AO cannot refer to DVO u/s 55 when valuation made by the registered valuer was on higher side

Brief of the case:

Revenue challenged the order passed by ITAT majorly on three grounds. Firstly, on ground of adopting value of property as per the value provided by registered valuer instead of value adopted by AO on the basis of report of DVO. Secondly, in applying cost inflation index with effect from 01.04.1981 instead of 1999-2000 in which assessee inherited property. Thirdly, on helding rental income as income from other sources instead of income from property. After examining the facts and circumstances considered by ITAT Hon’ble HC dismissed the appeal.

Facts of the case:

• The assessee is an individual and filed return for the asst. yr. 2004-05 declaring total income of Rs. 10,85,730. The assessment was made under Section 143(3) determining the total income taxable in the hands of the assessee at Rs. 82,67,260.
• Assessee has inherited a residential house property at 47, Golf Links, New Delhi, on the demise of her mother. It was originally acquired by the father of the assessee in 1958. After his demise, the assessee’s mother became its owner. After the demise of the mother, the assessee inherited the same along with other heirs and the share of the assessee is undisputedly 1/4th in the said property.
• As the said property was owned by the predecessor in title to the assessee prior to 1st April, 1981, the assessee has option to substitute the ‘fair market value’ of the said property as on 1st April, 1981 to be the “cost of acquisition”.
• Accordingly, the assessee has obtained a valuation report from a Registered Valuer. As per that valuation report, the fair market value of the property was determined at Rs. 73,60,975. The 1/4th share of the assessee’s share came to Rs. 18,40,244 and was considered as cost of acquisition under Section 55 of the IT Act, while arriving at the capital gain to be taxable in the hands of the assessee.
• During the course of the assessment proceedings, the assessee has filed the report issued by the Registered Valuer and the AO has referred the matter of valuation to the DVO under Section 55A of the Act.
• The DVO has estimated the market value of the property at Rs. 46,62,280 and thereby arrived at the 1/4th share of the assessee at Rs. 11,65,570. Taking this into account, the AO has determined the capital gain taxable in the hands of the

Contention of the revenue: