YULEY TANNERY,KOLKATA vs. ITO, WARD 33(1), KOLKATA, KOLKATA

Per Rajesh Kumar, AM:

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 25.03.2026 for the AY 2018-19.

“3. For that on the facts of the case, the A.O. has sent to DVO on 09.03.2021 but he has not received the valuation report within 6 months, therefore, as per proviso of section 142A(6) of the Act, the A.O. was wrong in not accepting the value at which the property was sold but has taken the registry value of property and computed capital gain which is completely arbitrary, unjustified and illegal.” 3. The facts in brief are that the case of the assessee was selected for limited scrutiny under e-assessment scheme

ITA No. 1598/KOL/2026 Yuley Tannery; A.Y. 2018-19 2019, for examination of investment and income on sale of property. The return of income was filed on 29.08.2019, declaring total income at ₹88,56,660/-, which was processed u/s 143(1) of the Act. Thereafter, the notice u/s 143(2) and 142(1) of the Act along with questionnaire were issued and served upon the assessee. The ld. AO called upon the assessee to furnish the details of property sold on which capital gain was shown in the return of income. The ld. AO also called upon the assessee to furnish the details of investment made and also to justify the why the stamp value as per the stamp value authority should not be adopted as per the Provisions of Section 50C of the Act. The assessee furnished before the ld. AO all the details qua the sale of property and the investment u/s 54EC of the Act. The ld. AO referred the matter to DVO on 09.03.2021, with the request to furnish the valuation report. The ld. AO noted that the assessee sold the property at ₹2,06,00,000/-, whereas the stamp valuation was ₹3,86,47,837/- and thus, the Provisions of Section 50C of the Act were applicable. The ld. AO did not receive the valuation report within six months in terms of section 142A(6) of the Act from the DVO and suo motto substituted the stamp value u/s 50C of the Act for sale consideration and computed the Long-Term Capital Gain at ₹2,63,21,505/-.After allowing the deduction of capital gain declared by the assessee a net addition of ₹1,80,47,837/- was made to the income in the assessment framed.

Page 2 of 12

ITA No. 1598/KOL/2026 Yuley Tannery; A.Y. 2018-19 5. After hearing the rival contentions and perusing the materials available on record, we note that the matter was referred to the DVO by the ld. AO on 09.03.2021 and admittedly the valuation report was not received by the dl AO within a period of six months from end of moth in which reference in terms of the provisions of Section 142A(6) of the Act was made by the AO. Therefore, the action of the ld. AO in adopting the stamp valuation u/s 50C of the Act is not sustainable. We also note that the value declared by the assessee under the said circumstances has to be taken as correct sales consideration declared by the assessee. The case of the assessee is squarely covered by the following decisions:-

i. In case of Metiabruz Retail and Warehpushing LLP in ITA No. 3238/KOL/2025

ii. In case of Lalit Kumar Jalan vs. Income-tax Officer [2024] 168 taxmann.com 529 (Cuttack - Trib.)[17-10-2024]

iii. In case of Rajeev Mittal Vs. ITO in ITA No. 806/KOL/2024 vide order dated 03.02.2025.

iv. Vivek Bose vs. Income-tax Officer, Ward -29(4), Kolkata [2014] 42 taxmann.com 35 (Kolkata - Trib.)/[2015] 152 ITD 745 (Kolkata - Trib.)[19-12-2013]

v. MAHA MAI DEVELOPERS & CO. Vs. ITO, in ITA No.559/KOL/2026, vide order dated 29.06.2026.

“3.4. We have heard the rival condition and perused the materials available in the report. We find that undisputedly a reference was made by the AO to the DVO for the purpose of valuation of the immovable property where the difference between the stamp value duty valuation and the consideration paid by the assessee was worked out at ₹1,06,074,034, which was more than Page 3 of 12

