RAJAGOPAL SHANKER,CHENNAI vs. ITO, NCW-3(1), CHENNAI

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ITA 1272/CHNY/2026Status: DisposedITAT Chennai22 July 2026AY 2014-1511 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the substitution of one valuation figure for another, which substantially alters the relief granted and taxable income, is not a mistake apparent from the record. Such an exercise goes beyond the limited jurisdiction of Section 154 and amounts to a review of the earlier appellate order.

What were the facts?

The assessee's appeal concerns a rectification order by the NFAC that substituted a Fair Market Value (FMV) for capital gains computation. The original appellate order had directed the use of Rs. 37,27,600/- based on a DVO report, but the AO, in giving effect, used Rs. 53,23,767/- from a later DVO report.

What were the issues?

Whether the NFAC was justified in using Section 154 to substitute a valuation figure, and if this constituted an impermissible review of the earlier appellate order.

Which sections of the Income-tax Act were involved?

Section 154,Section 50C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI

Before: MS. PADMAVATHY S & SHRI MANU KUMAR GIRI

Hearing: 23.06.2026

आदेश / O R D E R PER MANU KUMAR GIRI, JM:

This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals) National Faceless Appeal Centre (NFAC), [CIT(A)] dated 13.02.2026 confirming the assessment framed u/s. 154 r.w.s 250 of the Income Tax Act, 1961 for Assessment Year 2014-15. 2. The assessee has filed the following grounds of appeal as mentioned below: -

ITA No 1272/Chny/2026 (AY 2014-15) Rajagopal Shanker Vs ITO NCW-3(1) :: 2 :: 1. The rectification order of the NFAC, Delhi dated 13.02.2026 vide DIN & Order No. ITBA/NFAC/F/154/2025-26/1086007349(1) for the above-mentioned Assessment Year is contrary to law, fact and in circumstances of the case. 2. The NFAC, Delhi erred in assuming jurisdiction u/s. 154 of the Act at the instance of the rectification petition filed by the Jurisdictional Assessing Officer on 12.11.2024 in rectifying the order passed by the then First Appellate Authority dated 25.03.2022 without assigning proper reasons and justification. 3. The NFAC, Delhi failed to appreciate that the assumption of jurisdiction u/s. 154 of the Act was without sanction of law and ought to have appreciated that the consequential rectification order accordingly should be reckoned as bad in law. 4. The NFAC, Delhi failed to appreciate that the issue sought to be rectified was outside the scope of rectification proceedings permissible in terms of Section 154 of the Act and further ought to have appreciated that the reviewing decision rendered by the then First Appellate Authority vide their order dated 25.03.2022 should be reckoned as bad in law. 5. The NFAC, Delhi failed to appreciate that the acceptance of the appellant’s plea of determination of Fair Market Value at Rs. 37,27,600/- (as per DVO report dated 30.08.2017) for the purpose of computation of Long Term Capital Gains (as captured in para 6.2.2. of the appellate order dated 25.03.2022) was explicit from the directions rendered by them at para 6.2.3. of the said appellate order, there by vitiating the rectification order by directing the Assessing Officer to re-compute the Long-Term Capital Gains by reckoning the FMV as Rs. 53,23,767/- as per the DVO report dated 26.08.2019. 6. The NFAC, Delhi failed to appreciate that in any event even in the context of such typographic error existing in the said appellate order dated 25.03.2022, the rectification of the same would only be permissible to the extent of the rectifying the date of DVO report as 30.08.2017 as against the date mentioned as 26.08.2019. 7. The NFAC, Delhi failed to appreciate that the rectification order passed under the disguise of reviewing their appellate order on the premises of rectifying typographic mistake would vitiate the impugned order in its entirety. 8. The NFAC, Delhi failed to appreciate that the rectification order was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law. 9. The NFAC, Delhi failed to appreciate that the entire re- computation of taxation total income was wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law. 10. The NFAC, Delhi failed to appreciate that having not adhered to the prescription of faceless regime, the consequential rectification order passed should be reckoned as bad in law. 11. The NFAC, Delhi failed to appreciate that there was no proper opportunity given before passing of the impugned order and any

ITA No 1272/Chny/2026 (AY 2014-15) Rajagopal Shanker Vs ITO NCW-3(1) :: 3 :: order passed in violation of the principles natural justice would be nullity in law. 12. The Appellant craves leave to file additional grounds/arguments at the time of hearing.

