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Facts
The assessee declared long-term capital gains based on a cost of acquisition of Rs. 1,25,220/-. The Assessing Officer (AO) reduced this to Rs. 60,000/- without sufficient evidence or referring to a DVO, resulting in an addition of Rs. 4,63,534/-. The CIT(A) dismissed the assessee's appeal due to a delay in filing.
Held
The Tribunal held that the delay in filing the appeal before the CIT(A) was due to genuine reasons and ought to have been condoned. On merits, the Tribunal found that the AO's reduction of the cost of acquisition without referring to a DVO was unsustainable.
Key Issues
1. Whether the CIT(A) erred in dismissing the appeal in limine on the grounds of delay without condoning it. 2. Whether the AO was justified in reducing the cost of acquisition without referring the matter to the DVO.
Sections Cited
143(1), 143(2), 142(1), 250, 271(1)(c), 55A, 249(3), 50C(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL
Asst.Year 2011-12 Yogesh Jashubhai Patel, The Income Tax Officer Harivallabh Society बनाम/ Ward-3(4) v/s. Naroda Now Ward-1(2)(1) Opp. Devi Cinema Ahmedabad – 380 051 Ahmedabad – 382 345 �थायी लेखा सं./PAN: AUDPP 9058 L (अपीलाथ�/ Appellant) (�� यथ�/ Respondent) Assessee by : Shri M.K. Patel, Advocate Revenue by : Shri C. Dharani Nath, Sr.DR सुनवाई की तारीख/Date of Hearing : 16/09/2025 घोषणा की तारीख /Date of Pronouncement: 06/11/2025 आदेश/O R D E R
PER SIDDHARTHA NAUTIYAL, JM:
The present appeals have been preferred by the Assessee against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 06/01/2023 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Year (AY) 2011-2012.
2. The assessee has raised the following grounds of appeal in ITA No.158/Ahd/2023:
& 159/Ahd/2023 Yogesh Jashubhai Patel vs. ITO Asst. Year : 2011-12 2 “1. On the facts and in the circumstances of the case and in law, the Hon. CIT(A), NFAC erred in holding the delay in filing the appeal cannot be condoned. The appellant prays that the delay be condoned and appeal should be taken up for hearing 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not deciding the issue on merits that the computation of Long Term Capital Gains at Rs. 619962/ in place of Capital Gains Rs. 1,56,248/- as claimed by your Appellant and by not deciding the issue on addition in cost of acquisition as on 1-4- 1981 of Rs. 463534/- 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not deciding the issue on merits that as per provision of the Act that the Income Tax Officer was duty bound to accept the Valuation Report of Assessee or refer to matter of Valuation to Departmental Valuation Officer and the cost of acquisition once calculated by the appellant cannot be ignored or varied or substituted without obtaining valuation report form DVO. Your appellant prays to delete the addition made by the learned AO of Rs.463534/- in value of cost of acquisition.
4. The appellant craves liberty to add, alter, amend any of the grounds of appeal.” 2.1. The assessee has raised following grounds of appeal in :
“1. On the facts and in the circumstances of the case and in law, the Hon. CIT(A), NFAC erred in holding the delay in filing the appeal cannot be condoned. The appellant prays that the delay be condoned and appeal should be taken up for hearing.
On the facts and in the circumstances of the case and in law, the learned AO erred in in Law and in fact in passing the order u/s. 271(1)(c) of the Act in haste and hurry disregarding facts of the case and without providing sufficient time to your Appellant to reply to his Show Cause Notice.
On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not deciding the issue on merits that the computation of Long Term Capital Gains at Rs. 619962/-in place of Capital Gains Rs. 1,56,248/- as claimed by your Appellant and by not deciding the issue on addition in cost of acquisition as on 1-4- 1981 of Rs. 463534/- 4. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not deciding the issue on merits that as per provision of the Act that the Income Tax Officer was duty bound to accept the Valuation Report of Assessee or refer to matter of Valuation to Departmental Valuation Officer and the cost of & 159/Ahd/2023 Yogesh Jashubhai Patel vs. ITO Asst. Year : 2011-12 3 acquisition once calculated by the appellant cannot be ignored or varied or substituted without obtaining valuation report form DVO 5. The learned AO has erred in levying the penalty u/s. 271(1)(c) of the Act as the penalty would be leviable if the assessee conceals particulars of his income or furnishes inaccurate particulars thereof. Moreover, the valuation by approved valuer or otherwise is a matter of estimate. In view of the above facts and circumstances of the case, your appellant prays to delete the penalty levied of Rs. 94715/- u/s. 271(1)(c) on the basis of concealment of income.
The appellant craves liberty to add, alter, amend any of the grounds of appeal
.”
3. These are appeals filed by the assessee against the orders passed by CIT(Appeals) dismissing the appeal of the assessee, both on merits and also confirming levy of penalty u/s 271(1)(c) of the Act. Since, both the appeals are emanating from a common issue for consideration, both the appeals filed by the assessee are being taken up together.
The brief facts of the case are that the assessee, Shri Yogesh Jashubhai Patel, filed his return of income for the Assessment Year 2011–12, declaring a total income of Rs. 1,56,148/-. The return was processed under section 143(1) of the Income-tax Act, 1961 (“the Act”) on 10.09.2012. The Assessing Officer subsequently selected the case for scrutiny and issued notices under sections 143(2) and 142(1) of the Act along with questionnaires were issued to the assessee. During the course of the assessment proceedings, the Assessing Officer (“AO”) noticed that the assessee, along with eleven other co-owners, had sold agricultural land situated at Survey No. 675/1, Moje Naroda, Taluka City, District Ahmedabad, on 07.02.2011. The assessee’s share in the sale consideration was Rs. 10,46,562/-, representing an 11.11% share in the property. The AO examined the computation of long-term capital gain (LTCG) declared by the assessee and noted that the assessee had adopted a cost of acquisition of Rs. 1,25,220/- as on 01.04.1981, which, according to the AO, was on the higher side considering the market rates of similar lands in & 159/Ahd/2023 Yogesh Jashubhai Patel vs. ITO Asst. Year : 2011-12
4 the area. As per the Assessing Officer, since the assessee failed to furnish any supporting evidence for the cost of acquisition, the AO proposed to adopt a lower value of Rs. 60,000/- as on 01.04.1981. However, the Assessing Officer noted that the assessee did not file any response. In the absence of any reply, the AO finalized the assessment by adopting Rs. 60,000/- as the cost of acquisition, and computed the indexed cost at Rs. 4,26,600/-, and recomputed the long-term capital gain at Rs. 6,19,962/- as against Rs. 1,56,248/- declared by the assessee. Accordingly, an addition of Rs. 4,63,534/- was made to the total income on account of understatement of LTCG. The AO assessed the income at Rs. 6,19,780/-. The AO also initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income.
Aggrieved by the assessment order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. In the grounds of appeal, the assessee challenged the assessment order as arbitrary and against law and equity. The assessee contended that the AO had completed the assessment in undue haste without granting sufficient time to reply to the show-cause notice. The assessee further argued that the AO was not justified in substituting the cost of acquisition determined by the assessee without referring the matter to a Departmental Valuation Officer (DVO) as required under the provisions of the Act. The assessee submitted that the valuation adopted in his computation was reasonable and that the AO was duty- bound to either accept the same or refer the matter to the DVO before making any variation. The CIT(A) noted that the assessment order under section 143(3) was passed on 28.03.2014, while the appeal was electronically filed only on 19.01.2022, which resulted in a delay of more than seven years. In Form No. 35, the assessee stated that he was a Non-Resident Indian (NRI) and had come to India recently, whereupon he found the assessment and & 159/Ahd/2023 Yogesh Jashubhai Patel vs. ITO Asst. Year : 2011-12
5 penalty orders lying in his post box, following which he immediately consulted a tax consultant and filed the appeal. The CIT(A), however, held that the explanation furnished was not sufficient to justify the inordinate delay of over seven years and eight months in filing the appeal before him. The CIT(A) observed that the assessee did not provide any evidence to show that he had not visited India during the intervening years or that he had no knowledge of the assessment order earlier. Further, no specific date of his arrival in India or of filing the appeal thereafter was provided. The CIT(Appeals) referred to judicial precedents such as Vedabai v. Shantaram Baburao Patil [2002] 253 ITR 798 (SC) and CIT v. Ram Mohan Kabra [2002] 257 ITR 773 (P&H), and held that condonation of delay can only be granted when sufficient and bona fide cause is shown, which was absent in the present case. The CIT(A) held that provisions relating to limitation must be applied strictly and that the delay of several years cannot be condoned merely on general or vague grounds. Accordingly, the CIT(A) refused to condone the delay and dismissed the appeal in limine, without adjudicating the matter on merits. It was also noted that a similar delay existed in the penalty appeal filed under section 271(1)(c), which was also similarly dismissed. Thus, both appeals of the assessee were rejected at the threshold as time- barred, and no relief was granted on the merits of the case to the assessee.
