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Facts
The assessee claimed a long-term capital loss based on a valuation report for a property sold. The Assessing Officer rejected the report and referred the matter to the DVO. The CIT(A) confirmed the DVO's valuation without providing the assessee an opportunity for a personal hearing or adequately addressing objections.
Held
The Tribunal held that the CIT(A) failed to provide natural justice by not offering a hearing and by summarily dismissing objections. The CIT(A)'s view that they had no discretion to interfere with the DVO's valuation was found legally unsustainable.
Key Issues
Whether the CIT(A) erred in confirming the DVO's valuation without providing a proper hearing and adjudicating objections, thereby violating principles of natural justice.
Sections Cited
143(3)
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Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI SANDEEP GOSAIN & SHRI OM PRAKASH KANT
ORDER PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated 04.07.2025 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2012-13, raising following grounds:
1. That on the facts and circumstances of the case and in law the Ld. National Faceless Appeal Centre (NFAC) has erred in confirming the value adopted by the Ld. Departmental Valuation Officer (DVO) without giving an opportunity of being heard by Vijay Shambhulal Jobanputra Vijay Shambhulal Jobanputra 2 means of a personal hearing and without following the direction means of a personal hearing and without following the direction means of a personal hearing and without following the direction of the Tribunal. of the Tribunal.
2. That on the facts and circumstances of the cas 2. That on the facts and circumstances of the case and in law the e and in law the Ld. NFAC has erred in confirming the value adopted by the Ld. Ld. NFAC has erred in confirming the value adopted by the Ld. Ld. NFAC has erred in confirming the value adopted by the Ld. DVO by stating that the value of the DVO is binding on the Ld. DVO by stating that the value of the DVO is binding on the Ld. DVO by stating that the value of the DVO is binding on the Ld. NFAC, which is not in accordance with the law. NFAC, which is not in accordance with the law.
3. Without prejudice to above, value adopted by the appellant as 3. Without prejudice to above, value adopted by the appellant as 3. Without prejudice to above, value adopted by the appellant as on April 01, 1981 was based on the valuation report of the April 01, 1981 was based on the valuation report of the April 01, 1981 was based on the valuation report of the approved valuer whereas the departmental valuer adopted the approved valuer whereas the departmental valuer adopted the approved valuer whereas the departmental valuer adopted the value as on April 01, 1981 comparing the property which are far value as on April 01, 1981 comparing the property which are far value as on April 01, 1981 comparing the property which are far away from the locality hence the incorrect comparison was away from the locality hence the incorrect comparison was away from the locality hence the incorrect comparison was adopted by the DV adopted by the DVO, and hence the value adopted by the O, and hence the value adopted by the appellant as on April 01, 1981 may be directed to be adopted. appellant as on April 01, 1981 may be directed to be adopted. appellant as on April 01, 1981 may be directed to be adopted.
4. Without prejudice to above value adopted by the Registered 4. Without prejudice to above value adopted by the Registered 4. Without prejudice to above value adopted by the Registered Valuer as on April 01, 1981 was Rs 2,50,00,000/ Valuer as on April 01, 1981 was Rs 2,50,00,000/- where as the where as the Valuation Officer has valued the Valuation Officer has valued the property as on April 01, 1981 at property as on April 01, 1981 at Rs 33,83,000/ Rs 33,83,000/- by adopting the sales instances of the locality by adopting the sales instances of the locality which cannot be compared with the locality of the appellant and which cannot be compared with the locality of the appellant and which cannot be compared with the locality of the appellant and the Valuation was done by physical method instead of valuing the Valuation was done by physical method instead of valuing the Valuation was done by physical method instead of valuing the same by land and building meth the same by land and building method, hence the valuation od, hence the valuation adopted by the Registered valuer may be directed to be adopted adopted by the Registered valuer may be directed to be adopted adopted by the Registered valuer may be directed to be adopted as on April 01, 01, 1981.