ITA No. 1598/KOL/2026 Yuley Tannery; A.Y. 2018-19 50,000 as well as an amount equal to 5 percent of the consideration. The assessment was framed on 9-4-20-21 under section 143(3)of the Act with a remark that the same would be suitably modified under section 155(15) of the Act. Obviously, when the assessment has been framed by the AO then valuation report from the DVO was awaited. Moreover, the provisions of section 142A(5) and 142A(6) provides that where for the purpose of assessment or reassessment a reference is made to the DVO to estimate the value of property then, the valuation officer within a period of 6 months from the end of the month in which reference was made subsection (1), serve a copy on the AO to the assessee. We have also examined the provision of section 153 of the Act, which provides for time limit for completion of reassessment or computation and under that explanation 1 provides that in computing the period of limitation, the explanation 1 (v) to section 153 of the Act, provides that period commencing from the date on which the AO makes a reference to the valuation officer under subsection 1 of section 142A and ending with the date of which the report of valuation officer is received by the AO shall be excluded from the period of limitation. Therefore, the AO has unnecessarily and hurriedly framed of assessment without waiting for the report from the valuation officer. Further, this bench on 13th May, 2026 also be directed the DR to provide DVO's report on or before 02.07.2026.Now, the ld. DR on 14-05-26 has submitted before us that reference was wrongly made to the Mumbai TU instead of Kolkata TU and therefore, DVO report could not be furnished. The ld. DR prayed before the bench that the issue may be restored to the file of the ld. AO, so that the reference could be made and the actual value of the property could be ascertained and an assessment be made accordingly. In our opinion, the assessment framed by the AO is bad in law and cannot be sustained as he was not waited for the DVO's report and passed the assessment hurriedly and more so, when there was no reference and no valuation report available. The relevant extracts of the annexure filed by the DR before us are extracted below:-

Page 4 of 12

ITA No. 1598/KOL/2026 Yuley Tannery; A.Y. 2018-19

Page 5 of 12

ITA No. 1598/KOL/2026 Yuley Tannery; A.Y. 2018-19

3.4.1. Moreover, the case of the assessee is squarely covered by the decision of the court in the case of Rajni Arvind Birla (supra), Wherein similar issue has been decided in favor of the assessee and the assessment was quashed. The operative part of the decision is extracted below:-

Page 6 of 12

ITA No. 1598/KOL/2026 Yuley Tannery; A.Y. 2018-19 “18. We have carefully considered the rival submissions, perused the assessment order, rectification order under section 154, order of the learned CIT(A), the paper book filed by the assessee, and the judicial precedents cited. The controversy essentially lies within a narrow compass, whether the assessment order dated 22.09.2021 passed without awaiting the valuation report from the Departmental Valuation Officer (DVO) is legally sustainable and whether the subsequent rectification under section 154 could cure such a defect. It is an undisputed fact that the Assessing Officer, having noticed that the sale consideration disclosed by the assessee was lower than the stamp duty valuation, invoked section 50C(1) and, upon the assessee’s request, made a reference to the Valuation Officer under section 50C(2). Once such a reference is made, the statutory procedure mandates that the Assessing Officer must await the report of the Valuation Officer before finalising the assessment. The scheme of section 50C(2) read with section 142A(6) and Explanation 1(iii) to section 153 makes this position abundantly clear. The law explicitly excludes, for the purpose of limitation, the period commencing from the date of reference to the Valuation Officer till the date on which the report is received. 19. The legislative intent is that the assessment should be completed on the basis of the DVO’s determination and not by preempting it. Completion of assessment without awaiting the report would defeat the very purpose of the statutory reference mechanism. The assessment order dated 22.09.2021 passed while the reference was pending and before receipt of the DVO’s report cannot be said to be a valid and complete assessment in the eyes of law. The observation of the Assessing Officer that the assessment is “subject to rectification on receipt of valuation report” reinforces that the order was not final. Such a conditional or contingent assessment is alien to the scheme of the Act, which provides for only one final assessment under section 143(3) and does not contemplate a provisional or tentative determination of income. 20. The subsequent rectification order dated 20.11.2024, passed after receipt of the DVO’s report, seeks to re-compute the capital gains by adopting the DVO’s value. However, the DVO’s report was not in existence when the original assessment was framed and hence could not form part of the “record” of the assessment. The law is well settled that rectification under section 154 can be exercised only to correct an error apparent from the record and not to bring in or rely upon a subsequent event or fresh material. 21. The Co-ordinate Bench in case of Kirit P. Thakkar v. ITO, ITA No. 5892/Mum/2010 held that a valuation report received after completion of assessment cannot constitute a ‘mistake apparent from record’ within section 154. The power of rectification cannot be exercised to substitute or re-compute income on the basis of a subsequent report. Relevant paras are reproduced below:

