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Facts
The assessee, who had not filed a return for AY 2011-12, sold a property for Rs. 1.80 crore. The Assessing Officer (AO) referred the case for valuation under Section 55A without giving the assessee an opportunity to be heard and determined a capital gain of Rs. 47,14,403/- based on the DVO's report valuing the property as on 01.04.1981.
Held
The Tribunal held that the Assessing Officer had no power to refer the matter of cost of acquisition to the DVO under Section 55A for the relevant Assessment Year, as the assessee had relied on a Registered Valuer's certificate and the AO could not have invoked Section 55A(b) which was not applicable.
Key Issues
Whether the Assessing Officer was competent to refer the matter of cost of acquisition to the DVO under Section 55A of the Act prior to its amendment, when the assessee had relied on a Registered Valuer's report?
Sections Cited
143(3), 147, 148, 55A, 48
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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI T.R. SENTHIL KUMAR
Assessment Year: 2011-12 Jayendrabhai Kantilal Patel, The Income Tax Officer, A-3/24, Yogiraj Residency, Opp. Ward-1(2)(4), Vs Yash Complex, 30 Meter Wide Vadodara Road, Gotri, Vadodara-390021 [PAN No.:ACTPP8112D] अपीलाथ�/ (Appellant) �� यथ�/ (Respondent) Appellant by : Shri M K Patel, Advocate Respondent by : Shri Rohit Aasudani, Sr. DR सुनवाई की तारीख/Date of Hearing: 12.11.2025 घोषणा की तारीख /Date of Pronouncement: 14.11.2025 आदेश/O R D E R
PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER:
This appeal is filed by the assessee against the appellate order dated 18.07.2025 passed by Ld. Commissioner of Income Tax (Appeals) (hereinafter referred to as “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi arising out of the assessment order passed under Section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) relating to the Assessment Year 2011-12.
The brief facts of the cases are that the assessee is an individual who has not filed the return of income for the A.Y. 2011-12. The assessee sold a residential property at Ahmedabad for a consideration of Rs. 180,00,000/- wherein assessee’s share is 50%. The assessee has taken Registered Valuer certificate the value of the property as on 01.04.1981 in order to calculate the A.Y. 2011-12. 2 capital gain tax and found that below taxable limit hence, no original Return of Income was filed. However, in response to 148 notice the assessee filed Return of Income and the Assessing Officer has referred the case for valuation under Section 55A on 30.10.2018 without notice to the assessee. The Assessing Officer passed the assessment order on 29.12.2018 stating that the final Valuation Report from District Valuation Officer (“DVO”) was received through mail on 28.12.2018 and the said property was valued at Rs. 3,03,000/- as on 01.04.1981 and without giving opportunity of hearing to the assessee, computed that capital gain of Rs. 47,14,403/- being assessee’s 50% share.
Aggrieved against the re-assessment order, assessee filed appeal before Ld. CIT(A) who has confirmed the addition made by the Assessing Officer.
Aggrieved against the appellate order, assessee is in appeal before us raising the following grounds of appeal:
“(1) That on facts, and in law, the learned NFAC has grievously erred in holding that the AO was competent to refer the matter of cost of acquisition as on 01/04/1981 to the DVO u/s 55A of the Act for the year under consideration. (2) That on facts and in law, it ought to have been held that the entire reference u/s 55A of the Act was invalid and void ab initio. (3) That on facts, in law, and on evidence on record, the learned NFAC has grievously erred in confirming the addition of Rs. 47,14,403/- made to LTCG by reducing the cost of acquisition as on 01/04/1981 on the basis of DVO’s Report, and also without giving adequate opportunity to rebut the same. (4) The appellant craves leave to add, alter, amend any ground of appeal.”
A.Y. 2011-12. 3 5. Ld. Counsel appearing for the assessee submitted that the Assessing Officer has no power to make a reference under Section 55A of the Act relevant to the A.Y. 2011-12 and relied upon Jurisdictional Bench of the Tribunal in the case of Shri Devendra Rasiklal Shah vs. DCIT in vide order dated 01.06.2018. Further, in the case of the other co-owner namely assessee’s brother Vijendra Kantilal Patel on similar additions made by the Department, Ld. CIT(A) deleted the addition by holding that the AO cannot make reference under Section 55A of the Act to determine the Fair Market Value of the property. Thus, the entire assessment made is liable to be deleted.