Briefly stated, the facts of the case reveal that the assessee the facts of the case reveal that the assessee the facts of the case reveal that the assessee filed its return of income for the year under consideration on filed its return of income for the year under consideration on filed its return of income for the year under consideration on 28.07.2012 declaring a total income of ng a total income of ₹50,38,182/ 50,38,182/-. The return was selected for scrutiny and the Assessing Officer, after issuing was selected for scrutiny and the Assessing Officer, after issuing was selected for scrutiny and the Assessing Officer, after issuing and complying with the statutory notices under the Income-tax Act, and complying with the statutory notices under the Income and complying with the statutory notices under the Income 1961 (hereinafter “the Act”), noted that the assessee had sold 1961 (hereinafter “the Act”), noted that the assessee had sold 1961 (hereinafter “the Act”), noted that the assessee had sold property situated at Plot No. 36, K property situated at Plot No. 36, Koregaon Park, Pune and claimed oregaon Park, Pune and claimed a long-term capital loss of term capital loss of ₹5,62,50,000. In support of the claimed In support of the claimed cost of acquisition, the assessee furnished a valuation report of a cost of acquisition, the assessee furnished a valuation report of a cost of acquisition, the assessee furnished a valuation report of a registered valuer estimating the fair market value of the property at registered valuer estimating the fair market value of the property at registered valuer estimating the fair market value of the property at ₹2,50,00,000/- as on the relevant date. The Assessing Officer, on the relevant date. The Assessing Officer, on the relevant date. The Assessing Officer,
Vijay Shambhulal Jobanputra Vijay Shambhulal Jobanputra 3 however, rejected the said valuation report and, invoking his however, rejected the said valuation report and, invoking his however, rejected the said valuation report and, invoking his statutory powers, referred the matter to the District Valuation statutory powers, referred the matter to the District Valuation statutory powers, referred the matter to the District Valuation Officer (DVO) for determination of fair market value. As the period Officer (DVO) for determination of fair market value. As the period Officer (DVO) for determination of fair market value. As the period of limitation for completing the assessment was expiring and the completing the assessment was expiring and the completing the assessment was expiring and the DVO’s report had not been received, the Assessing Officer DVO’s report had not been received, the Assessing Officer DVO’s report had not been received, the Assessing Officer completed the assessment completed the assessment subject to the valuation to be furnished the valuation to be furnished by the DVO.
2.1 During the appellate proceedings, the DVO’s report was During the appellate proceedings, the DVO’s report was During the appellate proceedings, the DVO’s report was received, and the learned CIT(A) directed that the valuation so the learned CIT(A) directed that the valuation so the learned CIT(A) directed that the valuation so determined be adopted. determined be adopted.
2.2 Aggrieved, the assessee carried the matter before the Tribunal, Aggrieved, the assessee carried the matter before the Tribunal, Aggrieved, the assessee carried the matter before the Tribunal, contending that the DVO had failed to consider comparable sale contending that the DVO had failed to consider comparable sale contending that the DVO had failed to consider comparable sale instances in reasonable proximity to the assessee’s property and instances in reasonable proximity to the assessee’s instances in reasonable proximity to the assessee’s that there existed a substantial disparity between the sale that there existed a substantial disparity between the sale that there existed a substantial disparity between the sale agreement value and the prevailing ready reckoner rates. agreement value and the prevailing ready reckoner rates. agreement value and the prevailing ready reckoner rates.
2.3 In the first round of appellate proceedings, the Tribunal found In the first round of appellate proceedings, the Tribunal found In the first round of appellate proceedings, the Tribunal found that the learned CIT(A) had not adjudicated the assessee’s that the learned CIT(A) had not adjudicated the assessee’ that the learned CIT(A) had not adjudicated the assessee’ objections and restored the matter to the CIT(A) with a mandate to objections and restored the matter to the CIT(A) with a mandate to objections and restored the matter to the CIT(A) with a mandate to pass a speaking speaking order. order . The The relevant relevant observation observation of of the the Tribunal(supra) reads as under Tribunal(supra) reads as under:
“13. We have heard both the counsel and perused the records on 13. We have heard both the counsel and perused the records on 13. We have heard both the counsel and perused the records on this issue. We note that assessee's c this issue. We note that assessee's challenge to the merits of DVO hallenge to the merits of DVO valuation was there before the Id. Commissioner of Income Tax valuation was there before the Id. Commissioner of Income Tax valuation was there before the Id. Commissioner of Income Tax (Appeals). This the ld. Commissioner of Income Tax (Appeals) has (Appeals). This the ld. Commissioner of Income Tax (Appeals) has (Appeals). This the ld. Commissioner of Income Tax (Appeals) has noted and reproduced in his order. However, we note that the Id. noted and reproduced in his order. However, we note that the Id. noted and reproduced in his order. However, we note that the Id.
