The ITAT has upheld the validity of Section 50C concerning the taxation
Dhan Bahadur Gagan Chand Vs CIT [ITA No. 3462/Mum/2023] (ITAT Mumbai)
The appellant filed his income tax return for AY 2016-17, claiming a total income of ₹26,33,430/-. The case was scrutinized under the Computer Assisted Scrutiny Selection (CASS). During scrutiny, the appellant claimed he entered a development agreement with Indo Asian Buildcon Pvt. Ltd. for a land parcel in Dhakne which he had purchased on November 29, 2013, for ₹20,00,000/- (the AO recorded the purchase price as ₹21,00,000/-).
The AO determined the land’s valuation was ₹1,66,60,000/-, with stamp duty and registration fee paid by the appellant. The AO added a short-term capital gain of ₹1,45,60,000/- to the appellant’s total income for AY 2016-17. The appellant appealed and brought the matter before the ITAT.
The appellant argued that he was a company director, and the land was purchased on their behalf, with the entire purchase consideration paid by the company. A development agreement was executed in March 2016, and the capital gain should not be added to his income. He referenced case laws like ITAT Mumbai’s Voltas Ltd. vs. ITO and PCIT-Rohtak vs. Ram Kumar Duhan to argue that Section 50C was wrongly applied.
The DR claimed the land was purchased in the appellant’s name and handed over to the company under a development agreement for ₹2,51,000/-, without any memorandum of understanding or documentation. The consideration was significantly less than the government valuation, justifying the application of Section 50C by the AO.
The Tribunal found that the appellant purchased the land from multiple vendors, but the registered deed did not indicate that the company bought the land on their behalf. The development agreement referred to the appellant as the owner and transferred possession and development rights to the company, but there was no documentation proving that the land was purchased on their behalf.
Section 50C states that if the value of a land transfer’s consideration is less than the stamp valuation authority’s, the authority’s value is considered the full value. The consideration of ₹2,51,000/- was significantly less than the government valuation of ₹1,66,60,000/-. The Tribunal cited cases like M/s Dattani Development and Bharat Raojibhai Patel, where the same principle was upheld.
The Tribunal dismissed the appellant’s appeal, upholding the CIT(A) order confirming the addition of ₹1,45,60,000/- as short-term capital gain, and confirming the provisions of Section 50C were applicable. The appeal was dismissed, based on the government valuation of the property.
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