Per contra, Ld. Sr. DR appearing for the Revenue supported the order passed by lower authorities and requested to sustain the addition.
We have given our thoughtful consideration and perused the material available on record. This assessment of reference to Valuation Officer is no more res integra by the Jurisdictional High Court judgment in the case of Hiaben Jayantilal Shah 310 ITR 31 (Guj.) which was considered by the Coordinate Bench of this Tribunal by observing as follows:
“10. I have duly considered the rival contention and gone through the record. Short issue for my adjudication is, whether reference to the DVO made by the Assessing Officer was within the parameter of law or not? Before I advert to the facts of present case, I would like to make reference to relevant part of the decision of Hon’ble Gujarat High Court in the case of Gauranginiben S. Shodhan on this issue which reads as under:-
A.Y. 2011-12. 4 15. Coming to the question of reference to DVO for ascertaining the fair market value as on 1.4.1981 also, we find that such reference was not competent. We have noticed that prior to the amendment in section 55A with effect from 1.7.2012 in a case, the value of the asset claimed by the assessee is in accordance with the estimate made by the Registered Valuer, if the Assessing Officer was of the opinion that the value so claimed was less than its fair market value as on 1.4.1981. It would not be the case of the Assessing Officer that the value of the asset shown as on 1.4.1981 was less than the fair market value. Such clause, therefore, as it stood at the relevant time, had no application to the valuation as on 1.4.1981. We are conscious that with effect from 1.7.2012, the expression now used in clause (a) of section 55A is "is at variance with its fair market value". The situation may, therefore, be different after 1.7.2012. We are, however, concerned with the period prior thereto. Clause (b) of section 55A is in two parts and permits a reference to DVO if the Assessing Officer is of the opinion that (i) the fair market value of the asset exceeds the value of the asset so claimed by the assessee by more than such percentage of the value of the asset so claimed or by more than such amount as may be prescribed in this behalf; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do. Sub-clause(i) of clause (b) also for the same reasons recorded above, would have no bearing on the fair market value as on 1.4.1981. The Assessing Officer had not resorted to sub- clause(ii) of clause (b). In any case, clause (b) would apply where clause(a) does not apply since it starts with the expression "in any other case". In other words if assessee has relied upon a Registered Valuer's Report, Assessing Officer can proceed only under clause (a) and clause (b) would not be applicable.
In the present case, admittedly the assessee had relied on the estimate made by the Registered Valuer for the purpose of supporting its value of the asset. Any such situation would be governed by clause (a) of section 55A of the Act and the Assessing Officer could not have resorted to clause (b) thereof as held by the Division Bench of this Court in the case of Hiaben Jayantilal Shah v. ITO [2009] 310 ITR 31/181 Taxman 191 (Guj.). In the said decision, it was held and observed as under:- "10. Under clause(a) of sec. 55A of the Act under the Assessing Officer is entitled to make the reference to the Valuation Officer in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by the Registered Valuer, if the Assessing Officer is of the opinion that the value so claimed is less than the fair market value. In any other case, as provided under clause(b) of Sec. 55A of the Act, the Assessing Officer has to record an opinion that (i) the fair A.Y. 2011-12. 5 market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage or by more than such an amount as may be prescribed; or (ii) having regard to the nature of the asset and other relevant circumstances, it is necessary to make such a reference."
In the result, we see no reason to interfere. However, we have given our independent reasons and should not be seen to have confirmed the reasonings adopted by the Tribunal in the impugned judgment. Tax Appeal is dismissed.
