AO Must Refer Disputed Stamp Duty Value to DVO Before Making Section 50C Addition.

ORDER

Siddhartha Nautiyal, Judicial Member.- This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 12.02.2025 passed for A.Y. 2012-13.

2. At the outset, we observe that the appeal is time barred by 05 days. The delay of 05 days is condoned on due consideration of facts of assessee’s case and owing to causing no perceptible prejudice to other side.

3. The assessee has taken the following grounds of appeal:

“1. Learned CIT(A) erred in law and on facts in not considering actual sale consideration of Rs. 10,00,000/- received by the appellant by adopting value as per jantri rates of Rs. 29,65,802/- as deemed value of sale consideration u/s 50C of the Act without referring the valuation to the DVO to ascertain fair market value of the land under consideration without offering any cogent reasons for non-reference to DVO despite of repeated requested of your appellant for reference to DVO for arriving the fair market value of the land under consideration and thus depriving the appellant of the alternative remedial machinery available in the Act. Thus, making an addition of STCG of Rs. 24,53,638/- to the total income of the appellant is illegal, unwarranted and the addition is liable to be deleted.

2. L’nd CIT(A) erred in making an addition of Rs. 1,75,000/- as income from other sources as commission income without appreciating the facts and circumstances of the case and this addition of Rs. 1,75,000/- is liable to be deleted.

3. Your appellant craves leave to add, amend, alter or modify any of the grounds of appeal on or before the appeal is finalized.”

4. The brief facts of the case are that the assessee, Bhupendrabhai Bhikhalal Patel, filed his return of income for the Assessment Year 2012-13 declaring income from agricultural activities, capital gains, and income from other sources. Based on information received from the Sub-Registrar, Anand, the Assessing Officer observed that during the relevant year, the assessee had sold an immovable property for a consideration of Rs. 10,00,000/-, whereas the value adopted by the Sub-Registrar for stamp duty purposes was Rs. 29,65,802/-. Since the assessee had not offered the capital gains arising from the sale of the said property in his return of income, the Assessing Officer recorded reasons, obtained due approval, and reopened the assessment under section 147 of the Income Tax Act, 1961 (Act). During the course of reassessment proceedings, the assessee was issued several notices under section 142(1) of the Act calling for details of the sale transaction, computation of capital gains, and supporting documents. In response, the assessee initially contended that he had purchased agricultural land on 12.04.2010 for Rs. 4,03,650/- and sold the same on 05.07.2011 for Rs. 10,00,000/-. The assessee argued that since the land was agricultural and had not been converted to non-agricultural use, he believed that capital gains tax was not applicable on sale of such land. The assessee also contended that the Sub-Registrar’s valuation was based on the new jantri rates which came into effect from 01.04.2011 and should not apply to his case as the purchase occurred the assessee an earlier date when the old jantri rates were in force. The Assessing Officer, however, rejected the assessee’s explanation and held that under section 50C of the Act, the value adopted for stamp duty purposes must be taken as the full value of consideration for computing capital gains. The Assessing Officer also noted inconsistencies in the assessee’s disclosure while the assessee had earlier shown income of Rs. 1,75,000/- as commission income under “income from other sources,” in the return filed in response to notice under section 148 of the Act, he had declared short-term capital gains (STCG) of only Rs. 1,08,514/- and omitted a sum of Rs. 1,75,000/- while filing return of income. The Assessing Officer found the explanation unsatisfactory and added a sum of Rs. 24,53,638/- as short-term capital gains under section 50C (computed as Rs.29,65,802/- minus the cost of acquisition Rs.4,03,650/- and STCG Rs.1,08,514/-) and Rs. 1,75,000/- as commission income under “income from other sources.” The total income was thus assessed at Rs. 29,09,710/-, including agricultural income of Rs. 1,72,560/- for rate purposes, and penalty proceedings under section 271(1)(c) were also initiated for concealment of income.