Vijay Shambhulal Jobanputra Vijay Shambhulal Jobanputra 4 Commissioner of Income Tax (Appeal Commissioner of Income Tax (Appeals) has summarily dismissed s) has summarily dismissed and rejected the same by observing that the DVO has dealt with and rejected the same by observing that the DVO has dealt with and rejected the same by observing that the DVO has dealt with each of the objection in his report. The Id. Commissioner of Income each of the objection in his report. The Id. Commissioner of Income each of the objection in his report. The Id. Commissioner of Income Tax (Appeals) has failed to refer/reproduce the relevant portion of Tax (Appeals) has failed to refer/reproduce the relevant portion of Tax (Appeals) has failed to refer/reproduce the relevant portion of the DVO order leave alone his the DVO order leave alone his comment and adjudication there on. comment and adjudication there on. The order of the DVO has also not been placed before us. We find The order of the DVO has also not been placed before us. We find The order of the DVO has also not been placed before us. We find that honourable apex court in the case of M/s Sahara India that honourable apex court in the case of M/s Sahara India that honourable apex court in the case of M/s Sahara India (Farms) Vs. CIT & Anr. 300 ITR 403 (SC) has held that even (Farms) Vs. CIT & Anr. 300 ITR 403 (SC) has held that even (Farms) Vs. CIT & Anr. 300 ITR 403 (SC) has held that even administrative orders have to be consi administrative orders have to be consistent with the rules of stent with the rules of natural justice. natural justice.
Accordingly, in the background of aforesaid discussion and 14. Accordingly, in the background of aforesaid discussion and 14. Accordingly, in the background of aforesaid discussion and precedent we direct the Id. Commissioner of Income Tax (Appeals) precedent we direct the Id. Commissioner of Income Tax (Appeals) precedent we direct the Id. Commissioner of Income Tax (Appeals) to pass a speaking order on the assessee's challenge to the merits to pass a speaking order on the assessee's challenge to the merits to pass a speaking order on the assessee's challenge to the merits of the valuation of the valuation done by the DVO. Needless to add assessee done by the DVO. Needless to add assessee should be granted adequate opportunity should be granted adequate opportunity of being heard. heard.” 2.4 Pursuant thereto, the learned CIT(A) issued notices and listed Pursuant thereto, the learned CIT(A) issued notices and listed Pursuant thereto, the learned CIT(A) issued notices and listed the matter for hearing. However, from the impugned order it is the matter for hearing. However, from the impugned order it is the matter for hearing. However, from the impugned order it is evident that no opportunity evident that no opportunity of personal or virtual hearing was of personal or virtual hearing was afforded to the assessee. The learned CIT(A) merely observed that afforded to the assessee. The learned CIT(A) merely observed that afforded to the assessee. The learned CIT(A) merely observed that the DVO had considered and disposed of the assessee’s objections the DVO had considered and disposed of the assessee’s objections the DVO had considered and disposed of the assessee’s objections and concluded that neither the Assessing Officer nor the CIT(A) had and concluded that neither the Assessing Officer nor the CIT(A) had and concluded that neither the Assessing Officer nor the CIT(A) had discretion to interfer discretion to interfere with the valuation made by the DVO. His e with the valuation made by the DVO. His findings read as under: findings read as under:
Thus, it can be observed from the above that the DVO has Thus, it can be observed from the above that the DVO has Thus, it can be observed from the above that the DVO has considered and disposed of all the objections raised by the considered and disposed of all the objections raised by the considered and disposed of all the objections raised by the Appellant in a speaking manner. There does not seem to be any Appellant in a speaking manner. There does not seem to be any Appellant in a speaking manner. There does not seem to be any contravention of principles of natural justice in this case. In this tion of principles of natural justice in this case. In this tion of principles of natural justice in this case. In this regard, it is further stated that the AO or the CIT(A) has no regard, it is further stated that the AO or the CIT(A) has no regard, it is further stated that the AO or the CIT(A) has no discretion, whatsoever, in interfering with the valuation of the discretion, whatsoever, in interfering with the valuation of the discretion, whatsoever, in interfering with the valuation of the property as determined property as determined by the DVO.
Aggrieved, the assessee is onc Aggrieved, the assessee is once again in appeal before us. The e again in appeal before us. The learned counsel submitted that the assessee is a senior citizen and learned counsel submitted that the assessee is a senior citizen and learned counsel submitted that the assessee is a senior citizen and the matter pertains to A.Y. 2012 the matter pertains to A.Y. 2012-13, involving protracted litigation. 13, involving protracted litigation.
Vijay Shambhulal Jobanputra Vijay Shambhulal Jobanputra 5 It was urged that the Tribunal may either direct acceptance of the It was urged that the Tribunal may either direct acceptance of the It was urged that the Tribunal may either direct acceptance of the approved valuer’s report or, alternatively, direct the learned CIT(A) report or, alternatively, direct the learned CIT(A) report or, alternatively, direct the learned CIT(A) to adjudicate the objections by a reasoned and speaking order to adjudicate the objections by a reasoned and speaking order to adjudicate the objections by a reasoned and speaking order within a stipulated time. within a stipulated time.
