AO Must Refer Valuation to DVO When Registered Valuer’s Report is Disputed.

By | October 31, 2025
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AO Must Refer Valuation to DVO When Registered Valuer’s Report is Disputed.

Issue

Can an Assessing Officer (AO), who is not a technical expert, reject a registered valuer’s report for determining Fair Market Value (FMV) and substitute their own valuation without making a mandatory reference to the Departmental Valuation Officer (DVO) as envisaged under Section 55A?

Facts

  • The assessee, for computing long-term capital gains on a land sale, adopted the FMV as on April 1, 1981, at ₹250 per square meter, based on a registered valuer’s report.
  • The AO was dissatisfied, rejected this report, and determined the FMV at a much lower ₹11.30 per square meter based on sale instances he obtained from the Sub-Registrar’s office.
  • The assessee argued that the AO, not being a valuation expert, could not reject the report without seeking an expert opinion from the DVO.
  • The court also noted that the assessee’s own valuer’s report was weak and not well-supported.

Decision

  • The court held that the determination of the FMV required a fresh and proper examination.
  • The matter was remanded back to the Assessing Officer.
  • The AO was specifically directed to refer the valuation of the property to the DVO as requested by the assessee.
  • A fresh computation of capital gains is to be made only after considering the DVO’s report and providing the assessee with an opportunity of being heard.

Key Takeaways

  • AO is Not a Valuation Expert: An Assessing Officer cannot act as a valuation expert and arbitrarily substitute their own judgment for a report prepared by a government-approved registered valuer.
  • Reference to DVO is the Correct Procedure: If an AO has reasons to believe that the valuation adopted by the assessee is incorrect, the proper and legally mandated course of action is to make a reference to the Departmental Valuation Officer (DVO) under Section 55A.
  • Ensuring Fairness: This procedure ensures that the final valuation is based on an independent, expert opinion, providing a fair basis for both the taxpayer and the revenue.
  • Weak Reports Can Be Challenged: Both the taxpayer and the AO should ensure their valuation reports are robust. A weak report from either side can be a ground for referring the matter to the DVO.

Disallowance of Improvement Cost is Invalid if Based on Suspicion, Not Inquiry.

Issue

Can an Assessing Officer (AO) disallow a claim for the cost of improvement based solely on suspicion about the supporting bills (e.g., being handwritten), without conducting any independent inquiry or verification, especially when the assessee has provided the details of the vendors?

Facts

  • The assessee claimed a deduction for the “cost of improvement” while computing capital gains on a property sale.
  • The AO disallowed the claim on the grounds that the supporting bills were handwritten, lacked details, and some pertained to a period before the property was purchased.
  • The assessee had provided the names and addresses of the parties who carried out the improvement work.
  • The AO did not conduct any verification of these parties by issuing notices or summons. The disallowance was made purely on the basis of assumption and suspicion.

Decision

  • The court found that the AO had failed to conduct any independent verification of the evidence furnished by the assessee.
  • It held that an addition made solely based on assumptions, without proper inquiry, is legally unsustainable.
  • The matter was remanded back to the Assessing Officer for a fresh examination, with directions to conduct a proper and fair verification of the claim.

Key Takeaways

  • Suspicion is Not a Substitute for Proof: An AO cannot make a disallowance based on mere suspicion or the appearance of documents. The decision must be backed by evidence gathered through an inquiry.
  • Onus Shifts to the AO: Once a taxpayer provides foundational evidence and details to support a claim, the onus shifts to the Assessing Officer to disprove it through a proper investigation.
  • Use of Statutory Tools is Necessary: A proper inquiry involves using the tools available under the Act, such as issuing notices under Section 133(6) or summons under Section 131(1), to cross-verify information with third parties.
  • Violation of Natural Justice: Making an addition without giving the assessee a chance to have their evidence properly verified is a violation of the principles of natural justice.

Computation of Sale Consideration Remanded Along with Cost of Acquisition for a Fresh Look.

