2026 (3) TMI 484 - AT - Income Tax

Substitution of stamp duty value cannot be made at return-processing; such valuation adjustments require regular assessment proceedings.

Whether stamp duty value can be substituted for declared consideration at the return-processing stage is the central issue. The article explains that ... Adjustment made by AO by invoking section 50C while processing the return u/s 143(1) - Validity of invoking section 50C to substitute stamp-duty valuation by making an upward adjustment while processing the return u/s 143(1)(a)(ii) - HELD THAT: - The Tribunal held that section 50C is a deeming provision coupled with statutory rights of objection and a provision for reference to the Departmental Valuation Officer under section 50C(2). Consequently, substitution of stamp-duty value cannot be treated as an 'incorrect claim apparent from any information in the return' within the meaning of section 143(1)(a)(ii), because deciding that question requires examination beyond the return and the opportunity to avail objection/reference under section 50C. The co-ordinate Benches of the Tribunal in Prabha Anil Gandhi [2023 (10) TMI 1540 - ITAT MUMBAI], Inder Jeet Malik [2022 (7) TMI 1583 - ITAT DELHI] and Amit Sabharwal [2025 (3) TMI 712 - ITAT DELHI] have consistently held that substitution of stamp-duty value u/s 50C, being a deeming fiction coupled with statutory rights of objection and reference to DVO under sub-section (2) of section 50C, cannot be treated as an “incorrect claim apparent from information in the return” so as to permit adjustment u/s 143(1)(a)(ii). Such determination requires examination beyond the return and involves a debatable issue, which can be undertaken only in regular assessment proceedings and not at the stage of processing u/s 143(1). [Paras 8, 9, 10] The impugned upward adjustment made by invoking section 50C while processing the return u/s 143(1) is unsustainable and is deleted; Ground No. 1 is allowed. Final Conclusion: The Tribunal allowed the appeal, deleted the addition made by applying section 50C at the processing stage under section 143(1). Issues: Whether an upward adjustment under section 50C of the Income-tax Act, 1961 substituting stamp duty value for declared consideration can be made by the Assessing Officer while processing the return under section 143(1) read with clause (a)(ii) of section 143(1).Analysis: The Tribunal noted that substitution of stamp duty value under section 50C is a deeming provision which confers on the assessee statutory rights of objection and referral to the Departmental Valuation Officer under section 50C(2). Co-ordinate benches have consistently held that such an adjustment is not an 'incorrect claim apparent from any information in the return' within the meaning of section 143(1)(a)(ii) and therefore cannot be effected at the processing stage under section 143(1). The Tribunal further held that failure of the assessee to respond to an intimation under the first proviso to section 143(1)(a) does not enlarge the statutory scope of section 143(1) or cure a jurisdictional defect; an adjustment that is beyond the jurisdiction of section 143(1) remains unsustainable even if the assessee did not file a response at the processing stage.Conclusion: The impugned addition/upward adjustment of Rs. 33,80,000 made under section 50C while processing the return under section 143(1) is unsustainable in law and is deleted. The appeal is allowed in favour of the assessee on this ground; other grounds are infructuous.Ratio Decidendi: A substitution of consideration under section 50C, being a deeming fiction coupled with the statutory right to object and reference to the DVO under section 50C(2), cannot be treated as an 'incorrect claim apparent from any information in the return' and therefore cannot be adjusted during processing under section 143(1)(a)(ii); such adjustments require proceedings under the regular assessment provisions.