Applicability of deeming fiction u/s 50C when property purchased & sold within same year

When property purchased and sold within same year both sale and purchase price has to be adopted by applying same guideline value u/s 50C – ITAT

If AO adopts a deemed price u/s 50C, then where property was purchased within same year both sale and purchase price has to be adopted by applying same guideline value.

ABCAUS Case Law Citation:
5087 (2026) (03) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the addition to income by deeming fiction under section 50C of the Income Tax Act, 1961 (the Act).

The appellant assessee had purchased a piece of land. The said property was purchased for a consideration of Rs.17,50,000/-. The property was subsequently sold for Rs. 56,87,500/- within a period of four months within the same financial year. The assessee filed the return of income for the relevant Assessment Year showing the short term capital gain.

However, the Assessing Officer (AO) in the course of assessment held that as per the stamp duty guideline, the value in regard to said property was Rs. 70,00,000/- and therefore applied the provisions of section 50C and determined the difference between the STCG declared and the guideline value as income of the assessee.

Before the Tribunal, the assessee submitted that the benefit of cost of acquisition and the cost of improvement had been given to the assessee. It was further submitted that since the property was sold within the same financial year, for determining the purchase price of the property also the AO should take the stamp duty guideline price.

It was thus submitted that both the cost price and the sale price is to be determined as Rs.70,00,000/- by the Assessing Officer resulting in zero profit.

The Department submitted that the difference in regard to purchase price and guideline value was liable to be assessed to the hands of the assessee and the difference between the sale price and the guideline value was to be assessed in the hands of the purchaser of the property. It was the submission that the order of the Assessing Officer was liable to be upheld.

The Tribunal observed that when income was computed from short-term capital gains, the Assessing Officer admittedly had enhanced profit offered by the assessee from the sale consideration by adopting the guideline value as deemed sales consideration. However, as the property had been sold within four months, the guideline value in regard to the said property would have to be deemed to be Rs.70,00,000/- itself. This would result no profit being assessed under the head ‘short-term capital gains’. If the Assessing Officer adopts a deemed purchase price, then the deemed sale price also has to be adopted by applying same guideline value.

As the assessee had already offered a profit , the Tribunal deleted the addition as made by the Assessing Officer and direct the Assessing Officer to compute the short-term capital gains by adopting profit as disclosed by the assessee.

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