Page 7 of 12

ITA No. 1598/KOL/2026 Yuley Tannery; A.Y. 2018-19 5. After considering the rival contention and relevant material on record, we note that the original assessment was completed on 26.12.2006 whereby the long term capital gain on sale of 1/3rd shares in the residential property was computed at Rs. 25,62,833/-. The Assessing Officer allowed deduction u/s 54 for investment in the residential property by the assessee. Though, during the assessment proceedings, the Assessing Officer referred the property to the DVO for determining the FMV as on 1.4.1981 under the provisions of sec.55A; however, the DVO report was not received before completion of the assessment. Since the assessment was framed without the valuation report of the DVO; therefore, returned income was accepted by the Assessing Officer. Subsequently, the Assessing Officer received the DVO’s report which has valued the property as on 1.4.81 at Rs. 8,73,054/- 5.1 After receiving the report of the DVO, the Assessing Officer invoked the provisions of sec. 154 for re-computation of the long term capital gains on sale of 1/3rd shares of the residential property. The indexation cost of the property as per the valuation of the DVO is Rs. 40,42,240/- as against the indexed cost of acquisition adopted by the assessee is at Rs.1,04,17,500/-. The Assessing Officer accordingly worked out the capital gain at Rs. 46,87,920/- while passing the order u/s 154 dt 24.3.2008. 6. It is thus clear that while resorting to the provisions of sec. 154, the Assessing Officer re-determined the issue of long term capital gains and particularly, the FMV as on 1.4.1981. It is settled proposition of law that a decision of a debatable point of law or fact cannot be corrected u/s 154 of the I T Act. The issue of determining the FMV as on 1.4.81 is highly debatable one and based on the estimates. Therefore, on such issue, any decision is not free from subjective consideration. It is not the case of the simple overlooking a provision of law or clerical or calculation mistake in computation of income; but it is a point to be decided by application of fact, law and mind as well. Therefore, the issue of FMV as on 1.4.81 does not fall under the expression ‘mistake apparent on record’, which can be rectified without there being any necessity to re-work the matter or to re-appraisal the facts. Further, the DVO report is subsequent development to the completion of the assessment u/s 143(3) and therefore, considering the fresh material on the point of valuation/FMV of the property is beyond the scope of section 154. Under sec. 154 only a mistake obvious and apparent on record can be rectified and not something which can be established by a process of long drawn reasoning on the point on which there may conceivably be two opinion possible. Therefore, in the facts and circumstances of the case, the issue of valuation/FMV accepted by the Assessing Officer while passing the assessment order u/s 143(3) cannot be disturbed Page 8 of 12

ITA No. 1598/KOL/2026 Yuley Tannery; A.Y. 2018-19 and re-determined under the provisions of sec. 154, as the said issue, in our view, is not an error or mistake apparent on the face of the order, which can be rectified under the provisions of sec. 154. The Assessing Officer has travelled beyond his jurisdiction while passing the order u/s 154. Accordingly, we set aside the order passed u/s 154 as well as the order of the CIT(A) and delete the addition made by the Assessing Officer while passing the order u/s 154. 22. Accordingly, the so-called rectification order dated 20.11.2024, passed after receipt of the DVO’s report, cannot be sustained in law. The report of the Valuation Officer came into existence only after the completion of assessment and, therefore, did not form part of the “record” of the assessment proceedings. The Assessing Officer could not invoke section 154 to re-compute capital gains on the strength of such subsequent material. The authority of law under section 154 extends only to correction of mistakes apparent from the record, not to a situation where a fresh valuation or new evidence is brought in after completion of the assessment. Further, the very act of the Assessing Officer recording in the assessment order that it was “subject to rectification on receipt of valuation report from the Valuation Officer” shows that the order was incomplete and contingent upon a future event. The Income-tax Act does not recognize or authorize any such provisional assessment under section 143(3). Once the Assessing Officer had chosen to refer the matter to the DVO under section 50C(2), he was bound by statute to await the report— especially since Explanation 1(iii) to section 153 expressly excludes such period from limitation. By proceeding to finalize the assessment without the DVO’s report and by leaving it open for rectification later, the Assessing Officer acted contrary to the legislative scheme and beyond the scope of his jurisdiction. Hence, the subsequent rectification purportedly made under section 154 is not a mere correction of an error apparent on record but a substantive re- determination of income on the basis of fresh material. Such an action amounts to review or reassessment, which is impermissible under section 154. 23. Section 153(5) read with Explanation 1(iii) provides that the period commencing from the date of reference to the Valuation Officer to the date of receipt of the report is to be excluded for computing the period of limitation. This statutory exclusion is a legislative recognition that the Assessing Officer is expected to await the valuation report and that the assessment cannot be completed prematurely. The Assessing Officer, therefore, had sufficient time in law to defer completion of assessment until the DVO’s report was received. The action of finalising the assessment despite the pending reference is contrary to this legislative mandate. 24. Section 50C(2) of the Act establishes a mandatory procedural safeguard in favour of the assessee whenever the value adopted by the stamp valuation authority is disputed. The provision obliges the Page 9 of 12

