Tribunal rules section 50C addition invalid when valuation dispute not properly referred to DVO

The Lucknow bench of the Income Tax Appellate Tribunal has emphasised procedural compliance, ruling that a capital-gains addition under section 50C cannot be upheld where the department failed to properly refer valuation disputes to the Departmental Valuation Officer within the legal timeframe.

An Income Tax Appellate Tribunal bench in Lucknow has ruled that a capital-gains addition under section 50C cannot stand where an assessee challenged the stamp duty value and asked for a referral to the Departmental Valuation Officer, but the tax department failed to complete that process in time.

The dispute arose after Vijay Pal Singh sold an immovable property and declared consideration of ₹65 crore in the sale deed. The Assessing Officer, relying on the circle rate of ₹2,52,34,000, added ₹1,95,92,277 to the assessee’s income as long-term capital gains. Singh objected to the valuation and asked for a DVO reference, but the assessment was completed before any effective valuation report was obtained.

According to the tribunal’s order, an RTI reply later showed that the assessment unit had sought technical assistance on valuation and received a report from the technical unit on 14 March 2024, but there was no further communication showing that a proper reference to the DVO had been carried through. The bench treated that omission as decisive, saying the statutory safeguard in section 50C(2) had not been properly used.

The tribunal also rejected the Revenue’s plea to send the matter back for a fresh valuation exercise. It said that doing so would amount to giving the department another chance after the limitation period for completing the assessment had become relevant. In the tribunal’s view, the taxpayer had done what the law required by disputing the stamp value and seeking a reference; the failure lay with the Revenue, not the assessee.

The ruling adds to a line of decisions stressing that section 50C is not meant to operate mechanically. Tax authorities may rely on stamp duty value only within the framework Parliament laid down, and where an assessee raises a proper challenge, the valuation mechanism cannot be bypassed. The Lucknow bench cited earlier tribunal rulings, including Nirmal Singh and Aditya Narain Verma (HUF), in support of that approach.

For taxpayers selling property, the case is a reminder to put any objection to stamp valuation on record clearly and in writing. For the department, it is a warning that procedural lapses cannot be cured simply by asking for more time after limitation has expired.