ITAT Delhi in Chaitram Alonkar vs ITO: Full Cost of Acquisition Granted, Section 50C Upheld on On-Money Evidence, Partial Interest Relief Directed

Background and Overview

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, recently pronounced its ruling in Chaitram Alonkar Vs ITO, an appeal arising out of an assessment framed under Section 143(3) read with Section 153A of the Income Tax Act, 1961 for Assessment Year 2017-18. The case involved multiple contested issues, including the correctness of the cost of acquisition adopted for computing long-term capital gains (LTCG), the applicability of Section 50C for stamp duty valuation, the levy of interest under Sections 234A, 234B, and 234C, and a jurisdictional challenge raised for the first time before the Tribunal.

The proceedings had their genesis in a requisition of seized cash under Section 132A of the Act on 22 November 2016, following which the assessee — identified as a non-filer — was issued a notice under Section 142(1) and subsequently filed a return disclosing LTCG from sale of immovable property. The Assessing Officer (AO) recomputed the LTCG by substituting the stamp duty value (SDV) as the full value of consideration under Section 50C, resulting in a substantial addition. The matter travelled through first appellate proceedings before the Commissioner of Income-tax (Appeals) [CIT(A)], which partially allowed relief, and the assessee thereafter filed the present appeal before the ITAT.

Factual Matrix

Search and Seizure Proceedings

Police authorities had initially seized cash amounting to ₹46,80,500/-, which was subsequently requisitioned by the Revenue under Section 132A of the Income Tax Act, 1961 on 22 November 2016. When the assessee's statement was recorded on 08 December 2016, he admitted the ownership of the seized cash and confirmed that it represented sale proceeds received in connection with transfers of immovable properties owned by him.

Return Filing and Assessment

The assessee had not filed a return under Section 139(1) within the prescribed time. After being served a notice under Section 142(1), and upon a further reminder, the assessee filed his return of income on 12 December 2018, declaring:

  • Total taxable income: ₹2,46,34,580/-
  • Long-term capital gain (LTCG): ₹2,44,01,486/-
  • Agricultural income: ₹21,22,400/-

The AO subjected the return to scrutiny and made an addition of ₹2,32,90,398/- representing the differential LTCG arising from substitution of SDV for actual sale consideration. The total assessed income was determined at ₹2,79,24,978/- under Section 143(3) read with Section 153A.

Nature of the Property Transaction

The assessee originally held agricultural land measuring 1290.45 sq. metres. Prior to its sale, the Sub-Divisional Officer (SDO), Chhindwara issued a conversion/diversion order on 24 February 2016, converting part of the land into plots. The converted area measured 936.26 sq. metres, which was sold to four separate buyers via registered sale deeds all dated 30 July 2016, for aggregate sale consideration of ₹2,15,85,000/-. The SDV of the four plots as assessed by the stamp authorities stood at ₹2,89,87,712/- (as corrected by the CIT(A)).

Issue I — Jurisdictional Challenge Under Section 124

Grounds Raised

The assessee raised two legal grounds before the ITAT for the first time, challenging the authority of the AO to frame the assessment:

  • Ground 5: That the assessment, being a search-related matter under Section 132A, fell within the exclusive jurisdiction of the Central Circle and not with the Income Tax Officer (ITO), Chhindwara.
  • Ground 6: That since the returned income exceeded ₹15,00,000/-, the ITO lacked pecuniary jurisdiction, and the matter should have been handled by an Assistant Commissioner or Deputy Commissioner of Income Tax.

The ITAT admitted both grounds as pure questions of law requiring no fresh inquiry into facts, relying upon the ratio in: