M/S. GUPTAJEE & CO.,DELHI vs. JCIT, NEW DELHI

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ITA 4761/DEL/2015Status: DisposedITAT Delhi23 January 2026AY 2011-1210 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the multiplicative factor of '1' should be applied to the property sold by the assessee. The reasoning was that the property was recorded as agricultural/residential in the revenue records maintained by the State Government. While the property was used for commercial purposes (godown), no sanction was obtained, nor was any penalty levied by the competent authority for such misuse. The Tribunal emphasized that a deemed conversion of land based on usage alone is not valid unless recognized by revenue authorities. For the purpose of calculating circle rates under Section 50C, the nature of the property must be determined based on the revenue records. Since the property was recorded as agriculture/residential in revenue records and the agreement to sell, the multiplicative factor of '1' was correctly applied by the CIT(A). The AO's application of factor '3' was deemed invalid. Consequently, the Revenue's appeal was dismissed. The assessee's cross-objection and appeal were rendered infructuous due to the dismissal of the Revenue's appeal and prior High Court orders.

What were the facts?

The assessee, M/s. Guptajee & Company, sold a 'Lal Dora Property' in Badli, Samepur, Delhi, on March 31, 2011, for Rs. 16,75,00,000. The Assessing Officer (AO) invoked Section 50C of the Income Tax Act, 1961, to substitute the sale consideration with the stamp duty value, applying a multiplicative factor of '3' for commercial land instead of '1' for agricultural/residential property, resulting in an addition of Rs. 21,13,44,015 to capital gains. The AO also made additions for packing expenses (Rs. 95,75,917) and other expenses (Rs. 10,66,284) due to cash payments and non-deduction of TDS, and a disallowance of Rs. 81,818 for telephone and conveyance expenses. The Commissioner of Income Tax (Appeals) deleted the Section 50C addition, restricted packing expense disallowance to Rs. 6,00,000, restricted other expenses disallowance to Rs. 1,00,000, and sustained the telephone/conveyance disallowance. The Revenue appealed, and the assessee filed a cross-objection. The Tribunal initially dismissed both, but the High Court remanded the matter back to the Tribunal for fresh adjudication on the Section 50C issue.

What were the issues?

1. Whether the Tribunal was correct in affirming the order of the CIT(A) holding that a multiplicative factor of '1' is applicable to the property sold by the assessee, as opposed to a factor of '3' applied by the AO, concerning the applicability of Section 50C of the Income Tax Act, 1961. Assessee's Contention: The property is recorded as agricultural/residential in revenue documents, and the CIT(A)'s application of the multiplicative factor '1' is correct and requires no interference. Mere violation of property usage does not change its nature for stamp duty calculation unless recognized by authorities. Revenue's Contention: An inspector's report indicated the property was used as a godown for commercial purposes, and the area had factories and industries. Therefore, the CIT(A) erred in applying a multiplicative factor of '1' and should have sustained the AO's addition based on the commercial usage and a factor of '3'.

Which sections of the Income-tax Act were involved?

Section 50C,Section 40(a)(ia),Section 194C,Section 143(1),Section 143(3),Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘F’: NEW DELHI

Before: SHRI YOGESH KUMAR U.S., JUDICIALMEMBER

For Appellant: Shri Akshat Jain, CA, Shri Rajat Jain, CA
For Respondent: Shri Sumer Singh Meena, CIT-DR
Hearing: 11.12.2025

Heard together (3 matters)

ITA No.5168/Del/2015
C.O. No.07/Del/2016
ITA No.4761/Del/2015

Read from the judgment's own cause title. This page is filed under one of them.

Date of Hearing 11.12.2025 Date of Pronouncement 23 .01.2026 ORDER PER YOGESH KUMAR U.S., JM:

C.O.No.07/Del/2016 Guptajee & Co. vs. ACIT No.7/Del/2016 are filed by the Assesseeagainst the order of Learned Commissioner of Income Tax (Appeals)-XVI, New Delhi (“Ld.CIT(A)”,for short], dated09/06/2015 pertaining to Assessment Year 2011-12.

2.

Grounds of appeal are as under:

1. "On the facts and the circumstances of the case the Ld. CIT(A) has erred in deleting the addition made by AO of Rs.21,13,44,015/- by observing that the property comes in category type-1 i.e. for agricultural/residential not for commercial type-3."

2. "The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 89,75,917/-(out of Rs. 95,75,917/-) made by the AO on Packing expenses. These expenses were incurred in cash and also violating the provision of Sec.40(a)(ia) of the Act".