We have carefully considered the rival submissions and We have carefully considered the rival submissions and We have carefully considered the rival submissions and perused the material placed on record. It is undisputed that the perused the material placed on record. It is undisputed th perused the material placed on record. It is undisputed th Assessing Officer referred the matter to the DVO for determination Assessing Officer referred the matter to the DVO for determination Assessing Officer referred the matter to the DVO for determination of fair market value as on 01.04.1981. The assessee’s principal of fair market value as on 01.04.1981. The assessee’s principal of fair market value as on 01.04.1981. The assessee’s principal grievance is that the DVO failed to consider comparable sales in grievance is that the DVO failed to consider comparable sales in grievance is that the DVO failed to consider comparable sales in reasonable geographical proximity, a contention consistently raised reasonable geographical proximity, a contention consi reasonable geographical proximity, a contention consi before both the DVO and the learned CIT(A). before both the DVO and the learned CIT(A).
4.1 In our considered view, the learned CIT(A), being the first In our considered view, the learned CIT(A), being the first In our considered view, the learned CIT(A), being the first appellate authority, is under a statutory obligation to examine and appellate authority, is under a statutory obligation to examine and appellate authority, is under a statutory obligation to examine and adjudicate each of the assessee’s objections in a reasoned and adjudicate each of the assessee’s objections in a adjudicate each of the assessee’s objections in a speaking order. He is fully empowered to direct the DVO to consider . He is fully empowered to direct the DVO to consider . He is fully empowered to direct the DVO to consider relevant and proximate sale instances, should the material on relevant and proximate sale instances, should the material on relevant and proximate sale instances, should the material on record so warrant. The failure to do so, coupled with the absence of record so warrant. The failure to do so, coupled with the absence of record so warrant. The failure to do so, coupled with the absence of any opportunity of hearing, constitutes a clear infraction of the any opportunity of hearing, constitutes a clear infraction any opportunity of hearing, constitutes a clear infraction principles of natural justice, particularly when the Tribunal’s earlier principles of natural justice, particularly when the Tribunal’s earlier principles of natural justice, particularly when the Tribunal’s earlier direction specifically mandated a speaking order. direction specifically mandated a speaking order.
4.2 The reasoning adopted by the learned CIT(A) The reasoning adopted by the learned CIT(A) — — that he has no discretion to examine or interfere with the DVO’s valuation — is discretion to examine or interfere with the DVO’s valuation discretion to examine or interfere with the DVO’s valuation legally unsustainable. The appellate authority cannot abdicate its legally unsustainable. The appellate authority cannot abdicate its legally unsustainable. The appellate authority cannot abdicate its Vijay Shambhulal Jobanputra Vijay Shambhulal Jobanputra 6 jurisdiction, nor can it dispose of substantive objections by a mere jurisdiction, nor can it dispose of substantive objections by a mere jurisdiction, nor can it dispose of substantive objections by a mere endorsement of the DVO’s report without independent application endorsement of the DVO’s report without independent application endorsement of the DVO’s report without independent application of mind.
4.3 In light of the above discussion, and in In light of the above discussion, and in order to secure order to secure compliance with the Tribunal’s earlier directions dated 17.05.2018 compliance with the Tribunal’s earlier directions dated 17.05.2018 compliance with the Tribunal’s earlier directions dated 17.05.2018 as well as the settled law on natural justice, we deem it appropriate as well as the settled law on natural justice, we deem it appropriate as well as the settled law on natural justice, we deem it appropriate to set aside the order of the learned CIT(A) on this issue and restore to set aside the order of the learned CIT(A) on this issue and restore to set aside the order of the learned CIT(A) on this issue and restore the matter to his file. The lea the matter to his file. The learned CIT(A) shall adjudicate afresh, by rned CIT(A) shall adjudicate afresh, by passing a detailed and speaking order on each objection raised by passing a detailed and speaking order on each objection raised by passing a detailed and speaking order on each objection raised by the assessee, after affording due opportunity of being heard. the assessee, after affording due opportunity of being heard. the assessee, after affording due opportunity of being heard.
4.4 In the interest of expeditious justice, we direct that such order In the interest of expeditious justice, we direct that such order In the interest of expeditious justice, we direct that such order be passed at the earliest, preferably within a period of arliest, preferably within a period of six months arliest, preferably within a period of from the date of receipt of this order by the learned jurisdictional from the date of receipt of this order by the learned jurisdictional from the date of receipt of this order by the learned jurisdictional Principal Commissioner of Income Principal Commissioner of Income-tax (PCIT). The grounds raised The grounds raised by the assessee are accordingly allowed for statistical purposes. by the assessee are accordingly allowed for statistical purposes. by the assessee are accordingly allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for the result, the appeal of the assessee is allowed for the result, the appeal of the assessee is allowed for statistical purposes.