Issue

When the computation of the cost of acquisition for a capital gains transaction is remanded for fresh consideration, should the related issue of determining the full value of the sale consideration under Section 50C also be remanded for a comprehensive re-adjudication?

Facts

  • The assessee sold a piece of land, declaring a sale consideration of ₹50 lakhs.
  • The stamp duty valuation for the property was ₹67.56 lakhs.
  • The AO invoked Section 50C and added the difference to the assessee’s income.
  • In a related ground of appeal, the issue concerning the computation of the cost of acquisition for the very same transaction had already been restored to the file of the Assessing Officer for fresh consideration.

Decision

  • The court held that since the matter of computing the cost of acquisition was already remanded, it was appropriate to remand the connected issue of determining the sale consideration as well.
  • The matter was remanded back to the Assessing Officer for a de-novo (fresh) and comprehensive consideration of the entire capital gains computation.

Key Takeaways

  • Holistic Adjudication: To ensure consistency and avoid contradictory outcomes, it is a sound judicial practice to remand all interconnected issues of a single computation back to the primary authority.
  • Avoiding Piecemeal Decisions: Remanding all related grounds prevents piecemeal adjudication, where one part of a calculation is decided by the AO while another is decided by an appellate authority.
  • Comprehensive Re-evaluation: This approach allows the Assessing Officer to take a fresh look at all components of the capital gains calculation—sale consideration, cost of acquisition, and cost of improvement—to arrive at a correct and final figure in a single, consolidated proceeding.
IN THE ITAT AHMEDABAD BENCH ‘B’
Harshadkumar Hargovandas Patel
v.
Income-tax Officer
Siddhartha Nautiyal, Judicial Member
and Smt. Annapurna Gupta, Accountant Member
IT Appeal Nos. 124 and 125 (Ahd) of 2023
[Assessment year 2013-14]
OCTOBER  15, 2025
Tushar Hemani, Sr. Adv. and Parimalsinh B. Parmar, AR for the Appellant. Abhijit, Sr. D.R. for the Respondent.
ORDER
Siddhartha Nautiyal, Judicial Member.- These appeals have been filed by the Assessee against the orders passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide orders dated 30.12.2022 passed for A.Y. 2013-14.
First we shall deal with Assessee’s Appeal in ITA No. 124/Ahd/2023 (A.Y. 2013-14)
2. The Assessee has taken the following grounds of appeal:-
“1. The ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“CIT(A)” for short] grossly erred in law and on facts in confirming addition of Rs.1,48,61,085/-, being long term capital gain, by rejecting valuation report of a registered value and substituting valuation without referring valuation to the District Valuation Officer (DV).
2. The ld. CIT(A) grossly erred on facts in confirming addition of Rs. 3,05,400/-, being short term capital gain on sale of NA land situated at Block No. 1165, Village: Chhatral (in which Appellant held 1/3 share) by taking gross cost of purchase at Rs. 21,46,300/- instead of correct cost ofpurchase of Rs.23,08,800/- and rejecting gross cost of improvement and gross cost of transfer aggregating to Rs. 7,75,000/-.
3. The ld. CIT(A) grossly erred in law and on facts in confirming the assessment u/s. 143(3) r.w.s. 147 without service of notice u/s. 14392) of the Act hence assessment framed u/s. 14393) r.w.s. 147 is bad in law.
4. Appellant craves leave to add to, alter, amend, modify, substitute, change any of the grounds as and when the occasion may arise. “
3. The brief facts of the case are that the assessment in the case of the assessee, Shri Harshadkumar Hargovandas Patel, for A.Y. 2013-14 was reopened under section 148 of the Income Tax Act, 1961 (Act), on the basis of information in the Annual Information Report (AIR) that the assessee, along with two co-owners, had sold a non-agricultural land for a total consideration of Rs. 5,25,00,000/- during the Financial Year 2012-13. Since the assessee had not filed a return of income for the relevant year, the Assessing Officer reopened the case and completed the assessment determining Long-Term Capital Gain (LTCG) after making certain disallowances.
