JAGDISHKUMAR CHHOTUBHAI GANDHI,MUMBAI vs. ITO(INT.TAX), SURAT

ITA 245/SRT/2024Status: DisposedITAT Rajkot29 September 2026AY 2017-1824 pages
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What were the facts?

The assessee, an NRI, filed his return for AY 2017-18 declaring an income of Rs. 14,26,950. The initial assessment under section 143(3) accepted the returned income. Subsequently, the CIT (IT&TP) initiated revisionary proceedings under section 263, setting aside the assessment order and directing a fresh assessment. The AO issued a draft assessment order proposing additions. The assessee objected to the Dispute Resolution Panel (DRP), which rejected the objections and approved the draft order. The AO then passed the final assessment order under section 143(3) r.w.s. 263, re-assessing the total income at Rs. 1,28,18,087. The additions included Rs. 68,12,137 on account of short-term capital gain due to disallowance of deduction under section 54, and Rs. 45,79,000 under section 56(2)(vii)(b). The assessee appealed this order.

What did the Tribunal hold?

The Tribunal decided that grounds 1 to 3 were not pressed by the assessee and were dismissed. Regarding grounds 4 and 5, concerning the re-characterisation of capital gain as short-term and the disallowance of deduction under section 54, the Tribunal noted the assessee's claim that the holding period should be from the date of allotment (08.01.2011) to the date of sale (10.10.2016), making it long-term capital gain. The AO, however, considered the holding period from the date of conveyance deed registration (30.09.2016) to the date of sale (10.10.2016), resulting in short-term capital gain. The assessee relied on CBDT Circulars No. 471 and 672, and the ITAT Mumbai decision in Anita D. Kanjani vs. ACIT, arguing that allotment of property under such schemes grants a right/interest from the allotment date. The Tribunal found that the assessee had acquired a right/interest in the property from 08.01.2011, the date of allotment, and this right continued until the sale. Therefore, the holding period should be considered from the allotment date. The Tribunal held that the capital gain was long-term. The addition of Rs. 68,12,137 as short-term capital gain and the disallowance of deduction under section 54 were deleted. The issue regarding addition under section 56(2)(vii)(b) was not explicitly decided in the provided text, but the relief granted on capital gains implies a modification of the AO's order.

What were the issues?

1. Whether the order passed by the AO under section 143(3) r.w.s. 263 is bad and invalid in law? (Assessee's contention: Yes, it is bad and invalid. Revenue's contention: Not recorded). 2. Whether the order passed by the AO under section 143(3) r.w.s. 263 on 12.01.2024 is time-barred and hence void ab initio? (Assessee's contention: Yes, it is time-barred. Revenue's contention: Not recorded). 3. Whether the DRP erred in issuing directions under section 144C(5) vide order dated 20.12.2023? (Assessee's contention: Yes, it erred. Revenue's contention: Not recorded). 4. Whether the DRP and AO erred in disallowing the deduction claimed under section 54 amounting to Rs. 57,28,883? (Assessee's contention: Yes, they erred by re-characterising capital gain as short-term and disallowing deduction. Revenue's contention: Not recorded). 5. Whether the DRP and AO erred in making an addition of Rs. 68,12,137 as alleged short-term capital gains on sale of property? (Assessee's contention: Yes, they erred by re-characterising capital gain as short-term. Revenue's contention: Not recorded). 6. Whether the DRP and AO erred in making an addition of Rs. 45,79,000 under section 56(2)(vii)(b) on account of alleged difference in purchase consideration as per agreement and market value? (Assessee's contention: Yes, they erred. Revenue's contention: Not recorded).

Which sections of the Income-tax Act were involved?

Section 143(3),Section 263,Section 144C(1),Section 144C(5),Section 54,Section 56(2)(vii)(b)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, SURAT

Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI

For Appellant: Shri Dharmesh Shah, Advocate
For Respondent: Shri Om Prakash Jha, Sr.DR
Hearing: 23.07.2026Pronounced: 29.09.2026

Per B.M. Biyani, A.M.:

Feeling aggrieved by the order of assessment bearing DIN: ITBA/AST/S/ 143(3)/2023-24/1059656534(1) dated 12.01.2024 passed by learned ITO (Int. Tax.), Surat [“AO”] u/s 143(3) r.w.s. 263 of the Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2017-18, the assessee has filed this appeal.

Jagdishkumar Chhotubhai Gandhi ITA No. 245/SRT/2024 – AY 2017-18

2.

The background facts leading to present appeal are as under:

(i) The assessee-individual was

The order continues below.

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