6. The assessee is in appeal before us against the orders passed by CIT(Appeals) dismissing the appeal of the assessee, both on merits and also confirming levy of penalty u/s 271(1)(c) of the Act.
Before us, the Counsel for the assessee submitted that the learned CIT(A), NFAC, erred in law and on facts in refusing to condone the delay in filing the appeal and thereby dismissing it in limine without considering the & 159/Ahd/2023 Yogesh Jashubhai Patel vs. ITO Asst. Year : 2011-12
6 matter on merits. It was contended that the delay in filing the appeal occurred due to genuine and bona fide reasons, as the assessee was a Non-Resident Indian (NRI) residing abroad and was not aware of the assessment order or the demand raised by the Department. The Counsel submitted that immediately upon visiting India and discovering the assessment and penalty orders lying in his post box, the assessee took prompt steps to file the appeal. It was therefore pleaded that the delay was not deliberate or intentional but was caused by circumstances beyond the control of the assessee. The Counsel urged that, in the interest of justice, the delay deserves to be condoned and the appeal should be admitted for adjudication on merits. On the merits of the case, the Counsel submitted that the learned CIT(A) failed to adjudicate the core issue regarding the computation of Long Term Capital Gains (LTCG). The Assessing Officer had computed the LTCG at Rs. 6,19,962/- as against Rs. 1,56,248/- declared by the assessee, solely by reducing the cost of acquisition as on 01.04.1981 from Rs. 1,25,220/- to Rs. 60,000/-, without any valid basis or supporting evidence. It was argued that the AO had arbitrarily substituted the cost of acquisition adopted by the assessee, without following the proper procedure laid down in the Income-tax Act. The Counsel further submitted that under the provisions of the Act, the Assessing Officer was duty-bound to either accept the valuation report furnished by the assessee or, if not satisfied with the same, to make a reference to the Departmental Valuation Officer (DVO) under section 55A of the Act. In the present case, no such reference was made, nor was any independent valuation obtained by the AO. Therefore, the addition made by the AO by unilaterally reducing the cost of acquisition to Rs. 60,000/- and recomputing the capital gain was contrary to law and devoid of justification. It was submitted that the assessee had correctly determined the cost of acquisition based on prevailing market rates and relevant sale instances for the year 1981, and the same could not be & 159/Ahd/2023 Yogesh Jashubhai Patel vs. ITO Asst. Year : 2011-12
7 disregarded without due process. The Counsel submitted that both the AO and the CIT(A) had failed to appreciate that the addition of Rs. 4,63,534/- to the total income was made without any factual or legal foundation. Accordingly, the Counsel for the assessee prayed that the Hon’ble Tribunal may condone the delay in filing the appeal, set aside the order of the learned CIT(A), and direct the deletion of the addition made under the head “Long Term Capital Gain.” The Counsel further submitted that the appeal may be restored for adjudication on merits so that the issue of valuation and cost of acquisition could be properly examined in accordance with law.
In response, the Ld. DR placed reliance on the observations made by the Assessing Officer and Ld. CIT(Appeals) in their respective orders.
We have heard the rival contentions and perused the material on record. On going through the facts of the case, we are of the view that the learned CIT(A) has dismissed the appeal of the assessee in limine on the ground of delay in filing, without appreciating that the assessee had furnished a bona fide and reasonable explanation for such delay. The assessee has explained that being a Non-Resident Indian (NRI) during the relevant period, he was not aware of the assessment and penalty orders and came to know about them only upon his return to India. Immediately thereafter, he consulted his tax advisor and filed the appeals without any further delay. In our considered view, this explanation constitutes a reasonable cause within the meaning of section 249(3) of the Act. The delay was neither deliberate nor due to negligence but occasioned by genuine circumstances beyond the control of the assessee. Accordingly, the learned CIT(A) ought to have condoned the delay and adjudicated the appeal on merits. The Hon’ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji & Others [1987] & 159/Ahd/2023 Yogesh Jashubhai Patel vs. ITO Asst. Year : 2011-12
8 167 ITR 471 (SC) has held that a liberal and justice-oriented approach must be taken while considering applications for condonation of delay, as refusal to condone delay may result in a meritorious matter being thrown out at the threshold. Similarly, in Vedabai alias Vijayanatabai Baburao Patil v. Shantaram Baburao Patil [2002] 253 ITR 798 (SC), it was observed that when the explanation for delay is bona fide, courts should lean towards advancing substantial justice rather than technical considerations. Respectfully following these judicial principles, we hold that in the present case, the delay before the learned CIT(A) deserves to be condoned.
