AO Cannot Discard DVO Valuation for Stamp Duty Value: ITAT Mumbai

Deepika Dilip Nadkar Vs ITO (ITAT Mumbai)

Summary: The Mumbai Bench of the Income Tax Appellate Tribunal partly allowed Deepika Dilip Nadkar’s appeal for statistical purposes for AY 2020-21, rejecting her limitation objection but restoring the property valuation dispute to the Assessing Officer for a fresh DVO report. The assessee and her spouse jointly purchased a flat in Krushna Castle, Lower Parel, Mumbai, in April 2019 for ₹1.50 crore. Against this, the stamp valuation authority adopted ₹2,19,40,792. Although the Departmental Valuation Officer valued the property at ₹1,68,90,000, the AO rejected that estimate and adopted the stamp duty value, adding ₹34,70,396 under section 56(2)(x) in respect of the assessee’s 50% share. The CIT(A) sustained the addition.

On limitation, the assessee relied on an email dated 1 October 2022 forwarding the valuation report to NEAC, with a copy to her. She argued that this date governed the exclusion of time under section 153 and that the assessment dated 5 December 2022 was consequently late. The Tribunal, however, relied on the assessment record showing receipt through the Technical Unit on 6 October 2022 under a specified DIN, a date also mentioned in the AO’s subsequent communication. It held that the email did not establish receipt by the Assessment Unit through the prescribed faceless assessment channel on 1 October. Notification No.22/2021 dated 31.03.2021, conferring concurrent powers, did not dispense with the communication procedure under section 144B. Applying the statutory exclusion and the minimum remaining period of sixty days, the Tribunal held the assessment within time.

On merits, the Tribunal found that the CIT(A) had incorrectly treated ₹2,19,40,792 as the DVO’s valuation; the DVO had actually determined ₹1,68,90,000. Reading the valuation mechanism under section 56(2)(x), section 50C and section 16A(6) of the Wealth-tax Act, 1957, and relying on Bharti Jayesh Sangani v. ITO, the Tribunal held that the AO could not simply discard the DVO’s estimate and revert to stamp valuation. Nevertheless, the assessee herself disputed the DVO’s figure and produced an independent Government-registered valuer’s report estimating ₹1,52,10,000.

The Tribunal therefore declined to adopt the existing DVO figure mechanically. The objections concerned the building’s rehabilitation character, lack of parking and open space, inferior surroundings, inefficient flat layout and the suitability of comparables from Bhairav Darshan Building. The independent valuer reportedly used transactions within the assessee’s own building. Evidence of a subsequent sale of the same flat for ₹1,86,50,000 was considered potentially corroborative, rather than determinative of its value at the original purchase date. The AO was directed to obtain a de novo DVO report considering the independent valuation, specific objections, comparable transactions and subsequent-sale evidence, if furnished, with adequate hearing opportunities. No final property value or deletion of the addition was determined.

Cases Discussed

• Bharti Jayesh Sangani v. ITO, [2011] 128 ITD 345 (ITAT Mumbai) — Relied upon for the limited proposition that, once the statutory valuation mechanism is invoked, the AO must act in conformity with the Valuation Officer’s estimate and cannot simply discard it in favour of stamp valuation. The Tribunal nevertheless directed fresh valuation because the assessee also challenged the DVO’s methodology.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

This appeal filed by assessee is against the order of ld. CIT(A)-48, Mumbai vide DIN: ITBA/APL/S/250/2025-26/1079435815(1), dated 08.08.2025 passed against the assessment order by ld. DCIT, CC-2(1), Mumbai u/s 143(3) of the Income-tax Act (hereinafter referred to as the “Act”), dated 13.03.2024 for the Assessment Year 2020-21.

2. Assessee has raised the following grounds of appeal:

1. Ground 1: Order Barred by Limitation

1.1. The learned CIT(A) and the learned Assessing Officer erred in not appreciating that the assessment order is barred by limitation after giving due regard to clause (v) and the first proviso of Explanation to section 153 of the Act. The valuation report was received by email on 1 expired on 30/11/2022, whereas the order was passed on 05/12/2022.