3.

Brief facts of the case are that the assessee filed the return of income for AY 2014-15 declaring total income of Rs.13,38,980/-. During scrutiny assessment, the AO noticed sale of immovable property for Rs.30,00,000/- whereas the stamp duty value was Rs.1,09,52,000/-. On the assessee's request, reference was made to the DVO u/s. 50C(2). As the DVO report was not received before completion of assessment, the AO adopted the stamp duty value u/s. 50C and computed LTCG accordingly.

3.1 In the first appellate proceedings, the ld.CIT(A), vide order dated 25.03.2022, held that the AO was bound to adopt the DVO's valuation u/s. 50C(2) and directed adoption of Rs.37,27,600/- as the sale consideration for computing LTCG, though the order mentioned DVO report dated 26.08.2019.

3.2 While passing the order giving effect, the AO adopted Rs.53,23,767/- based on the later DVO report dated 26.08.2019 instead of Rs.37,27,600/-.

3.3 In the second round of appeal, the ld.CIT(A) held that the AO was bound by the operative directions contained in the appellate order dated 25.03.2022 and observed that if there was any apparent mistake, the proper course was to seek rectification before the ld.CIT(A).

ITA No 1272/Chny/2026 (AY 2014-15) Rajagopal Shanker Vs ITO NCW-3(1) :: 4 :: 3.4 Pursuant thereto, the AO moved an application u/s. 154 of the Act. The NFAC, by order dated 13.02.2026, rectified the earlier appellate order by substituting Rs.53,23,767/- in place of Rs.37,27,600/- holding that the earlier figure was only a typographical error. Aggrieved, the assessee is in appeal before the Tribunal.

4.

The ld.AR for the assessee submitted that the rectification order amounts to review of the earlier appellate order and not rectification of a mistake apparent from record. He pleaded that the original appellate order consciously accepted the DVO valuation of Rs.37,27,600/ and only the date of the DVO report was wrongly mentioned. He further submitted that even assuming there was a typographical error, only the date of the DVO report could have been corrected and not the valuation itself. He argued that whether the valuation of Rs.37,27,600/- or Rs.53,23,767/- should be adopted is a debatable issue, incapable of rectification u/s. 154 of the Act. The Revenue cannot invoke section 154 to substitute one valuation with another by re-appreciating evidence. The rectification proceedings were without jurisdiction and beyond the permissible scope of section 154. Reliance was placed on CIT v. Dr. Indra Swaroop Bhatnagar [(2013) 349 ITR 210 (All.)], wherein it was held that once a DVO valuation is obtained u/s. 50C(2), such valuation is binding for determining capital gains.

5.

The ld.DR for the revenue submitted that u/s. 250(4), the ld.CIT(A) possesses wide powers to call for further enquiry, including supplementary valuation reports. The second DVO report dated 26.08.2019 was obtained during appellate proceedings and

ITA No 1272/Chny/2026 (AY 2014-15) Rajagopal Shanker Vs ITO NCW-3(1) :: 5 :: formed part of the record. The appellate order discussed and intended to rely upon the second DVO report mentioning Rs.37,27,600/- instead of Rs.53,23,767/- was only a clerical/typographical mistake. Section 154 empowers the CIT(A) to rectify mistakes apparent from record in his own appellate order. The assessee had knowledge of the second DVO report and suffered no prejudice. Therefore, rectification substituting Rs.53,23,767/- was valid and within jurisdiction. 6. After conscious deliberation, the issues involved are: 1. Whether the CIT(A) was justified in invoking section 154 to substitute the valuation of Rs.37,27,600/- with Rs.53,23,767/- in the appellate order dated 25.03.2022. 2. Whether such substitution constitutes rectification of a mistake apparent from record or an impermissible review of the earlier appellate order. 3. Whether the existence of two DVO valuation reports makes the issue debatable and therefore outside the scope of section 154. 4. Whether the later DVO report automatically superseded the earlier report for purposes of section 50C.

7.

We have carefully considered the rival submissions, examined the material available on record, perused the orders of the authorities below and the judicial precedent relied upon by the ld.AR. The short controversy before us is not with regard to the applicability of section 50C of the Act, but whether the ld.CIT(A) could, by invoking the provisions of section 154, substitute the value of Rs.37,27,600/- directed in the appellate order dated 25.03.2022 with Rs.53,23,767/-, on the premise that the earlier figure represented only a typographical mistake.

