AO has wrongly considered the addition as a long-term capital gain in the hands of the appellant. Further, the AO has applied the section 56 of the Act, without identifying the specific limb of section 56. Of the limbs under section 56 of the Act, the sub section 56(2)(vii) and 56 (2) (x) are the two limbs, which specifically deal with the acquisition of the immovable properties at a 4

ITA No. 3308/Mum/2026 M/s. Classic Electricals Ltd. price below the fair market value. The section 56(2)(vi) is applicable only to individuals and Hindu Undivided Families (HUFs). The appellant, being a Company, is not covered by the section 56(2)(vii). Whereas, the Section 56(2)(x), which brought corporate entities under its ambit for such transactions, was introduced by the Finance Act, 2017, effective only from Assessment Year 2018-19. Thus, transactions in question have neither resulted in capital gains in the hands of the appellant nor are covered by Section 56 of the Act. Therefore, the addition made to the income of the appellant, under the above-mentioned sections, are legally invalid and cannot be sustained. 7.2. Coming to the merits of the addition, the appellant has explained that the said properties were actually purchased by it in the FY 1990-91 and only the registration of the properties was done in the FY 2013-14, due to which the transactions got flagged in the system. AO has rejected the explanation provided by the appellant by holding that; - it is hard to believe that the registration of the properties of such huge value can be delayed to such a long period due to "inadvertence". o the reason for registering the property at this stage after so long is not beyond doubt and does not appear acceptable. o the Municipal Taxes and Electricity bills are raised in the name of Mis Ellora Construction Company and are being paid by the M/s Ellora Construction Company and not the appellant. o the transactions are concocted and explanation provided by the appellant is nothing but an afterthought and ploy to avoid tax on Capital Gains. o the bank statement reflecting the transaction was not submitted. o the circle inspector had conducted on spot verification wherein it was found that the notice board of the premises of the properties bore the name of M/s Anchor Electronics & Electricals Ltd. and not M/s Classic Electrical Ltd. 7.3. I have considered the discussion in the assessment order and the submission of the appellant. The appellant has, during the assessment stage and the appellate proceedings, produced the copy of registered agreement of FY 2013-14 along with agreement recording sale of FY 1990-91. The said property was included in the fixed asset schedule of its balance sheet for the FY 1990-91. The purchase of the aforesaid premises was examined during the assessment proceedings for FY 1990-91 and 1991- 92 and recorded in the speaking orders for those years. Appellant has submitted the copies of the assessment orders for the assessment year 1991-92 and 1992-93. As regards the municipal tax and the electricity bill, it is stated that the same continued to be paid by the original builder M/s. Ellora Construction co., as the Co-operative society was not formed till date. The said taxes were paid by the appellant to M/s. Ellora Construction Co. and who in turn paid the same to MCGM. Appellant has submitted the copy of reply of M/s Ellora Construction in response to notice issued by the AO, in which the said concern had confirmed the stand of the appellant. 7.4. The documents provided by the appellant very well establish the fact that the said property was actually purchased in the FY 1990-91. Importantly, the said transactions have been already examined in the assessment order dated 28/3/1994 and 24/3/1995 passed for AY 1991-92 and 1992-93 respectively. During the said assessment proceedings, the properties were referred to the valuation cell and the based on the report of the DVO, an addition of Rs 1,06,18,870/- and Rs 12,33,600/-were made to the income of the appellant as undisclosed consideration paid for acquisition of the property. 5

ITA No. 3308/Mum/2026 M/s. Classic Electricals Ltd. 7.5. Considering the above-mentioned facts, the contention of the appellant that the said properties were purchased in the FY 1990-91, but registered in the FY 2013-14 is found to be correct. The actual sale of the property had taken place much earlier, and the registration in FY 2013-14 is held to be a procedural formality. The Stamp Duty Value of 2013-14 is irrelevant for determining the taxability of a transaction that got concluded two decades prior. The addition of Rs 5,08,88,700/- is held to be legally unsustainable. The AO is hereby directed to delete the same. 7.6. Ground nos. 1, 2 and 3 are allowed.” 10. Being dissatisfied with the aforesaid findings by the Ld., CIT(A), the revenue is in appeal before us.

11.

At the outset, the Ld. Sr. DR representing the Revenue submitted that the order of the Ld. CIT(A) is not acceptable, as the assessee, during the course of assessment proceedings, failed to furnish conclusive documentary evidence, such as bank statements or proof of payment, to establish that the properties in question had actually been purchased during Financial Years 1990-91 and 1991- 92. It was further submitted that the properties were registered and stamp duty was paid only during Financial Year 2013-14, which, according to the Revenue, indicated that the rights in the properties were effectively acquired or recognized only during the year under consideration.

12.

It was further submitted that the inquiry conducted during the course of assessment proceedings revealed that the municipal records and electricity connections were not standing in the name of the assessee, thereby raising doubts regarding the assessee's claim of ownership. The Ld. Sr. DR also submitted that although the provisions of section 56(2)(vii) may not be directly applicable to a company, the circumstances surrounding the transaction, particularly the 6

ITA No. 3308/Mum/2026 M/s. Classic Electricals Ltd. registration of the properties after a substantial gap of approximately 26 years, warranted examination of the genuineness of the assessee's claim. According to the Ld. Sr. DR, in the absence of contemporaneous documentary evidence establishing the purchase in the earlier years, the AO was justified in examining the transaction on the touchstone of human probabilities, placing reliance upon the judgment of the Hon'ble Supreme Court in Sumati Dayal v. CIT [1995] 214 ITR 801 (SC). It was submitted that the surrounding circumstances of the transaction were relevant for determining the true nature and year of the transaction.

