Krishna Ginning and Pressing Factory Vs DCIT/ACIT (ITAT Rajkot)
DVO Cuts the Valuation Gap to 0.38%: ITAT Reopens Section 50C Dispute
A ₹34.02 Lakh Addition Meets a Much Lower DVO Valuation
The Rajkot Tribunal condoned a 580-day delay in filing an appeal and restored a section 50C dispute to the CIT(A) for fresh examination of a Departmental Valuation Officer’s report.
The assessee had sold a property for ₹3,07,00,000, against which the Assessing Officer adopted the stamp duty value of ₹3,41,02,040. This resulted in an addition of ₹34,02,040 under section 50C.
However, the DVO subsequently valued the property at ₹3,08,15,700, reducing the difference from the actual consideration to just ₹1,15,700, or approximately 0.38%.
The Tribunal did not delete the addition outright. It held that the valuation report required examination and verification before the dispute could be finally decided.
Assessment Completed Before the Valuation Report Arrived
During the assessment proceedings, the assessee had specifically objected to adoption of the stamp duty value and requested a reference to the DVO.
The Assessing Officer made that reference on 2 June 2021. However, the valuation report had not been received when the assessment was completed under section 143(3) read with section 263 on 27 September 2021.
The Assessing Officer therefore proceeded with the stamp duty value and made the disputed addition.
Thereafter, the DVO issued his report on 15 November 2021, determining the property’s value at ₹3,08,15,700. According to the assessee’s affidavit, the report was forwarded to the National Faceless Assessment Centre pursuant to the departmental reference.
The assessee also received a copy and stated that it immediately forwarded the report to its erstwhile consultant, who was handling the assessment and appellate proceedings.
Consultant’s Omission and Recovery Proceedings Explain the Delay
The CIT(A), by an order dated 10 June 2024, upheld the disputed addition. The assessee’s subsequent appeal to the Tribunal was delayed by 580 days.
In its affidavit, the firm explained that its partners were engaged in business and relied on their consultant for the technical and procedural requirements of tax litigation.
They believed that all relevant documents, including the DVO report, were being appropriately presented before the authorities. The firm stated that it became aware of the adverse appellate order only when recovery proceedings concerning the outstanding demand were received.
On examining the appellate records, it discovered that the valuation report supplied to the consultant did not appear to have been placed before the CIT(A).
The assessee maintained that the omission was not deliberate and that the report had a direct bearing on the correct tax liability.
Tribunal Accepts Sufficient Cause for 580-Day Delay
The Revenue opposed condonation, arguing that a consultant’s mistake should not, by itself, justify the delay. It also pointed to the assessee’s failure to pursue the appeal effectively before the CIT(A).
The Tribunal nevertheless found the affidavit’s explanation convincing and sufficient.
It observed that a pragmatic and liberal approach should be adopted in appropriate delay-condonation cases. It referred to the Supreme Court’s decision cited in the order as Investment Trust v. Ujagarsingh, and the Gujarat High Court’s decision in Gujarat State Fertilizers & Chemicals Ltd. (283 ITR 149).
On the facts presented, the Tribunal held that the assessee should not be penalised for its consultant’s mistake and condoned the delay.
The 0.38% Difference Was an Argument, Not a Final Finding of Exemption
On merits, the assessee produced the DVO report as additional evidence under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963.
Its counsel argued that the difference between the declared consideration and the DVO valuation was only 0.38%, below the claimed 5% tolerance limit, and that the appeal should therefore be allowed.
The Tribunal did not conclusively accept this contention. In particular, it did not decide the applicability of the claimed tolerance benefit to assessment year 2015-16.
Instead, it focused on the fact that the valuation report had not been examined by the CIT(A) and had arrived after completion of the assessment.
CIT(A) Must Examine the Report With an AO Remand Report
The Tribunal considered that the DVO report involved factual matters requiring examination, including the basis and methodology of valuation and the material relied upon by the valuer.
It also considered it necessary to give the Revenue a reasonable opportunity to examine and respond to the additional evidence.
Accordingly, the CIT(A)’s order was set aside, and the matter was restored to that authority for fresh adjudication on merits, after obtaining an appropriate remand report from the Assessing Officer.
The appeal was allowed for statistical purposes. The ultimate section 50C relief remains to be determined in the restored proceedings.
Author’s Comments
The decision illustrates why a valuation reference must be followed through until the resulting report is brought into the adjudication process. Here, the DVO valuation materially changed the factual foundation of the dispute, but its omission from the appellate record prevented timely consideration.
The 0.38% difference is significant, yet the order should not be reported as a ruling granting tolerance relief for assessment year 2015-16. That was the assessee’s argument; the Tribunal ordered verification and fresh adjudication.
The practical lesson is clear: obtaining a favourable report is only part of the exercise—ensuring that the deciding authority considers it is equally important.
Cases Discussed
1. Investment Trust v. Ujagarsingh (Supreme Court) — Relied upon for the proposition that unless mala fide or negligence is writ large, delay should be condoned and appeals should ordinarily be decided on merits rather than rejected on the technical ground of delay.
2. Gujarat State Fertilizers & Chemicals Ltd. (Gujarat High Court) — 283 ITR 149 — Relied upon for adopting a liberal approach to condonation so that substantive rights are not defeated by technicalities or limitation.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT RAJKOT
Captioned appeal filed by the assessee, pertaining to Assessment Year 2015-16, is directed against the order under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by Commissioner of Income-tax (Appeals), dated 10.06.2024, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143 (3), r.w.s. 263 of the Act, on 27.09.2021.
2. The grounds of appeal raised by the assessee are as follows:
1. That the learned CIT(A) has grievously erred in law and on facts in upholding the addition to the extent of Rs.34,02,040/- as deemed income u/s 50C of the Act.
2. That the learned CIT(A) has grievously erred in law and on facts in dismissing the appeal without following the mandate of provisions of section 250(6) of the Act.
3. That the learned CIT(A) has grievously erred in law and on facts in dismissing the appeal violating the principles of natural justice.
4. That the appellant craves leave to add, amend, alter, vary and/or withdraw above ground of Appeal.
3. The appeal filed by the assessee for Assessment Year 2015-16, is barred by limitation by 580 days. The assessee has moved a petition requesting the Bench to condone the delay. The contents of the petition for condonation of delay are reproduced below:
“1. That I am a Partner of M/s. Krishna Ginning and Pressing Factory and am duly authorized to swear this affidavit on behalf of the Firm.
2. That during the course of assessment proceedings for A.Y. 2015-16, the Assessing Officer proposed adoption of Stamp Duty Value (SDV) of Rs.3,41,02,040/- as against the actual sale consideration of Rs.3,07,00,000/- and proposed addition of Rs.34,02,040/- under section 50C of the Income-tax Act, 1961.
3. That the Appellant Firm had specifically objected to the aforesaid Stamp Duty Value and had requested the Assessing Officer to refer the matter to the Departmental Valuation Officer (DVO) for determination of the fair market value of the property.
4. That pursuant to the said request, the Assessing Officer made a statutory reference to the Departmental Valuation Officer vide communication dated 02.06.2021.
5. That the assessment order records that the valuation report from the Ld. DVO had not been received before completion of the assessment proceedings and therefore the Ld. AO proceeded to complete the assessment by adopting the Stamp Duty Value of Rs.3,41,02,040/- and made addition of Rs.34,02,040/- under section 50C of the Act.
6. That thereafter Shri M.K. Saxena, District Valuation Officer, Income-tax Department, Ahmedabad, issued Valuation Report dated 15.11.2021 pursuant to the aforesaid statutory reference and determined the value of the property at Rs.3,08,15,700/-.
7. That the said Valuation Report dated 15.11.2021 was forwarded to “The Additional / Joint / Deputy / Assistant Commissioner of Income Tax/ Income Tax Officer, National Faceless Assessment Centre, Delhi” in discharge of the statutory reference made by the Income-tax Department.
8. That a copy of the aforesaid valuation report was also received by the Appellant Firm and immediately upon receipt thereof, the same was forwarded to the erstwhile consultant who was entrusted with handling the assessment as well as appellate proceedings on behalf of the Firm.
9. That the Appellant Firm was throughout under a bona fide belief that all relevant records, evidences and documents including the aforesaid valuation report were being appropriately attended to and represented before the income-tax authorities by the said consultant.
10. That the partners of the Firm are engaged in business activities and are not conversant with the technical and procedural requirements of income-tax litigation and therefore relied entirely upon the professional guidance and assistance of the said consultant.
11. That the Appellant Firm became aware of the adverse appellate order only upon receipt of recovery proceedings in respect of the outstanding demand.
12. That thereafter, upon obtaining and examining the appellate order and records pertaining to the appellate proceedings, it came to the knowledge of the Appellant Firm that the aforesaid Valuation Report dated 15.11.2021, though earlier made available to the erstwhile consultant, does not appear to have been placed before the Ld. CIT(A) for consideration.
13. That the aforesaid circumstance was never within the knowledge of the Appellant Firm and the Firm was throughout under a bona fide belief that all relevant records and evidences were being appropriately submitted to relevant income tax authorities.
14. That the aforesaid circumstance has occurred despite the Appellant Firm having made the valuation report available immediately upon receipt thereof and therefore the same is not attributable to any deliberate act, omission or lack of diligence on the part of the Appellant Firm.
15. That it is further evident from the valuation proceedings that the aforesaid report was forwarded by the Ld. D.V.O. to the National Faceless Assessment Centre pursuant to the statutory reference and therefore already formed part of the records available under the Act.
16. That accordingly, the valuation report was not merely available with the Appellant Firm but was already formed part of the records of the Income-tax Department and its authenticity, source and contents are capable of verification from departmental records.
17. That the valuation determined by the Ld. D.V.O. at Rs.3,08,15,700/- materially differs from the Stamp Duty Value of Rs.3,41,02,040/- adopted in the assessment order and therefore has a direct and substantial bearing on the very basis of the addition made under section 50C of the Act.
18. That the aforesaid valuation report goes to the root of the controversy involved in the present appeal and constitutes material evidence necessary for determination of the correct taxable income and tax liability in accordance with law.
19. That the valuation report contains findings directly relevant to the determination of the value liable to be adopted under section 50C of the Income-tax Act, 1961 and its consideration is necessary for proper, complete and effective adjudication of the issues involved in the appeal.
20. That the valuation report could not be placed before the learned Commissioner of Income-tax (Appeals) for reasons beyond the control of the Appellant Firm despite the same having been made available to the erstwhile consultant immediately upon receipt thereof and therefore the same may kindly be allowed to be adduced as additional evidence in the present appellate proceedings before this Hon’ble Tribunal considering the nature of the document and overall facts of the case.
21. That the circumstances stated hereinabove constitute sufficient cause for admission of the aforesaid Valuation Report dated 15.11.2021 as additional evidence under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963.
22. That the Appellant Firm has throughout acted in a bona fide manner and has never intended to withhold any material evidence, information or document from the income-tax authorities.
23. That all material facts relevant to determination of the value of the property stand incorporated in the Valuation Report dated 15.11.2021 prepared by the Ld. D.V.O. and the said report materially assists in proper appreciation and adjudication of the controversy involved in the appeal”.
4. Learned Counsel for the assessee submitted that assessee has explained the sufficient cause for delay in filing the appeal before the Tribunal, by way of filing the petition for condonation of delay. The Ld. Counsel submitted that the tax consultant of the assessee was not aware about the relevant provision of Income Tax Act and did not advise to assessee about the provisions of the Income Tax Act, applicable to the assessee, and therefore because of the mistake of the tax consultant, the assessee should not be penalised. The assessee came to know about passing the order of the Ld. CIT(A), when he received the demand notice from the Income Tax Department. Therefore, delay should be condoned in the interest of justice.
5. On the other hand, Ld. DR for the revenue submitted that such delay should not be condoned only on account of mistake of tax consultant of the assessee. The assessee also did not pursue the appeal effectively before the Ld. CIT(A) also. Therefore, delay should not be condoned.
6. We have heard, both the parties on this preliminary issue and noted that on account of mistake of tax consultant of the assessee, the assessee should not be penalized. On professional advice, we note that the Courts and Tribunals have consistently held that in the matter of condonation of delay, pragmatic and liberal approach should be taken. The Hon’ble Supreme Court also held the same in case of Investment Trust v. Ujagarsingh observing that unless mala fide or negligence writ large, delay should be condoned and appeals should not be rejected on technical ground of delay and they should be ordinarily decided on merits. The Hon’ble Gujarat High Court has also considered this aspect of condonation of delay in case of Gujarat State Fertilizers & Chemicals Ltd. (283 ITR 149) and held that…
“The position in law is well settled that an assessee should be granted due relief where it is due without standing on technicalities and the revenue must bear the established legal position in mind while dealing with applications seeking condonation of delay. It is necessary that liberal approach is adopted in such a matter so as to ensure that substantive rights are not defeated on the basis of technicalities or limitation. “
7. We note that the reasons given in the affidavit for condonation of delay were convincing and these reasons would constitute reasonable and sufficient cause for the delay in filing this appeal. Having heard both the parties and after having gone through the affidavit as well the delay condonation, application, we are of the considered opinion that in the interest of justice, the delay deserves to be condoned. We, accordingly, condone the delay.
8. On merit, we note that the assessee submitted additional evidence before the Tribunal, first time, which was not there before the learned CIT(A). The detail of additional evidence which is mentioned by the assessee in its written submission, is reproduced below (relevant part only).
“21. That the circumstances stated hereinabove constitute sufficient cause for admission of the aforesaid Valuation Report dated 15.11.2021 as additional evidence under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963”.
9. Therefore, learned DR for the revenue, argued that above additional evidences have not been examined by the Ld. CIT(A), and hence it should be remitted back to the file of the learned CIT(A) to examine, the above additional evidence and to take the appropriate remand report from the assessing officer, therefore, the matter should be remitted back to the file of the learned CIT(A).
10. On the other hand, Ld. Counsel for the assessee, in nutshell, argued that the difference between the sale consideration of the assessee and the fair valuation report of the DVO is less than 5%. The sale consideration, as per assessee is Rs.3,07,00,000/- and fair market valuation as per DVO valuation, comes to Rs.3,08,15,700/-, the difference between the two, comes to Rs.1,15,700/- [ 3,08,15,700 – 3,07,00,000 ], and in percentage terms, it comes to 0.38%, which is below 5% of tolerance limit and hence the appeal of the assessee should be allowed. That is, the difference between the fair market value determined by the DVO and the sale consideration of the assessee is below 5% and therefore assessee’s appeal should be allowed on this technical issue.
11. We have heard, both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that assessee has filed the additional evidence before the Tribunal, that is, the Valuation Report dated 15.11.2021 as additional evidence under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963, which was not examined by the learned CIT (A), therefore, the matter should be remitted back to the file of the learned CIT(A), to examine the additional evidence by taking the proper remand report from the assessing officer. We note that the assessee has produced before the Tribunal, as additional evidence under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963, the Valuation Report dated 15.11.2021. The said valuation report was not available before the Assessing Officer and was not examined or adjudicated upon by the learned CIT(A). Since the valuation report involves factual aspects which require examination and verification by the Assessing Officer, including the basis and methodology of valuation and the material relied upon by the valuer, therefore, we consider it appropriate, in the interest of justice and in order to afford a reasonable opportunity to the Revenue to examine and rebut the additional evidence, therefore, we restore the matter to the file of the learned CIT(A).Therefore, we deem it fit and proper to set aside the order of the ld. CIT(A) and remit the matter back to the file of the ld. CIT(A) to adjudicate the issue afresh on merits. For statistical purposes, the appeal of the assessee is treated as allowed.
12. In the result, appeal filed by the assessee is allowed for statistical purpose.
Order is pronounced in the open Court on 05/10/2026.