2. Ground 2: Merits of the case

2.1. The learned CIT(A) and the learned Assessing Officer erred in making an addition under section 56(2)(x) of INR 34,70,396 (50% share) assuming that the fair market value of the subject property is equivalent to stamp duty value at INR 2,19,40,792 (as against the purchase consideration of INR 1,50,00,000), without considering the adverse factors impacting the valuation and even not considering the Report issued by the Department Valuation Officer (ld. DVO) who arrived at FMV which is much lesser than the Stamp Duty Value.

2.2. The learned ld. DVO, the learned AO and the learned CIT(A) failed to consider the multiple adverse factors affecting the valuation of the subject property, namely:

a. the land area on which the building is constructed is only 115 sq. metres (17 m × 6.8 m);

b. the building is part of a Slum Rehabilitation Scheme;

c. there is no open space outside the building and no car parking facility;

d. the size and shape of the flat are very small, resembling a railway compartment;

e. large beams in the middle of rooms reduce the utility of the flat, etc.

2.3. The learned CIT(A) further erred in assuming that the ld. DVO had valued the subject property at INR 2,19,40,792, which is factually incorrect, and also in recording adverse factors which does not relate to the subject property while concluding the order.

2.4. The learned AO erred in rejecting the valuation report issued by the ld. DVO assessing the value at INR 1,68,90,000 and concluding that the stamp duty value is fair market value of the subject property by comparing the same with a flat on the 13th floor of Bhairav Darshan CHS Ltd., which does not suffer from any of the adverse factors listed

3. Brief facts of the case are that assessee is an individual and had filed her return of income on 31.03.2021, reporting total income at relating to purchase of immovable property for a consideration lower than the value adopted by the Stamp Valuation Authority. Assessee and her spouse jointly purchased flat no.501, 5th floor, Krushna Castle, Fitwala Road, Lower Parel, Mumbai, on 09/10.04.2019 for a total consideration of Rs.1.50 crore. Stamp Valuation Authority adopted the value of the property at Rs.2,19,40,792/-. Assessee contended before ld. Assessing Officer that the difference was attributable to several peculiar and adverse features of the property and requested that the matter be referred to the ld. Departmental Valuation Officer (“ld. DVO”). Ld. Assessing Officer accordingly made a reference to the ld. DVO on 13.09.2022 through the Technical Unit of the National Faceless Assessment Centre. Ld. DVO submitted his valuation report dated 28.09.2022 determining the value of the property at Rs.1,68,90,000/-. Ld. Assessing Officer, however, did not accept the valuation so determined. He raised a query with the Technical Unit on 01.11.2022. The Technical Unit, vide its response dated 16.11.2022, stated that the query did not involve any legal issue but was only a factual issue concerning the fair market value and returned the query. Ld. Assessing Officer thereafter again sought a specific report from the Technical Unit on 21.11.2022. The response was received on 30.11.2022. Ld. Assessing Officer ultimately rejected the ld. DVO report and proceeded to adopt the Stamp Duty Value of Rs.2,19,40,792/-.

3.1. Accordingly, after considering assessee’s 50% share, the difference of Rs.69,40,792/- was apportioned, resulting in an addition of Rs.34,70,396/- (50% share) under section 56(2)(x). Aggrieved, assessee went in appeal before ld. CIT(A) who sustained the addition so made. Aggrieved, assessee is in appeal before the Tribunal.

4. During the course of hearing, ld. Counsel for assessee submitted that the statutory period for completion of impugned assessment expired on 30.09.2022. It was submitted that assessee had requested reference to the ld. DVO and that the valuation report was emailed by the ld. DVO on 01.10.2022 to NEAC, with a copy marked to assessee. According to assessee, this communication establishes that the valuation report had reached the faceless assessment machinery on 01.10.2022. Assessee accordingly contended that the period to be excluded under Explanation 1(v) to section 153 should be reckoned only up to 01.10.2022 and that, applying the first proviso to Explanation 1, the assessment ought to have been completed by 01.12.2022. Since the assessment order was passed only on 05.12.2022, the same was claimed to be barred by limitation. The computation of timeline in this regard, placed before us is reproduced below:

4.1. Assessee further relied upon section 144B(5), Notification No.22/2021 dated 31.03.2021 and the concept of concurrent jurisdiction under the faceless assessment mechanism. It was submitted that the receipt of the communication by NEAC/NFAC ought to be treated as receipt by ld. Assessing Officer.

5. We have considered the rival submissions and perused the material available on record. The starting point of the controversy is the manner in which the ld. DVO’s report came to be received. The assessment order itself records in para 3.3(iii) that the reference to the ld. DVO was made on 13.09.2022 through the Technical Unit of the National Faceless Assessment Centre and that the report of the ld. DVO was received on 06.10.2022 through the Technical Unit, under DIN No. ITBA/AST/F/222/2022-23/1046181390. The same date of 06.10.2022 is again specifically referred to in the communication of ld. Assessing Officer dated 01.11.2022 addressed to the Technical Unit. Thus, the date of 06.10.2022 is not a date subsequently introduced by the Revenue. It finds place twice in the assessment record: first, in para 3.3(iii) of the assessment order while narrating receipt of the ld. DVO report, and again in ld. Assessing Officer’s communication dated 01.11.2022 while referring to the forwarding of the report by the Technical Unit.

5.1. On the other hand, assessee has placed reliance upon an email dated 01.10.2022 by which ld. DVO forwarded the valuation report to NEAC, with a copy to assessee. Assessee’s case is that this establishes

In our considered view, the distinction between these two dates assumes significance in the context of the statutory scheme governing faceless assessment. Section 144B(5) provides:

(5) All communication among the assessment unit, review unit, verification unit or technical unit or with the assessee or any other person with respect to the information or document or evidence or any other details, as may be necessary for the purposes of making a faceless assessment shall be through the National Faceless Assessment Centre;

5.2. Section 144B(6), insofar as relevant, further provides:

(6) All communications between the National Faceless Assessment Centre and the assessee, or his authorized representative, or any other person shall be exchanged exclusively by electronic mode; and all internal communications between the National Faceless Centre, Regional Faceless Centres and various units shall be exchanged exclusively by electronic mode;

Provided that the provisions of this sub-section shall not apply to the enquiry or verification conducted by the verification unit in the circumstances referred to in sub-section (g) of clause (xii) of sub-section (7);

5.3. The statutory architecture is therefore clear. Section 144B does not merely prescribe electronic communication. It prescribes the channel through which communication is to move between the different units and between the faceless centre and assessee. Section 144B(5) is particularly material. Where the Assessment Unit requires technical assistance, the communication is to pass through the National Faceless Assessment Centre. Correspondingly, clause (x) of section 144B(1) requires the National Faceless Assessment Centre to send the report received from the Technical Unit to the concerned Assessment Unit. This statutory process is important in the present case because the report in question was not merely a report exchanged privately between the ld. DVO and assessee. It was a report generated pursuant to a reference made by the Assessment Unit through the faceless assessment machinery.

5.4. Assessee’s reliance upon the email dated 01.10.2022 establishes, that an email was addressed to NEAC with assessee in copy. It does not, by itself, establish that the report was received by the Assessment Unit through the prescribed statutory channel on that date. There is no material placed before us demonstrating that the report was received by the Assessment Unit/NFAC through the prescribed process on 01.10.2022. In contrast, the assessment record specifically records receipt through the Technical Unit on 06.10.2022, under a specified DIN. We therefore find no basis to substitute the date of 01.10.2022, merely because assessee happened to receive a copy of the report on that date, for the date of receipt recorded by the Assessment Unit through the prescribed faceless assessment channel.

5.5. Assessee has also placed reliance upon Notification No.22/2021 dated 31.03.2021, under which the income-tax authorities of the National Faceless Assessment Centre were vested with concurrent powers and functions of Assessing Officers to facilitate faceless assessment proceedings. The notification confers concurrent powers and functions; it does not dispense with the statutory procedure prescribed under section 144B. Notification No.22/2021 was issued under section 120 and was intended to facilitate conduct of faceless assessment proceedings. The expression “concurrent” enables the designated authorities to exercise the relevant powers, but it cannot be read to mean that two different units may simultaneously deal with the same task independently, outside the process flow prescribed by section 144B. The faceless mechanism is deliberately structured as a team- based and functionally specialised system. The Assessment Unit identifies the issue and, where technical assistance is necessary, seeks such assistance through the National Faceless Assessment Centre. The Technical Unit provides the technical input; the report thereafter travels Assessment Unit. The Assessment Unit then proceeds with the assessment on the basis of the material available to it. This division is not merely administrative. It is the mechanism through which the exercise of different functions is coordinated.