3.1 The dispute was with respect to the fair market value (FMV) of the land as on 01.04.1981. The assessee had adopted the value of Rs. 72,84,500/-based on a registered valuer’s report and claimed an indexed cost of acquisition of Rs. 6,20,63,940/-. However, the Assessing Officer, being dissatisfied with the valuer’s report, obtained sale instances of similar nearby lands from the Sub-Registrar’s Office for the year 1981 and determined the FMV at Rs. 28,05,287/-. In appeal, the CIT(A) observed that the valuer’s report was not based on any documentary evidence or sale instances which were verifiable, but only on oral enquiries. The assessee’s valuer himself admitted that no written comparable sale instances were available and that the valuation was based on informal local discussions. The CIT(A) held that (such subjective valuation, which was not supported by any documentary proof, could not be relied upon, especially when the Assessing Officer had obtained direct evidence from the Sub-Registrar’s Office regarding actual sale instances of similar properties). The assessee’s argument that the Assessing Officer ought to have made a reference to the Departmental Valuation Officer (DVO) under section 55A of the Act was rejected. The CIT(A) held that section 55A uses the expression “may refer” and confers discretion on the Assessing Officer; where the Assessing Officer already possesses direct and cogent evidence in the form of registered sale deeds, there is no necessity for DVO reference. The case laws cited by the assessee were held to be distinguishable on facts. Accordingly, the CIT(A) upheld the AO’s valuation based on sale instances from the Sub-Registrar’s Office and dismissed the assessee’s appeal.
3.2 Further, the Assessing Officer made a disallowance of Rs. 13,00,000/-claimed by the assessee towards indexed cost of improvement and expenditure on transfer. The assessee had produced certain handwritten bills and notes to substantiate the claim. The Assessing Officer found that all the bills were written in the same handwriting, they were lacking in essential details such as PAN, TIN, or service tax numbers, and apparently were selfprepared. The assessee failed to furnish confirmations or income-tax details of the concerned parties and also did not produce them for verification. The CIT(A) thus held that the onus to prove the genuineness of such expenditure lay upon the assessee, and having failed to do so, the disallowance made by the Assessing Officer was justified.
3.3 Further, while framing the assessment, the Assessing Officer made a disallowance of Rs. 3,05,400/- towards cost of improvement and expenditure claimed while computing Short-Term Capital Gain on another property sold for Rs. 50,00,000/-. The Assessing Officer noted that the assessee had produced handwritten bills to support the claim, but all were found to be in the same handwriting and pertained to a period prior to the date of acquisition of the property. The assessee failed to produce any confirmations or independent evidence. The CIT(A) held that since the assessee could not establish the genuineness of the claim, the Assessing Officer was justified in disallowing the same. Accordingly, Ground No. 6 was also dismissed.
4. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.
Ground Number 1: CIT(Appeals) erred in confirming addition of Rs. 1,48,61,085/- being LTCG by rejecting valuation of Registered Valuer:
5. Before us, the Counsel for the assessee submitted that the learned CIT(A) has erred in confirming the addition of Rs.1,48,61,085/- made by the Assessing Officer towards Long-Term Capital Gain by rejecting the valuation report of a registered valuer without making a mandatory reference to the Departmental Valuation Officer (DVO) under section 55A of the Act. It was submitted that the assessee had sold land during the relevant assessment year and, for the purpose of computing Long-Term Capital Gains, had adopted the Fair Market Value (FMV) as on 01.04.1981 at Rs.250 per square meter based on a detailed valuation report prepared by a Government-approved registered valuer. The said report, containing all relevant details, was furnished before the Assessing Officer and is placed at pages 61 to 76 of the paper book. Despite this, the Assessing Officer overlooked the valuation report and instead obtained certain sale instances from the Sub-Registrar’s office, Vadodara, and on the basis of one such instance, adopted the FMV as on 01.04.1981 at Rs.11.30 per square meter, which is reflected at page 18 of the assessment order. The Counsel argued that the Assessing Officer, not being an expert in valuation matters, could not have substituted his own judgment for that of a qualified registered valuer without referring the matter to the DVO. It was contended that section 55A of the Act provides a clear mechanism for the Assessing Officer to make a reference to the Valuation Officer if he is not satisfied with the value adopted by the assessee. However, in the present case, the Assessing Officer did not invoke this provision and instead determined the FMV arbitrarily on the basis of a single sale instance, without establishing its comparability or relevance. It was therefore submitted that in the absence of a reference to the DVO, the Assessing Officer’s action in adopting a lower FMV is contrary to the provisions of law and unsustainable in view of the decision of the Hon’ble Delhi High Court in Ved Kumari Subhash Chander v. ITO   (Delhi – Trib.), wherein it was held that the Assessing Officer cannot disregard a registered valuer’s report without making a reference to the DVO. Accordingly, the Counsel urged that the addition made on account of alleged understatement of FMV deserves to be deleted on this short legal ground itself. With regard to the claim of cost of improvement of Rs.12,50,000/-, the Counsel submitted that the assessee had furnished complete details and supporting bills before the Assessing Officer, which are recorded at pages 13 to 16 of the assessment order and at pages 173 to 181 of the paper book. The bills contained the names and addresses of the contractors and workers who carried out the improvement work. However, the Assessing Officer, without issuing any notices under section 133(6) or summons under section 131 to verify the genuineness of the transactions, summarily disallowed the entire claim merely on the basis of suspicion. The Counsel for the assessee submitted that such an approach is contrary to the settled principle that suspicion, however strong, cannot take the place of evidence. The Counsel pointed out that no adverse material was brought on record by the Assessing Officer to doubt the veracity of the evidence produced by the assessee. Therefore, the disallowance of cost of improvement is wholly unjustified and the same ought to be allowed. As regards the claim of transfer expenses of Rs.50,000/-, the Counsel drew attention to the details furnished before the Assessing Officer as appearing at page 14 of the assessment order and the confirmation letter of the concerned broker placed at page 182 of the paper book. It was argued that despite having all relevant details including the name, address, and confirmation of the broker, the Assessing Officer made no attempt to verify the same. Neither any notice under section 133(6) nor any summons under section 131 was issued to cross-verify the transaction. Instead, the Assessing Officer disallowed the expenditure merely on the basis of conjecture and surmise. The Counsel submitted that both the Assessing Officer and the CIT(A) failed to appreciate that the expenditure was supported by records and confirmations and that the disallowance made in the absence of any contrary evidence is unsustainable in law. In summary, the Counsel for the assessee submitted that the addition made by the Assessing Officer and confirmed by the CIT(A) suffers from serious legal and factual infirmities. The Assessing Officer, being not competent to undertake valuation on his own, ought to have referred the matter to the DVO before rejecting the registered valuer’s report. Similarly, the disallowances of cost of improvement and transfer expenses were made without any inquiry or verification despite the availability of supporting evidence on record. It was thus pleaded that the impugned addition of Rs.1,48,61,085/- deserves to be deleted in its entirety and appropriate relief be granted to the assessee in the interest of justice.
6. In response, the Ld. DR placed reliance on the observations made by the Assessing Officer and Ld. CIT(Appeals) in their respective orders. The Ld. DR submitted that the Assessing Officer had relied on the registered sale deed documents provided to the Assessing Officer by Sub-Registrar Kalol. Further, it was pointed out that there was a substantial price difference between the rate of cost of acquisition, with the assessee taking the rate of Rs.250 per square meter as against the rate of Rs.11.30 per square meter taken by the Assessing Officer. Therefore, it was submitted that there is no viable justification of such a huge cost of acquisition taken by the assessee. Further, the assessee could not produce any corroborative evidence to justify cost of improvement or transfer cost as well. Accordingly, it was submitted that the there is no infirmity in the order of Ld. CIT (Appeals) so as to call for any interference.