3. "The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.9,66,284/-(out of Rs. 10,66,284/-) made by the AO on Loading and unloading, cartage outward etc. These expense were incurred in cash without any documentary evidence.

4. "The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.”

Grounds in Cross Objection No. 07/Del/2016 filed by the Assesseeare as under: “1. That on the facts and in the circumstances of the case and the legal position, the learned CIT(Appeals) has erred in holding that the provisions of section 50C are applicable in the case of appellant firm when a) the property falls in ‘extended laldora’. b) the property falls in non-confirming clusters of industrial concentration.

2. That the appellant craves to add/alter/delete/amend any ground(s) of appeal before or at the time of hearing.”

Y 2011-12) are as under “1. That the impugned order of the Ld. CIT(A)-16, New Delhi is bad in law and wrong on the facts and in the circumstances of the case And legal position.

2. That on the facts and in the circumstances of the case and the legal position, the Ld. CIT(A) has erred in confirming the disallowance of packing expenses to the extent of Rs. 6,00,000/- on ad-hoc basis.

3. That on the facts and in the circumstances of the case and the legal position, the Ld. CIT(A) has erred in confirming the disallowance of loading and unloading, cartage outward, general expenses, staff welfare, business promotion and printing and stationery to the extent of Rs. 1,00,000/- on adhoc basis.

4.

That on the facts and in the circumstances of the case and the legal position, the Ld. CIT(A) has ered in confirming the disallowance of 1/10th of telephone expenses and conveyance expenses amounting to Rs. 81,818/- for alleged personal use.”

3.

Brief facts of the case are that, the Assessee sold “Lal Dora Property’ at Badli, Samepur, Delhi, built on an agriculture land during the year under consideration through an agreement to sell dated 31/03/2011 for Rs. 16,75,00,000/- on which capital gain was earned.

Assessee filed return of incomedeclaring income at Rs. 16,68,42,034/- which was processed u/s 143(1) of the Income Tax Act, 1961 ('Act' for short). The case of the Assessee was selected for scrutiny and an assessment order came to be passed u/s 143(3) of the Act on C.O.No.07/Del/2016 Guptajee & Co. vs. ACIT 27/03/2014, wherein A.O. made addition of Rs. 21,13,44,015/- of capital gains on sale of land by substituting the sale consideration received by the Assessee with assumed stamp duty value by invoking the provision of Section 50C of the Act. The Ld. A.O. made a valuation of land by applying circle rate prescribed in the said area by taking multiplicative factor of ‘3’ as applicable for commercial land in the place of multiplicative factor of ‘1’as applicable for residential/agricultural property. The Ld. A.O. has also relied on the Inspector Report dated 20/03/2014, which stated that the property was Go-down of the Assessee and used for commercial purpose. The A.O. also made addition of Rs. 95,75,917/- on account of disallowance of packing expenses due to non-deduction of tax at source u/s 194C of the Act, addition of Rs. 10,66,284/- on account of ad-hoc disallowance of 10% of various expenses and also made addition of Rs. 81,818/- on account of ad-hoc disallowance of 10% of telephone and conveyance expenses.

4. Aggrieved by the assessment order dated 27/03/2014, Assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 09/06/2015, deleted the addition of Rs. 21,13,44,015/-, restricted the disallowance of packing expenses to Rs. 6,00,000/- from 95,75,917/- , by granting relief of Rs. 89,75,917/- further restricted the disallowance

C.O.No.07/Del/2016 Guptajee & Co. vs. ACIT of various expenses to Rs. 1,00,000/- from Rs. 10,66,284/- and the Ld.

CIT(A) sustained the disallowance of telephoneand conveyance expenses of Rs. 81,818/-.

5.

As against the order of the Ld. CIT(A) dated 09/06/2015, the Revenue preferred an Appeal and the Assessee has also filed Cross- objection before the Tribunal. The Tribunal after hearing both the parties, vide order dated 24/02/2020 upheld the findings and the conclusion of the Ld. CIT(A) and dismissed Appeals filed by the Revenue and also dismissed the Cross Objection filed by the Assessee.

6.

By challenging the order of the Tribunal dated 24/02/2020, Revenue preferred an Appeal before the Hon'ble High Court of Delhi in “i. Whether the ITAT was correct in affirming the order of CIT(A) holding that multiplicative factor of 1 is applicable to property sold by assessee.

ii. AO-pleading Xii. Whether the ITAT was correct in rejecting the suggestion of the AO-pleading for disallowance of expenses u/s 14A of the Act. iii. Whether ITAT was correct in affirming the order of CIT(A) reducing the disallowance of Rs. 95,75,917 made by the AO with respect to packaging expenses to 6,00,000.