The Hon’ble High Court has specifically held that prior to the amendment in section 55A with effect from 01.07.2012 in a case, the value of the assets claimed by the assessee is in accordance with the estimate made by the registered valuer, if the Assessing Officer was of the opinion that the value so claimed was less than the fair market value as on 01.04.1981 than reference can be made in the present case the value adopted by the assessee on the basis of registered valuer was not less than fair market value rather it was on the higher side. The Assessing Officer wants to reduce the value i.e cost of acquisition as on 01.04.1981. It is not permissible prior to the amendment carried out in the section 55A. Whether this amendment can be taken into consideration for this assessment year i.e 2008-09 is concerned. This aspect covered by the decision of Bombay High Court extracted (supra).
11. Respectfully following these two decisions I allow the appeal of assessee and direct the Assessing Officer to recompute the capital gain arisen to the assessee without taking cognizance of the report of DVO.
In the result, the appeal of the assessee is allowed.”
Further, Ld. CIT(A), NFAC in the case of assessee’s brother who is the 50% co-owner of the same property wherein held as follows:
“4. The appellant submitted that Section 55A(a) makes it crystal clear that when the assessee has got his asset valued by the Registered Valuer for fair market value, the AO can refer the said asset for valuation only if he is of the opinion that "the value so claimed is less than its fair market value". The words - is less than its fair market value came to be substituted by Finance Act, 2012 by the words - is at the variance with its fair market value. As per the above provisions of Section 55A of the IT Act, the AO can refer this property for valuation only if in the opinion of the AO, value of the asset arrived at by the Registered Valuer is less the fair market price. In the case of Gaurangiben S Shodhan (2014) 45 Taxman.com 356 the A.Y. 2011-12. 6 jurisdictional Gujarat High Court held that prior to the amendment in section 55A with effect from 1.7.2012 in a case, the value of the asset claimed by the assessee is in accordance with the estimate made by the Registered Valuer, if the Assessing Officer was of the opinion that the value so claimed was less than its fair market value as on 1.4.1981. It would not be the case of the Assessing Officer that the value of the asset shown as on 1.4.1981 was less than the fair market value. Such clause, therefore, as it stood at the relevant time, had no application to the valuation as on 1.4.1981. We are conscious that with effect from 1.7.2012, the expression now used in clause (a) of section 55A is "is at variance with its fair market value". The situation may, therefore, be different after 1.7.2012. We are, however, concerned with the period prior thereto. Clause (b) of section 55A is in two parts and permits a reference to DVO if the Assessing Officer is of the opinion that (i) the fair market value of the asset exceeds the value of the asset so claimed by the assessee. Identical view was taken by the High Court in the case of Hiaben Jayantilal Shah v. ITO [2009] 310 ITR 31/181 Taxman 191 (Guj.) also.
The law is settled in this matter that for the assessment year 2011-12, the Assessing Officer can make a reference to the DVO u/s.55A of the Act only if the value so adopted by the assessee u/s.48 is not supported by the Valuation Report of Govt. approved valuer or if the AO is of the opinion that the value of capital asset claimed by the assessee is "less than its fair market value" and not when "it is more than its fair market value". In this case none of the above conditions got fulfilled, hence AO is not legally competent to make reference to the DVO. As explained above the amended provision of Sec. 55A is not applicable to all those documents which got registered before 01.07.2012. In this case the sale deed was registered on 10.04.2010. Apparently, the AO has misinterpreted the provision and erroneously applied it retrospectively. With effect from July 1, 2012, the expression now used in clause (a) of Section 55A is 'at variance' the situation may, therefore, be different after July 1, 2012 which is applicable for assessment year 2013-14 whereas the assessee's case under consideration relates to assessment year 2011-12. Hence amended provisions are not applicable to the appellant. So the LTCG calculated by the appellant shall be adopted for the purpose of tax computation; Full Value of Consideration - Rs.90,00,000/- Less: Indexed Cost of Acquisition [7.11 x 1084597/-] Long Term Capital Gain - Rs.12,88,515 (Less) Deduction on account of purchase of new residential house – (-) Rs. 12,88,515 Long Term Capital Gain - Nil
As a result, grounds 1, 2 and 3 are allowed. Grounds 4 and 5 are consequential and hence do not require separate adjudication.
In result, the appeal is allowed.” 6.
Following the above judicial precedents the grounds raised by the assessee is hereby allowed.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the Court on 14.11.2025 at Ahmedabad.