7. We have heard the rival contentions and perused the material on record. The dispute in the present case primarily relates to the determination of the fair market value (FMV) of the land as on 01.04.1981 adopted by the assessee for the purpose of computing Long-Term Capital Gain. The assessee had adopted the FMV based on the valuation report of a registered valuer, whereas the Assessing Officer, without referring the matter to the Departmental Valuation Officer (DVO), determined the FMV based on certain sale instances obtained from the Sub-Registrar’s Office. The assessee has consistently contended that the Assessing Officer, not being a technical expert in valuation matters, could not have rejected the registered valuer’s report without seeking an expert opinion from the DVO as envisaged under section 55A of the Act. But at the same time, we are view that the value of Rs. 250 per square meter adopted by the Registered Valuer in it’s Report also has no legs to stand on. We are of the view that such subjective valuation, which was not supported by any documentary proof, could not be relied upon, especially when the Assessing Officer had obtained direct evidence from the Sub-Registrar’s Office regarding actual sale instances of similar properties. On careful consideration of the rival submissions, we are of the view that the issue relating to the determination of FMV as on 01.04.1981 requires fresh examination by the Assessing Officer. The determination of fair market value is essentially a technical matter which calls for expert evaluation, and therefore, in the interests of justice, we deem it appropriate to restore the issue to the file of the Assessing Officer for denovo consideration. The Assessing Officer is directed to refer the valuation of the property as on 01.04.1981 to the Departmental Valuation Officer (DVO) as per the specific request of the assessee, and thereafter, re-compute the Long-Term Capital Gain after giving due opportunity of being heard to the assessee and after considering the report of the DVO as well as any evidence or explanation that the assessee may submit in support of its claim.
8. Since the main issue relating to FMV is being restored to the file of the Assessing Officer for fresh adjudication, we also consider it appropriate to restore the issues relating to the assessee’s claim of cost of improvement and expenditure on transfer of sale of aforesaid property to the Assessing Officer for reconsideration. The Assessing Officer shall examine these claims afresh in accordance with law after affording reasonable opportunity of hearing to the assessee. The assessee shall be at liberty to furnish all necessary documentary evidence, including bills, vouchers, confirmations, or any other material in support of its claim of expenditure towards cost of improvement and transfer expenses.
9. We make it clear that we have not expressed any opinion on the merits of the issues involved and all contentions of both sides are left open for adjudication before the Assessing Officer. The Assessing Officer shall decide the matter de novo, after carrying out necessary verification and in accordance with law.
10. Accordingly, Ground Number 1 is restored to the file of the Assessing Officer for fresh consideration and the appeal of the assessee is allowed for statistical purposes.
Ground Number 2: CIT(Appeals) erred in confirming addition of Rs. 3,05,400/- being short term capital gains:
11. The brief facts in relation to this ground of appeal are that during the course of assessment proceedings, the Assessing Officer noticed from the Individual Transaction Statement (ITS) that the assessee, along with two coowners, had sold a non-agricultural land situated at Chhatral, Block No. 1165, admeasuring 3345 sq. meters, for a total sale consideration of Rs.50,00,000/-vide sale deed dated 23.07.2012. The property had been purchased earlier on 17.05.2011 for Rs.21,00,000/- along with two others, and additional amounts of Rs.25,000/- and Rs.21,300/- were paid towards stamp duty and registration charges respectively. Thus, the total cost of acquisition was taken at Rs.21,46,300/-. Based on these figures, the Assessing Officer worked out the total short-term capital gain at Rs.28,53,700/-, out of which the assessee’s share, being one-third, came to Rs.9,51,234/-. The Assessing Officer issued a show cause notice asking the assessee to explain why this amount should not be added to his total income. In response, the assessee filed a return of income on 07.12.2018 declaring a short-term capital gain of Rs.6,45,834/- and claimed deduction of Rs.3,05,400/- towards cost of improvement and transfer expenses. On examination of the evidence furnished, the Assessing Officer found that the bills submitted by the assessee were all handwritten, appeared to be in the same handwriting, and they apparently lacked necessary details such as PAN, TIN, or service tax registration of the concerned parties. The bills also did not mention the vehicle numbers of the JCBs and tractors allegedly used in the land development work, which raised doubts about their genuineness. Further, the Assessing Officer observed that the bills produced by the assessee pertained to the period between 02.02.2009 and 11.05.2010, whereas the property in question had been purchased only on 17.05.2011, clearly showing that the expenses could not relate to the said property. Despite repeated notices under sections 142(1) and 133(6), the assessee failed to furnish confirmations, income-tax details, or bank statements of the parties to whom payments were allegedly made. The assessee also did not produce any of those parties for verification. The Assessing Officer, therefore, held that the bills were self-serving and fabricated documents created merely to inflate the cost of improvement and reduce taxable gain. The explanation of the assessee that the expenses were incurred out of agricultural income was also rejected as no documentary proof of such agricultural income was submitted. The Assessing Officer, after giving ample opportunities to the assessee, held that the claim of improvement expenses was bogus. Accordingly, the short-term capital gain was computed at Rs.9,51,234/-, and since the assessee had declared only Rs.6,45,834/-, the difference of Rs.3,05,400/- was added to the total income of the assessee. Penalty proceedings under sections 271(1)(c) and 271F of the Income Tax Act were also initiated separately.
12. In appeal, the CIT(Appeals) upheld the action of the Assessing Officer. The Ld. CIT(A) observed that the assessee had failed to substantiate the genuineness of the claimed expenditure of Rs.3,05,400/- with credible evidence. The handwritten bills relied upon by the assessee were found to pertain to a period prior to the purchase of the property, and no independent or verifiable documents were produced to establish that the alleged development work was actually carried out on the said land. The CIT(Appeals) agreed with the findings of the Assessing Officer that the assessee had not discharged the onus of proving that the expenses claimed were genuine. Considering these facts and the lack of supporting evidence, the CIT(Appeals) held that there was no reason to interfere with the decision of the Assessing Officer and accordingly dismissed the assessee’s ground of appeal relating to the disallowance of cost of improvement and transfer expenses amounting to Rs.3,05,400/-.
13. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.
14. Before us, the Counsel for the assessee submitted that the Assessing Officer had wrongly made an addition of Rs.3,05,400/- in respect of ShortTerm Capital Gain by disallowing the assessee’s claim of expenditure of the same amount incurred towards improvement and transfer of the property. The Counsel submitted that during the course of assessment proceedings, the assessee had duly furnished all relevant details and supporting documents, including copies of bills and vouchers, evidencing the expenditure incurred. These bills and related details were placed before the Assessing Officer and are also available at pages 183 to 189 of the paper book. The Counsel submitted that the bills clearly contained the names and addresses of the persons who had actually carried out the development and improvement work on the property, and the expenditure was genuine and supported by records. The Counsel further contended that the Assessing Officer, instead of verifying these details or conducting any independent inquiry, rejected the claim solely on suspicion and conjecture. It was argued that the Assessing Officer did not issue a single notice under section 133(6) nor any summons under section 131(1) of the Act to the parties whose names were mentioned in the bills. No attempt was made to cross-verify the genuineness of the transactions or to confirm whether such improvement work was indeed undertaken. The Assessing Officer simply assumed that the bills were selfmade and rejected them on that ground alone, without bringing any adverse material on record to prove that the expenditure was bogus or fictitious. The Counsel pointed out that the Assessing Officer, being in possession of the names and addresses of the concerned parties, was duty-bound to make necessary inquiries before drawing any adverse inference. However, no such inquiry was conducted, and the claim was disallowed merely on suspicion. The Counsel submitted that it is