5.6. To accept assessee’s interpretation would lead to a situation where the ld. DVO, having been approached through the faceless mechanism, could independently send the report directly to assessee and thereby fix the date of receipt for limitation purposes, even though the report had not yet been transmitted through the prescribed channel to the Assessment Unit. Such an interpretation would render the process contemplated under section 144B(5) and section 144B(1)(x) otiose. Concurrent jurisdiction, therefore, cannot be understood as simultaneous and uncoordinated exercise of the same function by different authorities. It is concurrent in the sense that the designated authorities possess the necessary statutory powers within the faceless framework; the exercise of those powers remains subject to the prescribed process flow.

5.7. In the present case, the Assessment Unit made the reference to the ld. DVO through the Technical Unit. The report is recorded as having been received by ld. Assessing Officer through the Technical Unit on 06.10.2022. The subsequent communication of ld. Assessing Officer dated 01.11.2022 also refers to the same date. In the absence of evidence showing receipt by the Assessment Unit through the prescribed channel on 01.10.2022, the latter date cannot be adopted for computing limitation.

6. Explanation 1(iv) to section 153 provides for exclusion of:

“the period commencing from the date on which the Assessing Officer makes a with the date on which the report of the Valuation Officer is received by the Assessing Officer”.

6.1. The provision is explicit that the relevant terminal date is the date on which the report is received by the Assessing Officer. The first proviso to Explanation 1 further provides that where, immediately after exclusion of the relevant period, the period available to ld. Assessing Officer is less than sixty days, the remaining period shall be extended to sixty days. In the present case, the original limitation expired on 30.09.2022. The reference was made on 13.09.2022 and the report, as recorded in the assessment proceedings, was received by ld. Assessing Officer through the Technical Unit on 06.10.2022. The period from the date of reference to the date of receipt is accordingly excluded. Since the remaining period available to ld. Assessing Officer thereafter was less than sixty days, the first proviso to Explanation 1 extends the remaining period to sixty days. On that basis, the assessment order dated 05.12.2022 falls within the permissible period.

6.2. We accordingly reject assessee’s contention that the report is required to be treated as having been received on 01.10.2022 merely because a copy of the report was emailed to assessee with NEAC in copy. Accordingly, Ground No.1 is dismissed.

7. We now turn to the substantive issue concerning the addition of Rs.34,70,396/- under section 56(2)(x). Assessee and her spouse purchased the subject property jointly for a total consideration of Rs.1.50 crore. The Stamp Valuation Authority adopted a value of Rs.2,19,40,792/-. Assessee disputed the valuation and requested reference to ld. DVO. Ld. DVO’s report dated 28.09.2022 determined the value of the property at Rs.1,68,90,000/-. Ld. Assessing Officer did not with a property in Bhairav Darshan CHS Ltd. and ultimately proceeded to adopt the stamp duty value of Rs.2,19,40,792/-. Ld. Assessing Officer’s reasoning, as emerging from the assessment order, was principally that ld. DVO had not properly appreciated the surrounding facts that assessee had accepted the stamp duty value at the time of registration and that the comparable property cited in ld. DVO report indicated a higher rate. Ld. CIT(A), while confirming the addition, proceeded on the premise that the ld. DVO had also determined the value at Rs.2,19,40,792/-.

7.1. We find that this latter observation is factually not borne out from ld. DVO’s report reproduced in the assessment order. Ld. DVO’s report determines the value at Rs.1,68,90,000/-, whereas Rs.2,19,40,792/- is the value adopted by the Stamp Valuation Authority. This distinction is material.

8. Section 56(2)(x) contains a specific mechanism for dealing with a case where the stamp duty value of immovable property is disputed by assessee. The third proviso to section 56(2) (x)(b) provides that where the stamp duty value is disputed on the grounds mentioned in section 50C(2), ld. Assessing Officer may refer the valuation to a Valuation Officer and the provisions of section 50C and section 155(15) apply, as far as may be, in relation to such valuation. Thus, once the statutory valuation machinery is invoked and a reference is made, the valuation arrived at by the Valuation Officer assumes significance in determining the value to be adopted for purposes of the deeming provision. Section 50C(3), in the context of a reference made under section 50C, provides: “Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed or assessable by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed or assessable by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.”