C.O.No.07/Del/2016 Guptajee & Co. vs. ACIT iv. Whether ITAT was correct in affirming the order of CIT(A) reducing the disallowance from Rs. 10,66,284 to Rs. 1,00,000.”

7.

It is relevant to note that vide order dated 17/08/2022, the Hon'ble Jurisdictional High Court recorded the submission of the Revenue wherein the Revenue has not press the substantial question of law No. ii and vi mentioned above and vide order dated 11/09/2023, the Hon'ble High Court has decided that no substantial question of law arises in respect of Question No. iii (supra) and allowed the Assessee to file Cross Objection whether provision of Section 50C of the Act are applicable or not. Ultimately, the Hon'ble High Court vide order dated 06/08/2024, remanded the matter to the file of the Tribunal for fresh adjudication on the issue as to whether the Ld. CIT(A) is right in holding the multiplicative factor ‘1’ on the property sold by the Assessee.

8.

Before us, the Ld. Departmental Representative submitted that during the assessment proceedings inspector has visited the property and found that the entire property has been used as Go-down for storage for electrical items such as cables and fans of Havells Company and the entire property has been used for commercial purpose by the Assessee, even the said Street No. 9 found with Factories and Industries and there was no residential premises baring one or two. Thus, the Ld.

C.O.No.07/Del/2016 Guptajee & Co. vs. ACIT Department's Representative submitted that the Ld. CIT(A) committed error in applying multiplicative factor No. ‘3’, thus, sought for sustaining the addition made by the A.O. by setting aside the impugned order passed by the Ld. CIT(A).

9.

Per contra, the Ld. Assessee's Representative submitted that the revenue documents of the property in question is agriculture/residential, therefore, multiplicative factor ‘1’ applied by the Ld. CIT(A) requires no interference. Further contended that mere violation of the use of property by an Assessee will not change the nature itself for the purpose of calculating the stamp duty until and unless the same is recognized by the authorities and changing the nature of the property in revenue documents. The Ld. Assessee's Representative relying on the order of the Ld. CIT(A) sought for dismissal of the Appeal of the Revenue.

10.

We have heard both the parties and perused the material available on record. During the assessment proceedings, A.O. computed the capital gains u/s 50C of the Act relying on the circle rate of the property based on the usage of the property and by applying multiplicative factor ‘3’ and made the addition of Rs. 21,13,44,015/- u/s 50C of the Act.

Admittedly the property in question is a “Laldora” property and as per the Revenue record, the same has been identified as agriculture land wherein the building has been erected. However, the said building has C.O.No.07/Del/2016 Guptajee & Co. vs. ACIT been used for other than agriculture purpose i.e. commercial purpose for the sake of Godown for which no sanction has been issued by the competent authority and admittedly the competent authority has not levied any penalty or find for such misuse of land by the Assessee, therefore, in our considered opinion, since, the property in question is identified as residential/ agricultural property in the Revenue records maintained by the State Government, the multiplicative factor ‘1’ has to be taken.

11.

As long as the Revenue records maintained by the Authorities remains agriculture in nature there could be no dispute about the characterof the land which in the instant case was agriculture/residential. There cannot be any deemed conversion of land based on the usage of the property until and unless it is recognized by the revenue authorities, therefore, the multiplicative factor in the present case would be the ‘1’ which was prescribed by the Delhi Government for permissible/sanctioned use of lands either as agriculture or residential or industrial or commercial. Usage of agricultural/residential land to commercial purpose will be at the most subject to action by government for misuse of permissible use and consequential action but for the purpose of circle rate, the nature of the property has to be seen based on the revenue record maintained by the authorities. Since, the subject

C.O.No.07/Del/2016 Guptajee & Co. vs. ACIT property being an agriculture/residential in the revenue records and also in the agreement to sell, the multiplicative factor of ‘1’requires to be applied and the Ld. CIT(A) rightly held that factor of ‘3’ applied by the A.O. is contrary to the revenue records.

12.

In view of the above, we find no reason to interfere with the finding and the conclusion of the Ld. CIT(A) that application of multiplicative factor of ‘3’ by the A.O. as invalid and consequently we find no error or infirmity in the order of the Ld. CIT(A) in directing the A.O. to work out the value of the land by applying the factor as of ‘1’. Accordingly, we dismiss the Appeal in filed by the Revenue.

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