a well-settled principle of law that suspicion, however strong, cannot take the place of evidence. The Assessing Officer’s conclusion, based purely on assumptions without verification, is therefore unsustainable in law. The Counsel also contended that the CIT(A) had mechanically upheld the order of the Assessing Officer without proper appreciation of facts and evidence. The CIT(A) failed to consider that the assessee had discharged the initial onus by furnishing the relevant details and supporting documents. Once such evidence was placed on record, the burden shifted to the Department to disprove the assessee’s claim by conducting proper verification, which was not done in this case. The Counsel submitted that both the lower authorities had ignored the principle of natural justice by rejecting genuine evidence without verification or providing an opportunity to substantiate the claim further. In summary, the Counsel for the assessee submitted that the disallowance of Rs.3,05,400/- made by the Assessing Officer and confirmed by the CIT(A) is not justified either on facts or in law. The expenditure claimed was genuine, duly supported by evidence, and incurred wholly and exclusively for the purpose of improvement and transfer of the property. Since no contrary material has been brought on record by the Department and the addition has been made merely on suspicion, the same deserves to be deleted in the interest of justice.
15. In response, the Ld. DR placed reliance on the observations made by the Assessing Officer and Ld. CIT(Appeals) in their respective orders.
16. We have heard the rival contentions and perused the material on record. The issue under consideration relates to the addition of Rs.3,05,400/-made by the Assessing Officer in respect of Short-Term Capital Gain by disallowing the assessee’s claim of expenditure towards cost of improvement and transfer expenses. The Assessing Officer rejected the claim mainly on the ground that the bills furnished by the assessee were handwritten, lacked necessary details, and pertained to a period prior to the purchase of the property. The CIT(Appeals) confirmed the addition on the basis that the assessee failed to substantiate the genuineness of the expenses and could not produce verifiable evidence to prove that the improvement work was actually carried out on the said land. Before us, the assessee has contended that all relevant details, including the names and addresses of the parties who allegedly carried out the improvement work, were placed on record, but no inquiry or verification was conducted by the Assessing Officer. It was submitted that the Assessing Officer did not issue any notice under section 133(6) or summon the parties under section 131(1) of the Act for verification. The addition, therefore, was made merely on suspicion without any concrete evidence or cross-verification. Having considered these submissions and the material available on record, we find that the authorities below have not made any independent verification of the evidence furnished by the assessee. The Assessing Officer, instead of examining the genuineness of the claim through necessary enquiries, proceeded to make the addition solely based on assumptions. In our considered view, the matter requires fresh examination to ensure that a proper and fair verification is made in accordance with law. Therefore, in the interest of justice, we set aside the orders of the lower authorities on this issue and restore the matter to the file of the Assessing Officer for de-novo consideration. The Assessing Officer is directed to conduct a proper inquiry into the assessee’s claim of improvement and transfer expenses, including verification of the persons whose names and details are appearing in the bills, by issuing necessary notices or summons and allowing the assessee an effective opportunity to substantiate the claim. The assessee shall be at liberty to file all relevant supporting documents, confirmations, and any other material evidence to substantiate the genuineness of the expenditure claimed. The Assessing Officer shall then decide the issue afresh after examining all materials on record and in accordance with law.
17. Accordingly, the matter is restored to the file of the Assessing Officer for fresh adjudication, and the appeal of the assessee is allowed for statistical purposes.
18. The assessee has not argued any other Grounds of Appeal and accordingly the appeal of the assessee is being disposed in light of Grounds of Appeal argued before us.
19. In the combined result, the appeal of the assessee is allowed for statistical purposes.
