25. Capital gains – Section 50C: A. Y. 2006-07 – Stamp duty value higher than sale price- Reference to DVO – Valuation by DVO binding on AO

Principal CIT vs. Ravjibhai Nagjibhai
Thesia; 388 ITR 358 (Guj):

In the A. Y. 2006-07, the assessee sold his
land for a consideration of Rs. 16 lakh. The Stamp Valuation Authority valued
the property at Rs. 2,33,70,600/-. The case was therefore referred to the DVO
at the request of the assessee u/s. 50C(2). The DVO valued the property at Rs.
24,15,000/-. However, the Assessing Officer passed the assessment order before
the report of the DVO was received treating the difference of Rs. 2,17,70,600/-
as undisclosed income. The Commissioner (Appeals) and the Tribunal deleted the
addition and held that the capital gain has to be computed u/s. 50C on the
basis of the valuation by the DVO.

On appeal by the Revenue, the Gujarat High
Court upheld the decision of the Tribunal and held as under:

“i)  Once a reference was made
by the Assessing Officer u/s. 50C of the Act, to the DVO, for valuation of the
capital asset, the Assessing Officer was obliged to complete the assessment in
conformity with the estimation made by the DVO.

ii)  Under sub-section (2) of
section 50C, it was such lower valuation which was required to be taken into consideration
for the purposes of assessment. There was no legal infirmity in the orders of
the appellate authorities warranting interference.”