ITA No 1272/Chny/2026 (AY 2014-15) Rajagopal Shanker Vs ITO NCW-3(1) :: 6 :: 8. At the outset, it is necessary to appreciate the scheme of section 50C of the Act. Section 50C creates a deeming fiction whereby the stamp duty valuation is deemed to be the full value of consideration where the declared sale consideration is lower than the value adopted by the Stamp Valuation Authority. However, sub-section (2) provides a statutory safeguard in favour of the assessee. Once the assessee disputes the stamp duty valuation and requests reference to the Departmental Valuation Officer (DVO), the Assessing Officer (AO) is empowered to make such reference. The valuation determined by the DVO thereafter becomes the statutory basis for determination of the full value of consideration, subject only to the limitation contained in section 50C(3) of the Act. Thus, the legislative intent is to substitute the stamp valuation by an expert valuation wherever the conditions prescribed u/s. 50C(2) are fulfilled.

9.

The Hon'ble Allahabad High Court in CIT v. Dr. Indra Swaroop Bhatnagar [(2013) 349 ITR 210 (All.)] examined the very scope of section 50C of the Act. The substantial question before the Hon'ble High Court was whether, after obtaining the report of the DVO, the AO could still ignore such report and adopt the valuation fixed by the Stamp Valuation Authority. The Hon'ble High Court answered the issue in favour of the assessee and categorically held that once the AO obtains the DVO's report u/s. 50C(2), such report ordinarily becomes binding for determination of the full value of consideration. The Court further relied upon the earlier decision rendered in CWT v. Dr. H. Rahman [1991] 189 ITR 307/55 Taxman 408 (All) while interpreting the analogous provisions of the Wealth Tax Act and observed that the AO has no option but to complete the assessment

ITA No 1272/Chny/2026 (AY 2014-15) Rajagopal Shanker Vs ITO NCW-3(1) :: 7 :: in conformity with the valuation determined by the Valuation Officer. The Revenue's appeal was accordingly dismissed.

10.

The ratio emerging from the above judgment is that once a valuation report u/s. 50C(2) is obtained, the AO cannot disregard that report and substitute another value according to his own understanding. The statutory mandate is to adopt the valuation determined by the DVO.

11.

In the present case, however, the controversy is of an altogether different character. Here, there is no dispute that the first appellate authority accepted the applicability of section 50C(2). The operative direction contained in paragraph 6.2.3 of the appellate order dated 25.03.2022 specifically directed the Assessing Officer "to adopt the value of the property at Rs.37,27,600/- as per the DVO's valuation report and recompute the Long Term Capital Gain." This operative direction constituted the final adjudication between the parties. It is equally significant that while giving effect to the appellate order, the Assessing Officer consciously departed from the operative direction and adopted the value of Rs.53,23,767/-. The correctness of such action was examined by the subsequent appellate authority in the order dated 05.10.2024. The said appellate authority categorically held that, until the earlier appellate order was modified or amended, the Assessing Officer had no jurisdiction to substitute the figure mentioned in the operative portion. It was only suggested that if the Revenue believed that the earlier order suffered from an apparent mistake, an application u/s. 154 could be moved before the CIT(A). The Revenue thereafter invoked section 154 of the Act.

ITA No 1272/Chny/2026 (AY 2014-15) Rajagopal Shanker Vs ITO NCW-3(1) :: 8 :: 12. The question, therefore, is whether substitution of the valuation figure from Rs.37,27,600/- to Rs.53,23,767/- constitutes rectification of a mistake apparent from the record. Section 154 confers a very limited jurisdiction. The provision authorises correction only of mistakes which are patent, obvious and self- evident from the record. The power does not extend to reconsideration of evidence, re-appreciation of material already on record or review of the earlier decision. Whenever determination of the alleged mistake requires detailed reasoning, interpretation of documents or two possible views, the issue necessarily travels beyond the scope of section 154.

13.

