ANITHA RAMESH,MANGALORE vs. ITO, WARD -2(1), MANGALORE, MANGALORE

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ITA 2247/BANG/2026Status: DisposedITAT Bangalore05 October 20268 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal dismissed Ground Nos. 1, 5, and 6 as infructuous, and Ground No. 2 as not pressed. Regarding the effective issues (Ground Nos. 3 & 4), the Tribunal examined the Fair Market Value (FMV) of the property as on 01.04.1981. The Tribunal noted that the valuation report clearly stated its purpose was to determine the FMV as on 01.04.1981. The report contained details of the method and rates, including separate values. The Tribunal found that the first page of the report explicitly stated the valuation date as 01.04.1981, and the subsequent pages detailed the property and documents. The Tribunal observed that the AO adopted Rs. 64,800 as the cost of acquisition, while the assessee claimed Rs. 2,88,000 based on the valuer's report. The Tribunal's reasoning focused on the clarity of the valuation report regarding the date. The Tribunal did not explicitly decide on the reference to the DVO or the stamp duty value in the provided text, but the focus of the detailed analysis was on the FMV of the property as on 01.04.1981. The operative direction was to decide the appeal based on the findings.

What were the facts?

The assessee, Anitha Ramesh, filed an appeal against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2017-18. The assessee sold an immovable property for Rs. 15 Lakh, while the stamp duty value was Rs. 33 Lakh. The assessee declared a capital gain of Rs. 60,000, using Rs. 33 Lakh as sale consideration and Rs. 2,88,000 as the Fair Market Value (FMV) as on 01.04.1981 for indexation, based on a registered valuer's report. The Assessing Officer (AO) adopted the cost of acquisition at Rs. 64,800, based on the same report, and added Rs. 25,11,000 to the assessee's income. The CIT(A) partly allowed the appeal, restricting the capital gain to 1/3rd due to co-ownership but upholding the AO's rejection of the indexed cost of acquisition and the stamp duty value.

What were the issues?

1. Whether the reassessment order is void-ab-initio as the notice under section 148 of the Income Tax Act, 1961, was issued without complying with mandatory conditions? (Question of law, Section 148). The assessee's learned Authorized Representative (AR) did not press this ground. The revenue did not record any arguments on this issue. 2. Whether the Commissioner of Income Tax (Appeals) erred in confirming the addition of capital gain without considering the specific request for reference to the District Valuation Officer (DVO) under section 50C(2) of the Act and rejecting the Fair Market Value (FMV) of the cost of acquisition as on 01.04.1981? (Question of mixed law and fact, Sections 50C, 48). The assessee contended that the CIT(A) erred in sustaining the AO's action in determining the FMV and indexed cost of acquisition. The assessee argued that the reference to 01.04.2001 in the valuer's report was a typographical error and the property was valued as on 01.04.1981. The assessee also argued that the AO adopted the stamp duty value without referring the property to the DVO as requested. The revenue supported the orders of the authorities below, stating that the AO correctly determined the capital gain based on available material.

Which sections of the Income-tax Act were involved?

Section 250,Section 148,Section 234B,Section 234C,Section 50C,Section 50C(2),Section 48

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY

PER SHRI WASEEM AHMED, ACCOUNTANT MEMBER: The present appeal filed by the assessee is directed against the order under section 250 of the Income Tax Act, 1961 (hereafter the Act) passed by the learned Commissioner of Income Tax (Appeals) under the National Faceless Appeal Centre-Delhi (hereafter the Ld. CIT(A)) for A.Y. 2017-18 bearing DIN & Order No: ITBA/NFAC/S/250/2025-26/1086916243(1).

2.

The assessee has raised several grounds numbered as Ground Nos. 1 to 6. Ground Nos. 1 & 6 are general grounds, whereas Ground No. 5 pertains to levy of interest u/s 234B and 234C of the Act, which is consequential in nature and does not require separate adjudication. Hence, Ground Nos. 1, 5 & 6 are dismissed as infructuous.

3.

The issue raised in Ground No. 2 is that the reassessment order is void-ab-initio as the notice under section 148 of the Act was issued without complying with the mandatory condition. However, we note that the Ld. AR of the assessee before us did not press this ground. Hence, Ground No. 2 is dismissed as not pressed.

4.

The effective issue raised in Ground Nos. 3 & 4 of the appeal is that the Ld. CIT(A) erred in confirming the addition of capital gain without considering the specific request for reference to DVO u/s 50C(2) of the Act and rejecting the FMV of cost of acquisition as on 01-04-1981.

5.

The brief facts of the case are that the assessee is a woman individual who, during the year relevant to AY 2017-18, sold an immovable property for Rs. 15 Lakh whereas the stamp duty value was Rs. 33 Lakh. The assessee, in the ROI filed u/s 148 of the Act, declared capital gain of Rs. 60000 on the impugned transfer of immovable property. In computing the capital gain, the assessee took the sale consideration at Rs. 33 Lakh as per section 50C of the Act, and for indexation of the cost, took the FMV of the property as on 01-04-1981 at Rs. 2,88,000/-. The FMV of Rs. 2,88,000/- was claimed based on a valuation report from a registered government valuer.

