Assessment Order Passed Without Awaiting DVD Report Violates S. 50C(2) Income Tax Act: ITAT Ahmedabad

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has held that an assessment order passed without awaiting the DVD (Departmental Valuation Officer) report violates Section 50C(2) of the Income Tax Act.

Section 50C(2) of the Income Tax Act provides a mechanism for a taxpayer (seller) to dispute the stamp duty valuation of their immovable property if they believe it is higher than the actual fair market value (FMV)

Sanjay Garg (Judicial Member) and Makarand V. Mahadeokar (Accountant Member) opined that the assessment order passed under section 143(3) read with section 144B, without awaiting the DVO's report, when such a report was statutorily awaited, is not sustainable.

The subsequent rectification order under section 154 is also not sustainable, as it seeks to alter the assessment based on material not forming part of the original record and cannot be regarded as a “mistake apparent from record”, added the bench.

In this case, the assessee/appellant had sold immovable property. The sale consideration as per the registered sale deed was Rs. 1,75,00,000/-, which was duly reflected in the assessee's return of income.

The Sub-Registrar, while registering the sale deed, adopted a higher value of Rs. 2,23,37,669/- for the purpose of stamp duty, and accordingly collected additional stamp duty.

The Assessing Officer invoked section 50C(1) of the Income Tax Act and proposed to adopt Rs. 2,23,37,669/- as the deemed full value of consideration for computing capital gains.

In response, the assessee submitted that Rs. 1,75,00,000/- was the actual consideration received and that the value of the property adopted for the purpose of stamp duty was not a fair market value. The assessee alternatively requested the Assessing Officer to refer the valuation of the property to the Departmental Valuation Officer (DVO) under section 50C(2).

The Assessing Officer made a reference to the Valuation Officer under section 50C(2) following the SOP through the Technical Unit.

However, since the assessment was getting time-barred and the valuation report was not received from the DVO, without awaiting the valuation report, the Assessing Officer proceeded to pass an assessment order under section 143(3) read with section 144B, computing the long-term capital gain by adopting Rs. 2,23,37,669/- as the full value of consideration.

Aggrieved, the assessee preferred an appeal before the CIT(A), which was dismissed.

During the pendency of the appeal, the Assessing Officer received the valuation report from the DVO. As per the said report, the fair market value of the subject property was determined at Rs. 1,94,81,000/-, as against Rs. 2,23,37,669/- adopted in the original assessment order.

The CIT(A) held that the reference to the DVO itself was sufficient compliance with section 50C(2), and that the Assessing Officer was justified in proceeding with the available data when the DVO's report was delayed.

Based on the said valuation report, the Assessing Officer passed a rectification order under section 154, reducing the assessed long-term capital gain to Rs. 39,78,689/-.

The Tribunal stated that the assessee's statutory right under section 50C(2) was violated, and the assessment is consequently vitiated for breach of mandatory procedure and principles of natural justice. The CIT(A) erred in law and on facts in upholding both the assessment and rectification orders and in confirming disallowances without a proper opportunity.

The bench opined that the assessment order, framed without awaiting the valuation report in violation of the statutory mandate under section 50C(2) read with section 153, as well as the rectification order passed under section 154 on the basis of material not forming part of the assessment record, are invalid.

In view of the above, the Tribunal allowed the appeal and quashed the assessment order and rectification order.

Case Title: Rajni Arvind Birla v. Income Tax Officer

Case Number: I.T.A. No. 930/Ahd/2025

Counsel for Appellant/ Assessee: Shrunjal Shah

Counsel for Respondent/ Department: Abhijit

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