This case examines whether an addition can be made in the hands of a purchaser of immovable property by invoking the deeming provisions of Section 50C of the Income-tax Act, 1961. The Assessing Officer sought to treat the difference between the actual purchase consideration and the higher stamp duty valuation (circle rate) as taxable income of the assessee. The Income Tax Appellate Tribunal (ITAT), Delhi, clarified that Section 50C is a special provision applicable exclusively to the seller of the property for the purpose of computing capital gains and cannot be used to tax the purchaser. Holding the addition legally untenable, the Tribunal directed its deletion, reaffirming that deeming fictions must be applied strictly within the scope intended by the legislature.
Issue Involved
Whether Section 50C, which deems stamp duty value as full value of consideration, can be invoked against the purchaser of an immovable property for making an addition of the difference between transaction value and the circle rate.
Facts of the Case (Summary)
- The assessee was a purchaser of immovable property.
- The Assessing Officer made an addition to the purchaser’s income on the ground that the stamp duty valuation (circle rate) was higher than the actual purchase consideration.
- The AO treated the difference as unexplained investment or as income due to undervaluation.
- The assessee contended that Section 50C applies only to sellers, not purchasers.
Held (Decision)
- Section 50C creates a deeming fiction only for the purpose of computing capital gains in the hands of the seller of the property.
- It does not apply to the purchaser under any circumstance.
- Since the assessee was a purchaser, the addition was unsustainable.
- The ITAT deleted the entire addition.
Key Reasoning
- Section 50C is located in Chapter IV – Computation of Income from Capital Gains.
- It substitutes sale consideration with stamp duty value only in the hands of a transferor (seller).
- It does not determine purchase value or regulate purchaser-side transactions.
- For purchasers, the relevant provision is Section 56(2)(x) (taxing receipt of property below stamp value), but this applies only if invoked specifically—and the AO had invoked Section 50C, not Section 56(2)(x).
Therefore, the AO’s basis of addition was legally incorrect.
Final Outcome
✔️ Addition deleted
✔️ Section 50C cannot be applied against the purchaser
Case Details: