Rachit Baid Vs ITO (ITAT Kolkata)
Stamp-Duty Value Is Not the Final Word: AO Must Refer Valuation to DVO When Purchaser Disputes It
The Kolkata Bench of the ITAT has held that where an assessee disputes the stamp-duty value adopted for a purchased property and expressly requests a reference to the Departmental Valuation Officer, the AO cannot mechanically adopt the value appearing in the sale deed or Sub-Registrar’s records. The prescribed valuation procedure must be followed before the difference can be assessed as income u/s 56(2)(x).
The assessee, Mr. Rachit Baid, filed his return of income for AY 2024-25 declaring a total income of ₹27,34,310. During the relevant year, he purchased an immovable property. The purchase consideration recorded in the sale deed was lower than the fair market value adopted or assessed by the stamp-valuation authority.
The case was taken up for assessment, and the proceedings were ultimately completed ex parte u/s 144 r.w.s. 144B on 03-02-2026. The AO adopted the stamp-duty value appearing in the registered instrument and compared it with the actual consideration stated in the purchase deed.
The difference of ₹9,77,278 was treated as income chargeable under the head “Income from Other Sources” by invoking section 56(2)(x).
Section 56(2)(x) seeks to tax, in the hands of a purchaser, the prescribed difference between the stamp-duty value of immovable property and the consideration paid for acquiring it. However, the stamp-duty value is not intended to operate as an irrebuttable or conclusive measure in every case. The provision contains an inbuilt valuation mechanism for situations where the assessee disputes the value adopted by the stamp authority.
The assessee challenged the addition and maintained that the stamp-duty value did not represent the property’s actual fair market value. He specifically requested the AO to refer the property to the DVO for an independent valuation. When relief was not granted at the assessment stage, the assessee reiterated the same request before the CIT(A).
Both authorities, however, proceeded with the value reflected in the sale deed and Sub-Registrar’s records. Neither the AO nor the CIT(A) referred the property to the valuation officer. The CIT(A) confirmed the addition, leading to the appeal before the Tribunal.
Before the ITAT, the assessee confined his principal argument to Ground No. 3. He contended that the AO and CIT(A) had failed to follow the mandatory procedure contemplated by the third proviso to section 56(2)(x). Once the stamp-duty valuation was disputed and a specific request for reference to the DVO was made, the authorities could not simply ignore that request and adopt the stamp authority’s figure as the taxable benchmark.
The Revenue defended the orders of the lower authorities. It argued that the AO had correctly relied upon the market value recorded in the registered sale deed and the information available from the Sub-Registrar. According to the Department, no interference with the addition was warranted.
The Tribunal accepted the assessee’s contention. It recorded a clear factual finding that the assessee had requested a DVO reference during the assessment proceedings as well as before the CIT(A). Despite these requests, the authorities did not initiate the prescribed valuation process.
The ITAT held that when an assessee disputes the adopted value and requests a reference, the AO is duty-bound to refer the valuation dispute to the DVO. Mechanical adoption of the stamp-duty value, without considering the statutory remedy invoked by the assessee, amounts to a violation of the prescribed procedure.
The Tribunal referred to section 55A read with the third proviso to section 56(2)(x) while recognising the obligation to obtain the departmental valuation. Since that process had not been followed, the addition could not be sustained in its existing form.
The matter was therefore remanded to the AO with a direction to follow the valuation procedure, obtain the necessary valuation and decide the issue afresh in accordance with law. The assessee was also directed to be given an adequate opportunity of being heard. The appeal was partly allowed for statistical purposes.
Author’s Comments
The decision reiterates that the stamp-duty value is a rebuttable statutory benchmark and not unquestionable evidence of the property’s fair market value. Stamp valuations are ordinarily based on generalised ready-reckoner rates applicable to a locality. They may not fully account for disadvantages affecting a particular property, such as age, condition, tenancy, restricted access, litigation, irregular shape, poor location within the building or limitations on development.
Section 56(2)(x) itself recognises this possibility. Through its third proviso, the valuation mechanism contained in section 50C is made applicable, with necessary modifications, to the purchaser’s case. Therefore, where the purchaser claims that the stamp-duty value exceeds the actual fair market value, an independent departmental valuation becomes materially relevant.
Although the Tribunal described the reference with reference to section 55A read with the third proviso to section 56(2)(x), the third proviso statutorily imports the mechanism of section 50C(2). The essential principle remains that the AO cannot reject a valuation objection without activating the statutory machinery available for resolving it.
The order does not finally delete the addition of ₹9,77,278. The DVO may determine a value equal to, lower than or otherwise relevant in comparison with the stamp-duty value, subject to the statutory framework. The AO must thereafter recompute the addition after granting the assessee an opportunity to examine and object to the valuation report.
A purchaser disputing stamp value should place the objection on record at the earliest stage and support it with a registered valuer’s report, photographs, comparable sale instances and evidence of property-specific disadvantages. A bare assertion may invite resistance, whereas a reasoned objection strengthens the request for reference.
The ruling ultimately affirms a basic proposition: the Revenue cannot use the deeming fiction u/s 56(2)(x) while ignoring the taxpayer-protection mechanism built into the same provision. If stamp value is invoked, the statutory right to an independent valuation must travel with it.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT KOLKATA
This Appeal is filed by the Assessee against the order of the NFAC, Delhi (Appeal) [“the Ld. CIT(A)”, for short], dated 30.06.2026 passed u/s 250 of the Income Tax Act, 1961 (“the Act”, for short) pertaining to the Assessment Year 2024-25.
2. Brief facts of the case are that, Assessee filed his return of income declaring total income at Rs.27,34,310/-. An Assessment Order came to be passed on 03.02.2026 u/s 144 r.w.s.144B of the Act by making addition on account of difference of the fair market value of purchase of immovable property as adopted/assessed by Stamp duty authority and the purchase consideration as mentioned in the purchase deed. The said difference has been treated as income chargeable to tax under the head ‘income from other source’ vide Assessment Order dated 03.02.2026 by making addition of Rs.9,77,278/-.
3. The Learned Counsel for the Assessee arguing on the Ground No.3 and contended that, the Assessee has requested both before Assessing Officer as well as CIT(A) to refer the matter to the DVO for determining fair market value. However, the Ld. CIT(A) as well as the Assessing Officer have committed error in not following the procedure as laid down in the third proviso to Section 56(2)(x) of the Act in not referring the valuation of the Department Valuation Officer. Thus, sought for allowing Ground No.3 of the Assessee’s Appeal.
4. Per Contra, the Ld. DR submitted that the Ld. Assessing Officer has rightly adopted the market value as per the sale deed/ sub-registrar records and make the addition which requires no interference at the hands of the Tribunal. Thus, sought for dismissal of the Appeal filed by the Assessee.
5. We have heard the parties and perused the material on record. It is the specific case of the Assessee that during the Assessment proceedings as well as before the CIT(A), Assessee requested for referring the matter to DVO, however, the Assessing Officer and the CIT(A) have not considered the request of the Assessee. It is well-settled law that when the Assessee disputes the value of consideration and subsequently requests the Assessing Officer for referral to DVO, the Assessing Officer is duty bound to refer the matter to the DVO as per section 55A of the Act read with third proviso to Section 56(2)(x) of the Act. In the present case, the Assessing Officer have violated the said provision of law by rejecting the request of the Assessee for referring the matter to DVO.
6. In view of the above, we remand the matter to the file of the Assessing Officer with a direction to comply with the provision of section 55A of the Act read with the third proviso to Section 56(2)(x) of the Act and decide the issue afresh in accordance with law. Needless to state the Assessee shall be provided with opportunity of being heard.
7. In the result, Appeal of the Assessee is partly allowed for statistical purposes.
Order pronounced on 15.09.2026.