8.1. The statutory scheme therefore does not contemplate a situation where, after making a reference to the Valuation Officer, ld. Assessing Officer may simply discard the valuation report and revert to the stamp valuation without regard to the valuation so determined. This becomes further clear from the provisions of section 16A of the Wealth-tax Act, 1957, which are specifically incorporated into the valuation mechanism under section 50C. Section 16A(5) provides: “On the date specified in the notice under sub-section (4), or as soon thereafter as may be, after hearing such evidence as assessee may produce and after considering such evidence as the Valuation Officer may require on any specified points and after taking into account all relevant material which he has gathered, the Valuation Officer shall, by order in writing, estimate the value of the asset and send a copy of his order to the Assessing Officer and to assessee.”

8.2. Section 16A(6) then provides: “On receipt of the order under sub-section (3) or sub-section (5) from the Valuation Officer, the Assessing Officer shall, so far as the valuation of the asset in question is concerned, proceed to complete the assessment in conformity with the estimate of the Valuation Officer.”

8.3. From the above, it is noted that the expression used by the legislature is “shall” and, more importantly, the assessment is required to be completed “in conformity with” the estimate of the Valuation Officer.

9. This precise aspect was considered by the Coordinate Bench of ITAT, Mumbai, in Bharti Jayesh Sangani vs. ITO, [2011] 128 ITD 345 (Mum). The question before the Coordinate Bench was whether ld. Assessing Officer after making a reference to ld. DVO under section 50C(2), could disregard the value determined by ld. DVO and proceed to compute the capital gain on the basis of the stamp valuation. The Coordinate Bench, after considering section 50C and section 16A of the Wealth-tax Act, 1957 held that once a reference is made to the Valuation conformity with the estimate made by the Valuation Officer. The Bench emphasised that section 16A(6), as incorporated into section 50C, makes the valuation of the ld. DVO binding upon ld. Assessing Officer so far as valuation of the asset is concerned. The Coordinate Bench observed, inter alia, that the use of the expression “shall ” in section 16A(6), read with the requirement that the assessment be completed “ in conformity with ” the estimate of the Valuation Officer, makes it clear that ld. Assessing Officer cannot simply disregard ld. DVO’s estimate and substitute his own valuation. The Coordinate Bench further held that the legislative incorporation of section 16A into section 50C brings with it the substantive consequence that the ld. DVO’s valuation has to be acted upon by ld. Assessing Officer.

9.1. We find the ratio of the aforesaid decision apposite for the limited proposition that once the statutory valuation mechanism is invoked and the valuation is obtained from the Valuation Officer, ld. Assessing Officer cannot sit in appeal over the technical valuation and simply discard it in favour of the stamp valuation. In the present case, ld. Assessing Officer did precisely that. Ld. Assessing Officer had himself made a reference to ld. DVO. Ld. DVO determined the value at Rs.1,68,90,000/-. Ld. Assessing Officer thereafter raised queries with the Technical Unit and, on the basis of the responses received, rejected the ld. DVO report and reverted to the stamp duty value. In our considered view, such an approach is not in conformity with the statutory valuation mechanism.

9.2. This, however, does not conclude the matter in favour of assessee. Assessee herself has disputed the valuation determined by ld. DVO at Rs.1,68,90,000/-. Assessee contends that even this valuation is on the properly factored into the valuation. Assessee had specifically pointed out that:

i. the land area on which Building A-1 was constructed was only 17 metres x 6.8 metres, i.e. approximately 115 sq. metres;

ii. Building A-1 was a composite building forming part of an SRA project;

iii. the ground and first floors were rehabilitation components;

iv. there was hardly any open space and there was no car parking facility; v. the flat had an odd size and shape resembling a railway compartment;

vi. large beams in the middle of the rooms reduced the utility of the flat;

vii. the subject building had inferior surroundings and was adjacent to hutments/chawls; and

viii. the property was the last property sold by the developer and had remained unsold for a considerable period.