In the present case, we notice that the appellate order dated 25.03.2022 itself contains detailed discussion regarding the objections raised by the assessee against the valuation adopted by the Stamp Valuation Authority. The appellate authority also discussed the valuation proceedings and ultimately issued an operative direction adopting Rs.37,27,600/-. Whether the ld. CIT(A) intended to rely upon the first valuation report or the subsequent valuation report is not a matter capable of being answered merely by reading one sentence in isolation. It requires examination of the entire appellate order, the valuation reports, the proceedings before the DVO and the reasoning adopted by the appellate authority. Such an exercise clearly falls within the realm of interpretation and adjudication and cannot be characterised as rectification of an obvious clerical mistake.

ITA No 1272/Chny/2026 (AY 2014-15) Rajagopal Shanker Vs ITO NCW-3(1) :: 9 :: 14. The Revenue has argued that reference to Rs.37,27,600/- was merely a typographical error because the appellate order elsewhere referred to the DVO report dated 26.08.2019. We are unable to accept this contention. If the appellate authority had truly intended to correct only a clerical error, the correction would have been confined to the date of the DVO report or similar ministerial particulars. What has actually been done is substitution of the very foundation for computation of capital gains by replacing one valuation with another higher valuation. Such substitution substantially enhances the taxable capital gains and completely alters the relief granted to the assessee in the original appellate order. A correction resulting in enhancement of taxable income by substituting one valuation report for another cannot, by any stretch of imagination, be regarded as correction of a mere typographical error.

15.

The Revenue has also contended that the second DVO report superseded the earlier report and, therefore, the later valuation alone deserved acceptance. Even assuming such contention is available to the Revenue, acceptance thereof necessarily requires examination of the legality of obtaining the second valuation report, its evidentiary value, whether it superseded the earlier report and whether the appellate authority consciously accepted one report in preference to the other. All these questions are manifestly debatable and involve adjudication on merits. It is a settled principle that a debatable issue cannot be decided in proceedings u/s. 154 of the Act. The reliance placed by the ld.AR upon the judgment of the Hon'ble Allahabad High Court in CIT v. Dr. Indra Swaroop Bhatnagar (supra) is also significant for another reason. The Hon'ble High

ITA No 1272/Chny/2026 (AY 2014-15) Rajagopal Shanker Vs ITO NCW-3(1) :: 10 :: Court recognised the binding character of the DVO's valuation once obtained u/s. 50C(2). In the present case, the original appellate order had already accepted the DVO mechanism contemplated u/s. 50C(2) and directed adoption of a specific valuation. Whether that valuation was based upon one report or another is itself the very dispute sought to be reopened. Such reopening necessarily amounts to re-adjudication of the appellate decision and not rectification of an obvious mistake. The ratio of the Hon'ble Allahabad High Court reinforces the statutory finality attached to valuation adopted pursuant to section 50C(2), and does not support substitution of one DVO valuation by another through the limited jurisdiction u/s. 154 of the Act. We also find considerable force in the submission of the assessee that the order dated 13.02.2026, in substance, reviews the appellate order dated 25.03.2022. The Income Tax Act does not confer any power of review upon the ld.CIT(A). What cannot be done directly by exercising review jurisdiction cannot be achieved indirectly by invoking section 154 of the Act.

16.

Viewed from any angle, therefore, the issue sought to be rectified is not an obvious or patent mistake apparent from the record but a contentious issue requiring detailed examination of facts and law. Such an exercise falls outside the permissible ambit of section 154 of the Act. Accordingly, we hold that the ld.CIT(A) exceeded the jurisdiction vested u/s. 154 in substituting the valuation of Rs.37,27,600/- with Rs.53,23,767/-. The impugned rectification order dated 13.02.2026 is therefore unsustainable in law and is hereby set aside. Consequently, the original appellate directions contained in the order dated 25.03.2022 shall stand restored.

ITA No 1272/Chny/2026 (AY 2014-15) Rajagopal Shanker Vs ITO NCW-3(1) :: 11 :: 17. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on the 22nd day of July 2026 in Chennai.

Sd/- Sd/- (प�ावती एस) (मनु कुमार िग�र) (PADMAVATHY S) (MANU KUMAR GIRI) लेखा सद)या/ACCOUNTANT MEMBER �या�यक सद)य/JUDICIAL MEMBER चे�नई/Chennai, *दनांक/Dated: 22nd July, 2026. SNDP, Sr. PS आदेश क ��त+ल,प अ-े,षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF SAND Digitally signed by EEP SANDEEP KUMAR KUMA Date: 2026.07.28 R 11:36:22 +05'30'

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