AO Can Substitute Sale Value Disclosed In Registered Sale Deeds Where There Is Evidence Of Understatement: Punjab & Haryana High Court

The Punjab and Haryana High Court has upheld the jurisdiction of the Assessing Officer to substitute the sale value disclosed in registered sale deeds where there is evidence of understatement. The Bench of Justice Jagmohan Bansal and Justice Amarinder Singh Grewal has observed that the Department had relied on multiple pieces of evidence. These included the testimony of the Sarkaria Brothers, who stated during cross-examination that the agreed sale consideration was ₹22 lakh per acre and disclosed their sources of funds. The Court also observed that if ₹10 lakh was indeed 25% of the total sale consideration, as claimed by the assessee, the total value would amount to ₹40 lakh—far exceeding the declared figure of ₹22.10 lakh. The case arose from two connected appeals—ITA-338-2006 filed by Inderpal Singh Ahuja and ITA-117-2009 filed by the Commissioner of Income Tax—challenging separate orders of the Income Tax Appellate Tribunal, Amritsar Bench, concerning Assessment Year 2002-03. The dispute centered around the sale of agricultural land owned by Inderpal Singh Ahuja in Village Hair, District Amritsar. The assessee had executed seven registered sale deeds declaring a total sale consideration of ₹22,10,500 for approximately 18 acres of land. However, the Assessing Officer formed an opinion that the sale consideration had been grossly suppressed and determined the market value at ₹24,20,000 per acre while framing assessment under the Income Tax Act, 1961. The assessment resulted in a substantial enhancement of long-term capital gains liability. The Commissioner of Income Tax (Appeals) upheld the assessment, and the Income Tax Appellate Tribunal partly modified the valuation by determining the sale consideration at ₹22,10,000 per acre. Aggrieved, the assessee approached the High Court under Section 260A of the Act. During the proceedings, the assessee argued that ₹10 lakh deposited by two prospective buyers—Sukhvinder Singh and Gurvinder Singh (referred to as the Sarkaria Brothers)—represented 25% of the agreed total sale consideration, contending that the authorities had wrongly inferred a higher sale price. It was further argued that the Department had improperly relied upon transactions relating to plotted colonies and adjoining developed land, which were not comparable to the assessee’s agricultural land. The assessee also contended that the enhancement in Collector rates occurred after the sale and was triggered by the announcement of an airport in the vicinity. The Revenue, however, maintained that the airport had already been declared prior to the sale, leading to a significant rise in land values in the surrounding area. It was further contended that the land in question was road-facing and situated in a developing zone, justifying the higher valuation. The High Court noted that there were concurrent findings of fact by the Assessing Officer, CIT(A), and the Tribunal. It rejected the argument that the Assessing Officer lacked jurisdiction to substitute the declared consideration. The Bench observed that there is no provision in the Income Tax Act prohibiting the Assessing Officer from revising declared sale consideration where evidence indicates that the assessee received a higher amount. The Court remarked that accepting the assessee’s contention would encourage tax evasion by permitting unscrupulous taxpayers to disclose artificially low consideration in sale deeds. It held that such a practice “can neither be accepted nor approved by the Courts.” Further, the Court considered comparative instances of similar land sold five years earlier at ₹7.84 lakh per acre, making it implausible for the same land to be sold later at ₹4.50 lakh per acre amid rising market trends. It also took note of the exponential increase in Collector rates—from ₹4.95 lakh per acre to ₹30 lakh per acre in 2003—holding that such a dramatic revision was indicative of substantial appreciation in land value. Additionally, the Court referred to the development of adjoining land owned by the assessee’s brother, which had been converted into a residential colony after obtaining approval from PUDA and sold at significantly higher rates. While clarifying that this fact alone was not determinative, the Bench treated it as corroborative evidence supporting the Revenue’s case. Concluding that there was sufficient material to justify rejection of the declared value and reassessment of capital gains, the High Court answered the substantial questions of law against the assessee and dismissed his appeal. In the connected appeal filed by the Revenue, the issue pertained to the cancellation of penalty proceedings on the ground of limitation. The Tribunal had set aside the penalty, holding that it was imposed beyond the statutory time limit. The department was unable to rebut this finding before the High Court. Observing no infirmity in the Tribunal’s order, the Court dismissed the Revenue’s appeal as well. Case Details Case Title: Inderpal Singh Ahuja Versus The Assessing Officer-Cum-A.C.I.T. & Ors. Citation: JURISHOUR-139-HC-2026(PHC) Case No.: ITA-338-2006 (O&M) Date: 19.02.2026 Counsel For Petitioner: Kshitij Sharma, Sr. Advocate Counsel For Respondent: Urvashi Dhugga, Sr. Standing Counsel Click Here To Read Order Read More: Pvt. Ltd. Entitled to Same Exemption As Public Ltd. Companies: Calcutta HC Strikes Down Liquor Excise Fee Rule

AO Can Substitute Sale Value Disclosed In Registered Sale Deeds Where There Is Evidence Of Understatement: Punjab & Haryana High Court

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