5.1 However, the AO, from the valuation report submitted by the assessee, observed that the valuer in the report valued the market rate of the property as on 01-04-1981 at Rs. 64,800/- (Rs. 5400 per cent x 12 cents). The AO noticed that the value of Rs. 2,88,000/- taken by the assessee is the prevailing market rate during the year 2000-2001, as considered by the valuer. Accordingly, the AO adopted the cost of acquisition at Rs. 64,800/- and computed the long-term capital gain at Rs. 25,71,000/-only. After reducing Rs. 60,000 already offered by the assessee, the AO made an addition of Rs. 25,11,000/- to the total income of the assessee.

6.

Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee submitted that the property was jointly owned by her and her two sons and, therefore, only 1/3rd of the capital gain could be assessed in her hands. It was further submitted that the AO adopted the stamp duty value of Rs. 33,00,000/- without referring the property to the DVO under section 50C(2) of the Act, despite the specific request made in this regard. As regards to the cost of acquisition, the assessee submitted that the reference to 01.04.2001 in the registered valuer's report was only a typographical error, since the report itself clearly stated that the valuation was made as on 01.04.1981.

6.1 The Ld. CIT(A) partly allowed the appeal. The Ld. CIT(A) accepted that the assessee and her two sons were equal co-owners and directed the AO to restrict the capital gain to 1/3rd in the hands of the assessee. However, the Ld. CIT(A) upheld the AO's rejection of the indexed cost of acquisition claimed by the assessee. The Ld. CIT(A) also rejected the ground relating to reference to the DVO, observing that the assessment order did not clearly show that the assessee had made such a request during the assessment proceedings.

7.

Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.

7.1 Before us the Ld. AR for the assessee filed a paper book running from pages 1 to 61 and submitted that the Ld. CIT(A) was not justified in sustaining the AO's action in determining the fair market value and indexed cost of acquisition. He submitted that the assessee obtained a valuation report from a registered valuer to determine the fair market value of the property as on 01.04.1981. The report clearly states that the purpose of valuation was to determine the fair market value as on 01.04.1981. According to the Ld. AR, the reference to 01.04.2001 in the report was merely a typographical error and the assessee had also explained the same before the AO. Therefore, the claim could not have been rejected merely on the basis of such error.

7.2 The Ld. AR further submitted that the assessee had disputed the adoption of the stamp duty value of Rs. 33,00,000/- against the actual sale consideration of Rs. 15,00,000/-. The assessee had specifically requested the AO that, if the stamp duty value was proposed to be adopted, the valuation of the property should be referred to the DVO u/s 50C(2) of the Act. However, the AO adopted the stamp duty value without making such reference. It was therefore submitted that the addition sustained by the Ld. CIT(A) was not justified.

8.

The Ld. DR, on the contrary, vehemently supported the orders of the authorities below and submitted that the AO had correctly determined the capital gain on the basis of the material available on record. He therefore prayed that the order of the Ld. CIT(A) be upheld.

9.

We have heard the rival contentions of both the parties and perused the materials available on record. The dispute before us is regarding to the computation of long-term capital gain arising from the sale of the property. The two issues which require our consideration are the fair market value of the property as on 01.04.1981 for determining the cost of acquisition and the adoption of the stamp duty value of Rs. 33,00,000/- u/s 50C of the Act. The assessee had taken the fair market value as on 01.04.1981 at Rs. 2,88,000/- on the basis of a report obtained from a Government-registered valuer. The AO, however, adopted the value at Rs. 64,800/-, referring to the same valuation report.

9.1 First, we proceed to deal with the dispute regarding the FMV of the impugned property as on 01-04-1981. In this respect, we have carefully examined the valuation report dated 10th July 2020 placed before us and available at pages 15 to 18 of the paper book. The very first page of the valuation report clearly states that the purpose of the valuation was to determine the fair market value of the land for the year 1981 as on 01.04.1981. Thus, there is no doubt regarding the relevant valuation date adopted by the registered valuer. Pages 1 and 2 of the valuation report further contain a description of the documents produced and the description and details of the property under valuation.

9.2 The most important is page 3 of the valuation report in the given facts, which contains details of the method and rates. The valuation report contains two separate values. The first is the guideline rate obtained from the Sub-Registrar's Office. The report records that the guideline rate during the year 1981-82 was Rs. 5,400/- per cent. On this basis, the value of 12 cents works out to Rs. 64,800/-. However, the valuer did not treat the guideline rate as the fair market value of the property. The registered valuer separately considered the prevailing market value of the land. The report records that, on detailed enquiry, the rates of lands adjacent to the subject property were found to be between Rs. 24,000/- and Rs. 26,000/- per cent. The valuer adopted the lower rate of Rs. 24,000/- per cent as the fair market value. For 12 cents, the value therefore works out to Rs. 2,88,000/-. This is also the final value stated in the valuation report. The relevant content of the valuation report is extracted as under:

9.3 On the contrary, the value of Rs. 24,000/- per cent was considered as on 01-04- 2001. The AO's view is based on the following content of the valuation report, as mentioned below in the “Rates” para.