ITA No. 1598/KOL/2026 Yuley Tannery; A.Y. 2018-19 Assessing Officer, upon such objection, to refer the valuation of the capital asset to a Departmental Valuation Officer for determination of its fair market value. This mechanism, by incorporation of the procedure prescribed under section 16A of the Wealth-tax Act, 1957, mandates that before finalising such valuation, the Valuation Officer must give the assessee a reasonable opportunity of being heard and to produce evidence in support of the declared value. Failure to adhere to this procedure or to afford the assessee an opportunity to raise objections to the proposed valuation constitutes a violation of the statutory right vested under section 50C(2) and renders the assessment legally unsustainable as being contrary to the principles of natural justice. In the present case, though the Assessing Officer did make the reference, he failed to await the DVO’s determination and instead proceeded to compute capital gains based on the stamp duty valuation. This deprived the assessee of the statutory right to contest the valuation before an independent authority. The violation of section 50C(2), being a procedural safeguard founded on principles of natural justice, renders the assessment unsustainable. 25. We also find substantial force in the assessee’s submission regarding the exceptional hardship under which the property in question was sold and the consequent deprivation of opportunity to be heard on the DVO’s valuation. The record reveals that the assessee was compelled to dispose of the property owing to acute personal and financial exigencies, and the sale was bona fide, negotiated at a price consistent with prevailing market conditions. In such circumstances, it cannot be said that the transaction was designed to evade tax or to understate consideration. Notwithstanding this, the Assessing Officer adopted the stamp duty valuation without awaiting the report of the Valuation Officer and without affording the assessee an opportunity to contest the valuation subsequently made. It is pertinent to note that no opportunity as mandated under section 16A(4) of the Wealthtax Act, 1957, incorporated into section 50C(2) of the Income-tax Act, was granted to the assessee. The absence of such opportunity constitutes a clear violation of the statutory procedure and the principles of natural justice. Having regard to these circumstances, we are of the opinion that the assessee suffered genuine hardship both in the course of sale and in the subsequent assessment proceedings. 26. We further observe that the learned CIT(A) has not dealt with the judicial precedents specifically relied upon by the assessee in support of her contentions. The order of the CIT(A) merely records that the decisions cited are “distinguishable on facts,” without undertaking any analytical discussion or assigning reasons for such distinction. The appellate authority is expected to examine each precedent cited before it, analyse its ratio, and record findings as to why it does or does not apply to the facts of the case. A summary rejection of binding or persuasive authorities without reasoned evaluation amounts to non-application of mind and renders the order vulnerable to judicial scrutiny. In the present case, such omission further weakens the sustainability of the impugned appellate order. Page 10 of 12

ITA No. 1598/KOL/2026 Yuley Tannery; A.Y. 2018-19 27. On merits, the disallowances made by the Assessing Officer and sustained by the CIT(A) also cannot be upheld. The records reveal that the assessee was not afforded an effective opportunity to substantiate the claims with documentary evidence. The CIT(A) decided the matter without any further hearing despite the assessee’s request to produce additional material. The findings of the CIT(A) thus suffer from violation of natural justice and cannot be treated as conclusive. The issues relating to cost of acquisition, indexed cost of improvement and transfer expenses require verification by the Assessing Officer in light of the supporting documents, if any, produced by the assessee. 28. In view of the above discussion, we hold that: i. The assessment order dated 22.09.2021 passed under section 143(3) read with section 144B without awaiting the DVO’s report, when such report was statutorily awaited, is not sustainable. ii. The subsequent rectification order dated 20.11.2024 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.” iii. The assessee’s statutory right under section 50C(2) stood violated, and the assessment is consequently vitiated for breach of mandatory procedure and principles of natural justice. iv. The CIT(A) erred in law and on facts in upholding both the assessment and rectification orders and in confirming disallowances without proper opportunity. 29. Accordingly, the assessment order dated 22.09.2021, 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 dated 20.11.2024 passed under section 154 on the basis of material not forming part of the assessment record, are declared to be invalid and are accordingly quashed. As the very foundation of the assessment stands vitiated on account of jurisdictional infirmities and breach of mandatory procedure, no further adjudication on the merits of the additions is warranted.” 3.4.2. Consequently, we quash the assessment framed by the AO. The additional ground raised by the assessee is allowed.” 7. We therefore, respectfully following the above decisions ,set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition. The ground no. 3 is allowed. Page 11 of 12

ITA No. 1598/KOL/2026 Yuley Tannery; A.Y. 2018-19 8. The other grounds raised are not being adjudicated at this stage and are left open to be decided if need arises for the same in future.

Order pronounced on 03.09.2026.

Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 03.09.2026 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy// (Manish Bhoi) Dy. Registrar Income Tax Appellate Tribunal, Kolkata

Page 12 of 12