9.3. These submissions were also stated to have been made during the assessment proceedings and before the ld. CIT(A). The statement of facts records that assessee furnished the purchase agreement, solicitor’s certificate, housing loan details, stamp duty details and other material before ld. Assessing Officer. Assessee further placed before the ld. CIT(A) an independent valuation report obtained from a Government Registered Valuer. The said valuer, after considering comparable transactions within the same building and applying an increase for the passage of time, determined the value at Rs.1,52,10,000/-.

9.4. Assessee has accordingly placed three valuation positions before

9.5. The divergence between these values itself demonstrates that the valuation issue requires examination on the basis of appropriate comparable instances and the peculiar characteristics of the subject property. Assessee has placed the following comparative table. We reproduce the same below:

9.6. The table above brings out a material aspect which, in our considered view, has not been properly examined by the lower authorities. Ld. DVO’s comparison was with flats in Bhairav Darshan Building. Assessee’s contention is that although the building forms part of the same larger SRA project, the two buildings are materially different in their physical characteristics, amenities, surroundings and nature of occupation. The independent valuer, on the other hand, is stated to have considered actual sale instances within assessee’s own building. This distinction cannot be brushed aside merely by observing that both buildings are situated within the same project.

9.7. There is yet another piece of evidence which has been brought on record by assessee. Assessee has stated that the very same property was Rs.1,86,50,000/-, whereas the stamp duty value as on that date was stated to be Rs.1,72,30,488/-. We are conscious that the subsequent transaction has taken place nearly seven years after the original purchase and, therefore, the subsequent sale price cannot, by itself, be treated as determinative of the fair market value as on 09.04.2019. At the same time, this subsequent transaction cannot be ignored altogether. It is a transaction concerning the very same property and it demonstrates that, at a later point of time, the actual consideration exceeded the stamp duty value. This lends corroborative support to assessee’s contention that the stamp duty value adopted at the time of the original purchase may not necessarily have represented the actual fair market value of the subject property after taking into account its peculiar characteristics. The subsequent sale is therefore a relevant piece of corroborative evidence which ought to be considered by the valuation authority while undertaking the exercise afresh.

10. On a cumulative consideration of the facts, we find that there are two distinct conclusions which emerge. First, ld. Assessing Officer was not justified in simply rejecting the ld. DVO’s valuation of Rs.1,68,90,000/- and reverting to the stamp duty value of Rs.2,19,40,792/-. The statutory valuation mechanism, read with section 16A(6) of the Wealth-tax Act, 1957 and the ratio of the Coordinate Bench in Bharti Jayesh Sangani (supra) does not permit such an approach. Once the reference was made and the ld. DVO furnished his estimate, ld. Assessing Officer was required to proceed in conformity with the valuation so determined, subject to the statutory framework.

10.1. Second, assessee has herself placed before the appellate Rs.1,52,10,000/- and has pointed out specific defects and discrepancies in the ld. DVO’s valuation methodology and comparable instances. Thus, while ld. Assessing Officer’s rejection of the ld. DVO report cannot be sustained, it would equally not be appropriate for us to mechanically adopt the ld. DVO’s figure of Rs.1,68,90,000/- without examining the objections raised by assessee against that very valuation.

11. Having regard to the totality of facts and circumstances discussed above, we find it appropriate to set aside the impugned order on merits and restore the matter to the file of ld. Assessing Officer with a direction to obtain a de novo valuation report from the ld. DVO, after affording the assessee an opportunity of being heard and after taking into account:

(a) the Government-approved valuer’s report filed by the assessee;

(b) the specific objections and adverse factors raised by the assessee to the valuation adopted by the Stamp Valuation Authority as well as to the DVO’s earlier report dated 28.09.2022, including the comparability of the sale instances relied upon; and

(c) the evidence relating to the subsequent sale of the very same property, if furnished by the assessee.

11.1. Ld. Assessing Officer shall thereafter complete the assessment afresh, in accordance with law, on the basis of the valuation so determined, after affording adequate opportunity of being heard to the assessee. Needless to add, we have not expressed any final opinion on the correctness or otherwise of the value ultimately to be determined,

2 to 5 raised by the assessee are, accordingly, allowed for statistical purposes.

12. In the result, appeal of assessee is partly allowed for statistical purposes.

Order is pronounced in the open court on 10 September, 2026