9.4 In our considered view, the AO erred in considering the value of Rs. 24000/- per cent for the year 2000-01 by considering only the content of this part. In our view, the report has to be read as a whole and not by taking one figure from the report in isolation. On the contrary, if we see the valuation report as a whole. Then we are of the considered view that the valuer here means that the market value of Rs. 24000/- as on 01-04-1981 was arrived at by considering the prevailing market rate in the locality during the year 2000-01.

9.5 Thus, Rs. 64,800/- and Rs. 2,88,000/- are not two competing figures arrived at for the same purpose. The amount of Rs. 64,800/- represents the value based only on the guideline rate of the Sub-Registrar's Office. In contrast, Rs. 2,88,000/- represents the fair market value determined by the registered valuer after considering the prevailing rates of comparable lands in the locality. The AO, in our view, erred in adopting the guideline value of Rs. 64,800/- as the fair market value merely because that figure also appears in the valuation report.

9.6 The authorities below appear to have proceeded on the basis that the amount of Rs. 2,88,000/- related to the market rate prevailing in the year 2000-01. However, on carefully reading the valuation report placed before us, we find that its stated purpose is valuation as on 01.04.1981 and the guideline rate specifically referred to therein is for the year 1981-82. The assessee had also explained before the Ld. CIT(A) that the reference to 01.04.2001, to the extent it appeared in the report, was only a typographical error. A clerical or typographical error cannot be read in isolation so as to defeat the substance of the valuation report, particularly when the report, read as a whole, makes the relevant valuation date clear.

9.7 We therefore find no proper basis for rejecting the fair market value of Rs. 2,88,000/- determined by the registered valuer and substituting it with the guideline value of Rs. 64,800/-. Accordingly, we direct the AO to adopt Rs. 2,88,000/- as the fair market value of the entire property as on 01.04.1981 for the purpose of determining the indexed cost of acquisition. The assessee's share in the resulting capital gain shall, of course, remain restricted to 1/3rd, as already accepted by the Ld. CIT(A).

9.8 Coming to the second issue, the property was actually sold for Rs. 15,00,000/- only whereas the stamp duty value was Rs. 33,00,000/-. The assessee has consistently contended that the stamp duty value was higher than the fair market value and that a request was made for reference to the DVO u/s 50C(2) of the Act. The Ld. CIT(A) rejected this contention mainly on the ground that the assessment order did not clearly record such a request.

9.9 In our view, once the assessee disputes the stamp duty value and claims that the same exceeds the fair market value of the property, the valuation dispute requires proper examination in terms of section 50C(2) of the Act. The difference in the present case is substantial. The actual consideration is Rs. 15,00,000/-, whereas the value adopted for stamp duty purposes is Rs. 33,00,000/-. Therefore, adoption of the stamp duty value without examining the assessee's objection through the prescribed valuation mechanism would not be justified.

9.10 Accordingly, for the limited purpose of determining the sale consideration u/s 50C of the Act, we direct the AO to refer the valuation of the property to the DVO and thereafter determine the value in accordance with section 50C of the Act and as per law. However, the fair market value as on 01.04.1981 for the purpose of indexed cost of acquisition shall be taken at Rs. 2,88,000/-, as directed above.

9.11 The AO shall thereafter recompute the long-term capital gain in the hands of the assessee by taking only her 1/3rd share in the property. Accordingly, Ground Nos. 3 and 4 raised by the assessee are allowed in the terms indicated above.

10.

In the result appeal the appeal of the assessee is partly allowed.

Order pronounced in the open court on 5th October, 2026

Sd/- Sd/- KESHAV DUBEY WASEEM AHMED JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore Dated: 5th October, 2026 Vms Copy to: ANITHA RAMESH, WILSCOLE APARTMENTS, FLAT NO.204, 1 UPPER BENDOOR, MANGALORE, MANGALURU-575002, KARNATAKA

ITO, WARD -2(1), MANGALORE, AAYAKAR BHAVAN, ATTAVARA, 2 MANGALORE - 575 001, MANGALURU-575001, KARNATAKA

3 THE PCIT / CIT, 4 THE D.R., ITAT, BANGALORE BENCH 5 GUARD FILE

By Order

ASSISTANT REGISTRAR / I.T.A.T., BANGALORE P G Digitally signed RAJAN by P G RAJANI Date: 2026.10.21 12:23:03 +05'30' I

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