5. In appeal, the learned CIT(Appeals) observed that the assessee had filed Form 35 but failed to upload or submit any supporting documents, written submissions, or evidence during the appellate proceedings. Several opportunities were provided to the assessee to present his case, but he remained non-compliant. The CIT(A) noted that the Assessing Officer had duly verified the information and computed capital gains in accordance with section 50C based on the stamp duty valuation. Since the assessee did not produce any material to substantiate his claim or contest the findings of the Assessing Officer, the CIT(A) found no reason to interfere with the assessment order. Accordingly, the CIT(A) upheld the additions made by the Assessing Officer and dismissed the appeal of the assessee. Thus, in the absence of any supporting evidence or explanation from the assessee, the order of the Assessing Officer was confirmed, and the appeal was dismissed on merits.

6. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. Before us, the counsel for the assessee submitted that it a well settled law that for purposes of invoking section 50C of the Act, the Assessing Officer must refer the matter to the DVO for arriving at the correct value of sale value.

7. In response, the Ld. DR placed reliance on the observations made by the Assessing Officer and Ld. CIT(Appeals) in their respective orders.

8. We have carefully considered the rival submissions and perused the material available on record. The brief facts of the case have already been set out hereinabove. The core issue under consideration is whether the Assessing Officer was justified in adopting the value determined by the Sub-Registrar for stamp duty purposes as the full value of consideration under section 50C(1) of the Act, without referring the matter to the Departmental Valuation Officer (DVO) under section 50C(2) of the Act. On a careful consideration of the facts and the submissions made before us, we find merit in the contention of the assessee that once an assessee disputes the correctness of the value adopted by the stamp valuation authority and claims that such value exceeds the fair market value of the property, it becomes mandatory for the Assessing Officer to make a reference to the DVO under section 50C(2) of the Act to ascertain the fair market value of the property before making any addition. From the facts placed on record, we observe that the assessee submitted that the Jantri value has been calculated at a higher rate and the revised Jantri rates do not apply to the assessee. Therefore, the Assessing Officer in the instant case, having received such objection, ought to have exercised the statutory power conferred under section 50C(2) and referred the valuation issue to the DVO before completing the assessment. This principle has been consistently upheld by several judicial pronouncements. The Hon’ble Visakhapatnam Bench of the Tribunal in ACIT v. Kishore Kumar  ITR(T) 158 (Visakhapatnam – Trib.) held that where the assessee disputes the adoption of stamp duty valuation, the Assessing Officer is duty-bound to refer the matter to the DVO under section 50C(2) of the Act. Similarly, in Asstt. CIT v. Lalitha Karan [IT Appeal No. 1130 (Hyd.) of 2015, dated 4-1-2017], the Hyderabad Bench of the Tribunal held that the Assessing Officer must refer the valuation to the DVO when the assessee claims that the stamp duty value does not represent the true market value. The Delhi Bench of the Tribunal, in ACIT v. Ridgeview Developers (P.) Ltd.  (Delhi – Trib.), reiterated that an addition under section 50C of the Act cannot be sustained if the Assessing Officer fails to obtain the DVO’s report despite a specific objection by the assessee. Likewise, in Assistant Commissioner of Income-tax v. Tarun Agarwal  ITD 107 (Agra – Trib.), it was categorically held that when an assessee disputes the stamp duty valuation, it is a bounden duty of the Assessing Officer to refer the matter to the DVO to determine the fair market value of the property as on the date of transfer. In the light of the above settled judicial precedents and considering the facts of the case, we are of the considered view that the Assessing Officer erred in adopting the stamp duty valuation straightaway without referring the matter to the DVO despite the assessee having objected to the jantri value as being excessive. Therefore in the interests of substantial justice, the matter needs to be reconsidered afresh after obtaining a valuation report from the DVO under section 50C(2) of the Act. Accordingly, the impugned order of the CIT(A) is set aside, and the matter is restored to the file of the Assessing Officer with a direction to refer the valuation of the property to the Departmental Valuation Officer (DVO) in accordance with law, obtain the valuation report, and thereafter decide the issue of short-term capital gains afresh after giving due opportunity of hearing to the assessee.

9. In the result, the appeal of the assessee is allowed for statistical purposes, in the interests of justice.