13.

Accordingly, the Ld. Sr. DR prayed, considering the facts and circumstances of the case, the appeal filed by the Revenue be allowed and the addition made by the AO be sustained.

14.

On the contrary, Ld. Counsel of the assessee vehemently relied on the orders of Ld. CIT(A) and has placed a factual paper book on record, supporting the decision of Ld. CIT(A).

15.

We have considered the rival submissions, perused the material available on record and the case laws relied upon by the parties. It is an admitted position that, before the AO, the assessee failed to furnish the complete contemporaneous documentary evidence relating to the purchase of the properties in the Financial Years 1990-91 and 1991-92, except financial statements of the company.

ITA No. 3308/Mum/2026 M/s. Classic Electricals Ltd. However, the issue cannot be examined in isolation from the material already available on the record of the Revenue itself.

16.

We find that, before the Ld. CIT(A), the assessee furnished copies of the assessment orders passed in its case for the relevant assessment years and demonstrated that the transactions relating to acquisition of the properties had already been examined by the Department in the course of those assessments.

17.

The Ld. CIT(A), after examining the said assessment orders, specifically recorded that the transactions had been considered in the assessments completed vide orders dated 28.03.1994 and 24.03.1995 for Assessment Years 1991-92 and 1992-93, respectively.

18.

It is further evident from the aforesaid assessment orders (copies furnished before us in assessee’s factual paper book) that, during those assessment proceedings, the transactions relating to purchase of the properties were referred to the Departmental Valuation Officer (DVO) and, on the basis of the valuation reports, additions of Rs. 1,06,18,870/- and Rs. 12,33,600/- were made in the hands of the assessee towards undisclosed consideration allegedly paid for acquisition of the properties.

19.

Thus, the material relied upon by the assessee before the Ld. CIT(A) is not in the nature of subsequently created or independently produced evidence. On the contrary, the relevant assessment orders form part of the Department's own

ITA No. 3308/Mum/2026 M/s. Classic Electricals Ltd. assessment record and demonstrate that the transactions concerning acquisition of the properties had been examined by the Revenue in the relevant earlier assessment years. The fact that the Revenue had itself examined the acquisition transactions and had made additions towards undisclosed consideration on the basis of the DVO's reports assumes significance while determining the year in which the underlying transactions had actually taken place.

20.

In these circumstances, the subsequent registration of the properties during Financial Year 2013-14, by itself, cannot alter the factual position already emerging from the assessment records that the acquisition transactions had taken place in the earlier period and had been subjected to examination by the Department. The registration of the properties in Financial Year 2013-14, therefore, has to be considered in the context of the pre-existing transactions and cannot, merely on account of the time gap, be treated as giving rise to a fresh acquisition in the year of registration.

21.

Consequently, the estimated value of the properties as obtaining in Financial Year 2013-14 cannot, merely on the basis of subsequent registration, be substituted for the consideration or value pertaining to a transaction which, as established from the Department's own assessment records, had already been examined in the earlier assessment years. The subsequent registration, in the facts of the present case, is required to be viewed as completion of the formalities

ITA No. 3308/Mum/2026 M/s. Classic Electricals Ltd. relating to the properties already acquired earlier and not as the year in which the underlying purchase transaction originated.

22.

We also find that the reliance placed by the Revenue upon the decision of the Hon'ble Supreme Court in Sumati Dayal v. CIT (supra) does not advance the case of the Revenue in the facts presently available on record. The principle that the surrounding circumstances and the test of human probabilities may be considered while examining the genuineness of a transaction cannot be disputed. However, such principle cannot displace or disregard established documentary material emanating from the Department's own assessment records, particularly when the disputed transactions in question had already been subjected to scrutiny by the Revenue in the relevant earlier assessment years and had resulted in additions based upon the valuation undertaken by the DVO.

23.

The objection of the Revenue that the assessee did not furnish before the AO contemporaneous bank statements or payment proofs pertaining to the period of purchase also cannot be examined independently of the aforesaid material. The absence of a particular piece of evidence in the present assessment proceedings cannot render irrelevant the assessment orders of the Department pertaining to the earlier years, wherein the same transactions had already been considered and additions had been made in respect thereof.

24.

Accordingly, on consideration of the material available on record, we find that the Ld. CIT(A) has taken into account the relevant assessment records and 10

ITA No. 3308/Mum/2026 M/s. Classic Electricals Ltd. has recorded a finding consistent with the documentary material emanating from the Department's own records. Once the acquisition transactions had already been examined by the Revenue in the relevant earlier assessment years and the consideration relating thereto had also been subjected to valuation by the DVO, the same transaction could not, merely because of subsequent registration in Financial Year 2013-14, be regarded as a transaction arising in the year under consideration.

25.

The contention of the Revenue based upon the alleged failure of the assessee to furnish further evidence before the AO, therefore, cannot override the material facts emerging from the earlier assessment orders. The said contention, when examined in the light of the documentary material forming part of the Revenue's own record, is found to be without sufficient basis. Accordingly, the order of the Ld. CIT(A), being based upon the material available on record, calls for no interference. The grounds raised by the Revenue are, therefore, being bereft of merits are liable to dismissed.

26.

In the result, the appeal of the Revenue stands dismissed.

Order pronounced in the open court on 23-09-2026.

Sd/- Sd/- (NARENDER KUMAR CHOUDHRY) (ARUN KHODPIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated : 23-09-2026. Ankit K., Sr. PS 11

ITA No. 3308/Mum/2026 M/s. Classic Electricals Ltd. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT

BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai

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