Now we shall come to assessee’s appeal in ITA No. 125/Ahd/2023 (A.Y. 2013-14)
20. The assessee has raised the following grounds of appeal:
“1. The ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi grossly erred in law and on facts in confirming addition of’Rs.5,85,632/-u/s. 50C of the Income Tax Act, made by Income Tax Officer, Ward: 4, Mehsana vide order u/s. 154 and that too without referring valuation to the District Valuation Officer (DVO).
2. Appellant craves leave to add to, alter, amend, modify, substitute, change any of the grounds as and when the occasion may arise. “
21. The brief facts of the case are that the assessment in the case of the assessee for Assessment Y ear 2013-14 was reopened under section 148 of the Act based on information available in the Annual Information Report (AIR). In response to the notice, the assessee filed his return of income on 07.12.2018 declaring total income of Rs.6,45,830/-. The assessment was thereafter completed under section 143(3) read with section 147 on 24.12.2018 determining total income at Rs.1,58,12,320/- as against the returned income of Rs.6,45,830/-. During the assessment proceedings, the Assessing Officer observed from the Individual Transaction Statement (ITS) that the assessee, along with two co-owners, had sold a non-agricultural land situated at Chhatral, Block No. 1165, admeasuring 3345 sq. meters, for a total sale consideration of Rs.50,00,000/- vide sale deed dated 23.07.2012. The property had been purchased earlier on 17.05.2011 for Rs.21,00,000/-, on which further amounts of ?25,000/- and Rs.21,300/- were paid towards stamp duty and registration fee respectively, taking the total cost of acquisition to Rs.21,46,300/-. The Assessing Officer obtained details from the SubRegistrar’s Office, Kalol, under section 133(6) and found that the market value of the property as per the stamp valuation authority was Rs.67,56,900/-, whereas the property was registered at Rs.50,00,000/-. Since the stamp duty value exceeded the declared sale consideration, the provisions of section 50C of the Act were found to be applicable. However, in the original assessment, the Assessing Officer computed Short-Term Capital Gain (STCG) by taking the sale consideration at Rs.50,00,000/- instead of Rs.67,56,900/-, resulting in a total gain of Rs.28,53,700/- and the assessee’s one-third share at Rs.9,51,234/-. Later, upon verification, the Assessing Officer was noticed that the computation was erroneous as per the records of the Sub-Registrar’s Office. The Assessing Officer held that this was a “mistake apparent from record” within the meaning of section 154 of the Act, as the correct sale consideration for computation of capital gains should have been Rs.67,56,900/- in accordance with section 50C of the Act. The Assessing Officer thereafter recomputed the Short-Term Capital Gain by adopting the market value of Rs.67,56,900/-, resulting in total STCG of Rs.46,10,600/- for the entire property. The assessee’s one-third share in the property was worked out at Rs.15,36,866/-, and after reducing the STCG of Rs.9,51,234/- already taxed in the original assessment, the balance amount of Rs.5,85,632/- was added to the assessee’s income. Consequently, the revised total income was conmputed at Rs.1,63,97,950/- as against Rs.1,58,12,320/- assessed earlier.
22. In appal, CIT(Appeals) dismissed the appeal of the assessee.
23. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.
24. We note that the issue with respect to computation of STCG for the aforesaid transaction has been restored to file of the Assessing Officer for fresh consideration, while dealing with Ground Number 2 of the assessee’s appeal in ITA 124/Ahd/2013. In ITA 124/Ahd/2013, the issue was with respect to computation of cost of acquisition. We note that the Assessing Officer has passed 154 order with respect to the very same transaction, but this time the sale consideration has been disputed by the Assessing Officer. Since the matter with respect to computation of cost of acquisition has been restored to the file of the Assessing Officer for fresh consideration, since the issue in the present appeal is with respect to arriving of correct sale consideration (against which computation of cost of acquisition has been restored to file the Assessing Officer), we hereby direct that the present matter may also be restored to the file of the Assessing Officer for de-novo consideration.
25. In the result, the appeal of the assessee is allowed for statistical purposes.
26. In the combined result, both the appeals are filed by the assessee are allowed for statistical purposes.