M/S. GUPTAJEE & CO.,DELHI vs. JCIT, NEW DELHI
Facts
The assessee sold a "Lal Dora Property" in Badli, Delhi, which was recorded as agricultural/residential but used as a go-down. The Assessing Officer (AO) applied Section 50C, valuing the property using a commercial multiplicative factor ('3') and made a significant addition to capital gains, along with other disallowances. The CIT(A) deleted the main capital gains addition, holding that the residential/agricultural factor ('1') should apply, which led to the Revenue's appeal and subsequent remand by the High Court for fresh adjudication on this specific valuation issue.
Held
The Tribunal affirmed the CIT(A)'s decision, ruling that for the purpose of Section 50C, the property's nature must be determined by revenue records, not its actual use, unless officially recognized by authorities. Therefore, the multiplicative factor of '1' for agricultural/residential property was correctly applied, and the AO's use of '3' for commercial property was invalid. Consequently, the Revenue's appeal was dismissed, rendering the assessee's cross-objection and appeal infructuous.
Key Issues
The key legal issue was the correct multiplicative factor (1 or 3) to apply for valuing a property under Section 50C of the Income Tax Act, where revenue records indicated agricultural/residential use but the property was factually used for commercial purposes.
Sections Cited
Section 50C, Section 143(1), Section 143(3), Section 40(a)(ia), Section 194C, 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 & SHRI MANISH AGARWAL
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’: NEW DELHI BEFORE SHRI YOGESH KUMAR U.S., JUDICIALMEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.5168/Del/2015 (ASSESSMENT YEAR 2011-12) Asst. Commissioner of M/s. Guptajee& Income Tax,Circle-47(1), Company,1831, Bhagirath Room No. 107, Drum Vs. Palace, Shape, Building, I P. Delhi-110006. Estate, New Delhi. PAN-AAAFG1846Q (Appellant) (Respondent) C.O. No.07/Del/2016 Arising out of ITA No.5168/Del/2015 (A.Y 2011-12) M/s. Guptajee& Asst. Commissioner of Company, 1831, Income Tax,Circle-47(1), Bhagirath Palace, Vs. Room No. 107, Drum Shape, Delhi-110006. Building, I P. Estate, New PAN-AAAFG1846Q Delhi . (Appellant) (Respondent) ITA No.4761/Del/2015 (ASSESSMENT YEAR 2011-12) M/s. Guptajee& Company, Joint Commissioner of 1831, Bhagirath Palace, Income Tax, Range-29 Delhi-110006. Vs Drum Shape Building, PAN-AAAFG1846Q New Delhi (Appellant) (Respondent)
Appellant by Shri Akshat Jain, CA and Shri Rajat Jain, CA
Respondent by Shri Sumer Singh Meena, CIT-DR
Date of Hearing 11.12.2025 Date of Pronouncement 23 .01.2026 ORDER PER YOGESH KUMAR U.S., JM:
The captioned appeal in ITA 5168/Del/2015 is filed by the
Revenue, ITA No. 4761/Del/2015 and the Cross Objection
2 ITA Nos.5168 & 4761/Del/2015 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.
Grounds of appealof the Revenue in ITA No.5168/Del/2015 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."
"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".
"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.
"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.”
3 ITA Nos.5168 & 4761/Del/2015 C.O.No.07/Del/2016 Guptajee & Co. vs. ACIT
Grounds of Appeal of the Assessee in ITA No.4761/Del/2015(A.
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.
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.
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.
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.”
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
4 ITA Nos.5168 & 4761/Del/2015 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.
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
5 ITA Nos.5168 & 4761/Del/2015 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/-.
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.
By challenging the order of the Tribunal dated 24/02/2020,
Revenue preferred an Appeal before the Hon'ble High Court of Delhi in
ITA No. 136/2021 by framing following question of law
“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.
6 ITA Nos.5168 & 4761/Del/2015 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.”
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.
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.
7 ITA Nos.5168 & 4761/Del/2015 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).
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.
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
8 ITA Nos.5168 & 4761/Del/2015 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.
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
9 ITA Nos.5168 & 4761/Del/2015 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.
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 ITA No. 5168/Del/2015 filed by the Revenue.
Since, we have dismissed the appeal of the Revenue in ITA No.
5168/Del/2015 and in view of the Orders of the Hon’ble Jurisdictional
High Court dated 17/08/2022 and 11/08/2024 passed in ITA No.
136/2021, the Cross Objection No. 7/Del/2016 and the Appeal in ITA
No. 4761/Del/2015 filed by the Assessee rendered in-fructuous.
Accordingly, Cross Objection No. 7/Del/2016 and the Appeal in ITA No.
4761/Del/2015 filed by the Assessee are dismissed.
Order pronounced in open Court on 23rd January, 2026.
Sd/- Sd/- (MANISH AGARWAL) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 23.01.2026 Pk/ R. N Sr.PS.
10 ITA Nos.5168 & 4761/Del/2015 C.O.No.07/Del/2016 Guptajee & Co. vs. ACIT
