Sukla Banerjee Vs NFC/ITO (ITAT Kolkata)
DVO Route Misused—Assessment Beyond 31-03-2024 Held Barred by Limitation-142A Is Not for Capital Gains:
Wrong 142A Reference Can’t Extend Limitation: DVO Route Misused—Assessment Beyond 31-03-2024 Held Barred by Limitation
142A Is Not for Capital Gains: ITAT Kolkata Strikes Down ₹3.76 Cr LTCG Addition
Kolkata ITAT ‘D’ Bench in Sukla Banerjee vs ITO (ITA No.1987/Kol/2025, AY 2022-23, order dated 23-12-2025) allowed the assessee’s appeal and quashed the entire assessment as barred by limitation, holding that a reference made to the DVO u/s 142A for capital-gains purposes is legally invalid and cannot extend the time-limit prescribed u/s 153(1).
The assessee, an individual, sold an inherited land during FY 2021-22 and declared LTCG of ₹7.13 lakh, adopting FMV as on 01-04-2001 based on a registered valuer’s report. Though the case was selected for scrutiny only to verify the cost of improvement, the AO made a reference to the DVO u/s 142A to determine FMV as on 01-04-2001. Based on the DVO’s report, AO recomputed LTCG at ₹3.83 crore and made a massive addition of ₹3.76 crore, passing the assessment order on 02-07-2024.
Before ITAT, the assessee raised an additional legal ground contending that:
• for AY 2022-23, the outer time-limit u/s 153(1) (as substituted by FA 2021) was 12 months, expiring on 31-03-2024;
• the AO sought to rely on Explanation 1(v) to section 153 (exclusion of time for DVO reference), which is available only when a valid reference is made; and
• section 142A permits reference only for estimating investments u/s 69, 69A or 69B, and not for determining FMV/cost for capital-gains computation.
ITAT admitted the legal ground (relying on NTPC, Jute Corporation & Britannia Industries) and held that:
• Section 142A has a limited scope—it cannot be invoked to challenge an alleged over-valuation of cost in a capital-gains case;
• such a wrong reference cannot trigger exclusion of time under Explanation 1(v) to section 153;
• consequently, the assessment order dated 02-07-2024, passed after 31-03-2024, was hopelessly time-barred.
The Tribunal followed the Ahmedabad ITAT decision in Smt. Rashidaben Taher Morawala and categorically held that NFAC/AO cannot take advantage of an extended limitation period based on an invalid DVO reference. Once the assessment itself was barred by limitation, all additions automatically fell.
Accordingly, ITAT quashed the assessment in toto and allowed the assessee’s appeal.
Key takeaway:
• 142A is not a tool for capital-gains valuation
• Invalid DVO reference cannot extend limitation u/s 153
• For AY 2022-23, the 12-month clock is sacrosanct
• Time-barred assessment = nullity, irrespective of merits
FULL TEXT OF THE ORDER OF ITAT KOLKATA
