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Facts
The assessee, a retired employee of Tata Steel, sold a house property for Rs. 3,20,00,000. The assessee declared long-term capital gains, adopting a fair market value of Rs. 25,49,000 as on 1.4.1981. The Assessing Officer (AO) adopted a fair market value of Rs. 5,00,000 as on 1.4.1981 using a comparative method. The assessee contended that the AO's comparative case was not relevant and that in case of valuation disputes, the matter should be referred to the DVO.
Held
The Tribunal noted that while both the assessee and the AO used acceptable valuation methods, the Income Tax Act mandates a reference to the DVO in case of a dispute regarding valuation. Since this procedure was not followed by the AO, the addition made by the AO and confirmed by the CIT(A) is not permissible.
Key Issues
Whether the addition made by the AO based on a comparative valuation method is sustainable without referring the matter to the DVO in case of a dispute regarding fair market value as on 1.4.1981.
Sections Cited
Section 4, Section 5
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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL,
This is an appeal filed by the assessee against the order of the ld CIT(A This is an appeal filed by the assessee against the order of the ld CIT(A This is an appeal filed by the assessee against the order of the ld CIT(A), Jamshedpur dated 16.8.2026 i Jamshedpur dated 16.8.2026 in Appeal No. 36/JSR/2015-16f 16for the assessment year2013-14.
P a g e 1 | 4
Shri Khub Chand Pandya, ld Sr DR appeared for the revenue and Shri Debasis Sannigrahi,ld AR appeared for the assessee.
It was submitted by ld AR that the assessee, a retired employees of Tata Steel Limited had sold the house property on 27.7.2012. It was the submission that the sale consideration of the property was Rs.3,20,00,000/-. It was the submission that the assessee had filed his return of income declaring long term capital gains. In the computation of long term capital gains, the assessee had adopted the fair market value as on 1.4.1981 at Rs.25,49,000/-. It was the submission that the area of the property sold was 4320 sq. ft. It was the submission that the Assessing Officer had adopted the fair market value of the property as on 1.4.1981 at Rs.5,00,000/-. It was the submission that the assessee had applied reverse calculation to arrive at the valuation as on 1.4.1981 and the Assessing Officer had applied a comparative method. It was the submission that the property sold by the assessee was in the commercial area, whereas the comparative case taken by the AO was nowhere near the property which was sold by the assessee. It was the further submission that when there is a dispute in the valuation of the fair market value of the property, what was required do be done was that the valuation of the property to be referred to Department Valuation Officer (DVO). It was the submission that this has not been done. It was the submission that as the assessee has already disclosed capital gains and has also given justifiable value for the valuation of the property
P a g e 2 | 4 as per the Registered valuation report, the value as adopted by the assessee as on 1.4.1981 is liable to be accepted.
In reply, ld Sr DR vehemently supported the order of the AO and ld CIT(A). It was the submission that the Assessing Officer has adopted an acceptable method of valuation being comparative case valuation. It was the submission that the valuation as adopted by the AO was more appropriate and the same is liable to be upheld.
We have considered the rival submissions. The assessee has given fair market value in respect of his property as on 1.4.1981. The Assessing Officer is disputing that valuation. The assessee and the AO have admittedly adopted the acceptable method of valuation. However, the Act requires that in the event of dispute in regard to valuation, the valuation is to be referred to the DVO. This has admittedly not been done. This being so, we are of the view that the addition as made by the AO by adopting the comparative case is not permissible. Consequently, the addition as made by the AO and confirmed by ld CIT(A) stands deleted.
In the result, appeal of the assessee stands allowed.