Coming to the merits of the case, we note that the Assessing Officer made an addition to the assessee’s income under the head “Long-Term Capital Gains” by reducing the cost of acquisition of land as on 01.04.1981 from Rs. 1,25,220/- to Rs. 60,000/-. The Assessing Officer made this substitution purely on an estimated basis, without citing any comparable sale instances, independent valuation, or expert opinion. Such estimation without cogent evidence or technical basis cannot be sustained in law. Once the assessee had furnished a valuation report from a registered valuer, the Assessing Officer, if not satisfied with the same, was statutorily obliged to refer the matter to the Departmental Valuation Officer (DVO) under section 55A of the Act for determination of the fair market value (FMV). In this regard, we draw support from the decision of the Hon’ble Bombay High Court in Rallis India Ltd. v. Commissioner of Income-tax (Appeals)-XXI, Mumbai [2015] 56 taxmann.com 282 (Bom), wherein it was held that where the Assessing Officer failed to make a reference to the DVO under section 55A, the Commissioner (Appeals) has the power under section 250(4) to direct such reference. It was further held that the valuation by the DVO is a mandatory step when the Assessing Officer disputes the fair market value & 159/Ahd/2023 Yogesh Jashubhai Patel vs. ITO Asst. Year : 2011-12
9 adopted by the assessee. Further, the ITAT Raipur Bench in Ram Bhuvan Yadav v. Deputy Commissioner of Income-tax-2(1) [2025] 176 taxmann.com 363 (Raipur - Trib.) has held that when the difference between declared value and stamp duty valuation arises, it is mandatory under sections 50C(2) and 55A to refer the matter to the DVO for determining the fair market value. Similarly, the ITAT Ahmedabad Bench in Harshadkumar Hargovandas Patel v. Income-tax Officer [2025] 179 taxmann.com 408 (Ahmedabad - Trib.) has held that the Assessing Officer, being a non-technical authority, cannot reject the valuation given by a registered valuer and adopt his own value without seeking expert opinion from the DVO. Following the ratio laid down in the above judicial precedents and considering the facts of the case, we are of the view that the addition made by the Assessing Officer is unsustainable. The determination of the fair market value of property as on 01.04.1981 is a technical matter that requires expert evaluation. The Assessing Officer, having failed to refer the matter to the DVO and having relied solely on an estimate without any supporting evidence, acted contrary to the settled legal position. We, therefore, hold that the addition made towards long-term capital gains deserves to be deleted. Accordingly, the appeal of the assessee on the quantum issue is allowed.
As regards the penalty levied under section 271(1)(c) of the Act, once the quantum addition itself stands deleted, the foundation for the penalty automatically collapses. Moreover, the assessee had furnished full particulars of income, including a valuation report prepared by a government-approved valuer, and acted in a bona fide manner. The addition made by the Assessing Officer was only on estimation and difference of opinion regarding valuation. It is well settled by the Hon’ble Supreme Court in CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158 (SC) that where the assessee has & 159/Ahd/2023 Yogesh Jashubhai Patel vs. ITO Asst. Year : 2011-12
10 made a bona fide claim and disclosed all relevant facts, mere disallowance or difference in computation does not amount to furnishing inaccurate particulars of income. Similarly, the Hon’ble Gujarat High Court in National Textiles v. CIT [2001] 249 ITR 125 (Guj.) has held that when income is assessed on estimation and there is no positive evidence of concealment, penalty under section 271(1)(c) cannot be sustained.
In light of the above legal position and since the quantum addition has been deleted, we direct that the penalty levied under section 271(1)(c) of the Act be deleted.
12.1. Accordingly, both the appeals filed by the assessee, one relating to the quantum addition and the other relating to the penalty under section 271(1)(c) of the Act, are allowed.
In the result, both the appeals filed by the assessee are allowed.
Order pronounced in the Open Court on 06/11/2025 at Ahmedabad.