Adjust consideration from return/AIR under section 143(1); SRO value not applied under section 50C if title dispute pending-refer to DVO

ITAT (Hyderabad - AT) held that where deemed consideration is apparent from the return and supported by AIR/sale deed, the AO may adjust it while processing under sec. 143(1). However, because title and a challenge to the Sub-Registrar's fair market value are pending before the Civil Court and HC, the SRO value cannot be treated as deemed consideration under sec. 50C; the AO should refer valuation to the DVO. The Tribunal set aside the CIT(A) order for want of clear direction and restored the matter to the AO for de novo consideration. Appeal allowed for statistical purposes.

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1. ISSUES PRESENTED AND CONSIDERED

1. Whether an assessing adjustment invoking deemed consideration under section 50C can be made by CPC while processing a return under section 143(1) as an "incorrect claim apparent from information in the return" under amended section 143(1)(a).

2. Whether issuance (and non-response) of a communication by CPC proposing substitution of stamp-register (SRO) value for actual sale consideration satisfies the opportunity requirement for making adjustments under section 143(1)(a).

3. Whether a disputed title and pending litigation challenging SRO/stamp-duty valuation preclude adoption of SRO value as deemed consideration under section 50C without further inquiry, including mandatory reference to the Valuation Officer (DVO) under section 50C(2).

4. Whether, on facts showing dispute as to title and pending writ concerning stamp duty valuation, appellate authority should dismiss the appeal for statistical purposes or remit the matter to the Assessing Officer for de novo consideration with specific directions (including reference to DVO).

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Power of CPC to make section 50C adjustment under section 143(1)(a): Legal framework

Section 143(1)(a) (as amended w.e.f. 01.04.2017) permits computation of total income on processing return after making adjustments for arithmetical errors or incorrect claims apparent from information in the return, provided intimation is given to the assessee. Section 50C deems stamp-duty (SRO) value to be the consideration for computing capital gains where certain conditions are met; section 50C(2) enables reference to the DVO for determination of value.

Issue 1 - Precedent Treatment

A contrary ITAT decision (Prabha Anil Gandhi v. ADIT-CPC) held that absent opportunity, CPC cannot make a section 50C adjustment in the intimation. The present Tribunal distinguishes that decision on facts where CPC issued a communication proposing substitution, making this case fall within the scope of 143(1)(a).

Issue 1 - Interpretation and reasoning

The Court reasons that deemed consideration under section 50C is ascertainable from information furnished in the return and accompanying AIR/sale deed; hence an incorrect claim is "apparent from information in the return." Where the CPC issues a communication proposing substitution of SRO value, the adjustment qualifies as a section 143(1)(a) adjustment. The Tribunal rejects the contention that section 50C is inherently a debatable issue requiring full adjudication before any processing-stage adjustment.

Issue 1 - Ratio vs. Obiter

Ratio: An assessing adjustment under section 50C can be effected during processing under section 143(1)(a) where the deemed consideration is apparent from information in the return and CPC issues the prescribed communication; such an adjustment falls within the statutory ambit of 143(1)(a).

Issue 1 - Conclusion

The Tribunal holds that CPC acted within the scope of section 143(1)(a) in proposing substitution of SRO value and making the adjustment, and the assessee's contention that the adjustment cannot be made at processing stage is rejected to the extent it challenges CPC's statutory power when information is apparent.

Issue 2 - Adequacy of opportunity afforded by CPC communication

Legal framework

Section 143(1)(a) requires intimation of adjustments in writing or electronically; principles of natural justice require an opportunity to respond before adverse adjustment where opportunity is practicable. Prior authority (Prabha Anil Gandhi) set aside adjustments made without any opportunity.

Interpretation and reasoning

On the facts, CPC issued a communication dated 04.06.2020 proposing the adjustment. The Tribunal finds that the mere fact the assessee claims not to have noticed the communication does not vitiate proceedings; the requirement is that the communication be issued. Whether the assessee availed the opportunity is not decisive for determining CPC's power under 143(1)(a). Hence the precedent setting aside adjustments for absence of any opportunity is distinguishable.

Ratio vs. Obiter

Ratio: Issuance of prescribed communication by CPC constitutes the opportunity requirement under section 143(1)(a); failure by the assessee to notice the communication does not automatically nullify the adjustment.

Conclusion

The Tribunal rejects the argument that CPC lacked opportunity to adjust; the CPC communicated the proposed substitution and therefore fulfilled the statutory requirement for making a 143(1)(a) adjustment.

Issue 3 - Effect of disputed title and pending litigation on adoption of SRO value and duty to refer to DVO

Legal framework

Section 50C deems SRO/stamp duty value as consideration but section 50C(2) contemplates reference to the DVO for determination of fair market value where disputed. Judicial precedent (Calcutta High Court, Sunil Kumar Agarwal) held that statutory reference to DVO under section 50C is mandatory even if the assessee has not sought such reference when facts warrant it.

Interpretation and reasoning

The Tribunal notes undisputed facts: large disparity between sale deed consideration and SRO value; simultaneous litigation on title and a writ challenging SRO valuation/refund of excess stamp duty. The Tribunal reasons that dispute on title affects marketability and therefore market value; where title and valuation are contested and sub judice before Civil Court and High Court, the SRO value cannot be treated as conclusive deemed consideration for section 50C purposes without further inquiry. In such circumstances it is the Assessing Officer's duty to consider referral to DVO to determine fair market value.

Precedent treatment

The Tribunal follows and applies the principle in Sunil Kumar Agarwal that reference to DVO is mandatory in appropriate cases and treats the SRO-based deeming as not determinative where value and title are in dispute pending judicial resolution.

Ratio vs. Obiter

Ratio: Where title and SRO valuation are under judicial challenge, the Assessing Officer cannot uncritically adopt SRO value as deemed consideration under section 50C; the matter must be reconsidered and, if appropriate, referred to the DVO for determination of fair market value.

Conclusion

The Tribunal holds that because of pending disputes as to title and SRO valuation, the SRO value cannot be adopted as deemed consideration without de novo consideration by the Assessing Officer, including exploring reference to the DVO. The matter is set aside to the Assessing Officer for fresh adjudication and necessary steps.

Issue 4 - Appropriate appellate disposition

Interpretation and reasoning

The Tribunal finds the lower appellate order dismissed the appeal for statistical purposes but directed the Assessing Officer to revisit the matter in accordance with the High Court decision when pronounced; the Tribunal considers this direction insufficiently specific given the duty to refer to DVO and the factual matrix (OS, writ petition). Therefore the Tribunal sets aside the CIT(A) order and remits the issue for de novo consideration with explicit direction to examine court filings and to explore all procedural steps including DVO reference.

Ratio vs. Obiter

Ratio: Where material factual disputes (title and valuation) and pending judicial proceedings exist, appellate authority should remit for de novo assessment with explicit directions rather than merely dismissing the appeal for statistical purposes with a generic admonition.

Conclusion

The Tribunal allows the appeal for statistical purposes and restores the issue to the file of the Assessing Officer for fresh consideration in light of the evidentiary record (civil suit and writ) and with directions to consider reference to the DVO and any other appropriate steps to determine fair market value under section 50C.

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