Bangalore ITAT Grants Relief in Section 50C Addition – DVO Valuation in Co-Owner’s Case Accepted Over Stamp Duty Value

Baby Vs ITO (ITAT Bangalore)

In a notable ruling, the Bangalore ITAT granted substantial relief to a senior citizen assessee in a capital gains dispute by holding that the stamp duty value adopted u/s 50C cannot be mechanically applied when credible valuation evidence is available. The assessee had sold ancestral property along with 11 other co-owners and received a share consideration of ₹11.87 lakh.

The Assessing Officer invoked section 50C and substituted the assessee’s declared sale consideration with the stamp duty value of ₹18.90 lakh, resulting in an addition of ₹7.94 lakh to capital gains. The AO ignored the fact that the assessee had already furnished a registered valuer’s report supporting the actual sale consideration.

Before the Tribunal, the assessee pointed out that in the case of another co-seller, Mrs. Revathi, the Department itself had obtained a District Valuation Officer (DVO) report, wherein the fair market value of the same property was determined at ₹2.15 crore, which substantially supported the actual transaction value and contradicted the higher stamp duty valuation adopted by the AO.

Accepting the contention, the ITAT held that once the assessee had substantiated the sale consideration through a registered valuer’s report and the Department’s own DVO valuation in the co-owner’s case also supported the valuation, the AO was not justified in blindly adopting the stamp duty value for computing capital gains.

The Tribunal accordingly directed the AO to recompute the assessee’s capital gains by adopting proportionate value based on the DVO valuation of ₹2.15 crore instead of the stamp duty value. The ITAT also directed allowance of indexed deduction relating to compound wall construction expenses.

FULL TEXT OF THE ORDER OF ITAT BANGALORE

1. ITA No. 868/Bang/2025 for assessment year 2018-19 is filed by Baby Mangalore against the appellate order passed by the National Faceless Appeals Centre Delhi dated 29^thJanuary 2025 wherein the appeal filed by the assessee against the reassessment order passed by the National Faceless Assessment Centre Delhi under Section 147 read with Section 144B of the Income Tax Act 1961 (the Act) dated 14^thFebruary 2023 was dismissed. Therefore assessee is in appeal before us. The facts clearly shows that assessee is a senior citizen who does not carry on any business transferred in ancestral property during the year and received the consideration of Rs. 11,87,500/- as his share.

During the course of assessment proceedings it was found that the assessee has disclosed capital gain however the stamp duty valuation authorities have considered the relevant stamp duty value of the property at Rs. 18,90,000/- against the sale consideration shown by the assessee of Rs. 11,87,500/-. Therefore invoking the provisions of Section 50C of the Act the learned Assessing Officer considered the deemed sale consideration of Rs. 18,90,000/-, granted deduction of the indexed cost of property at Rs. 8,16,000/- deducted commission pay of Rs. 30,000/- and computed balance capital gain of Rs. 10,44,000/-. Against this the assessee has declared a capital gain of Rs. 2,49,380/- thus an addition of Rs. 7,94,620/- was made to the total income of the assessee. The learned Assessing Officer passed the reassessment order which was challenged before the learned CIT-A. The sole reason for making the addition based on provisions of Section 50C of the Act was that the assessee did not challenge the valuation adopted by the Registrar however the assessee submitted the valuation report of the registered valuer Mr. S.N.Bhat dated 20^th April 2017 wherein the valuation of the property by registered valuer was stated to be consideration received by the assessee only. Thus the assessee objected the same by submitting the registered valuer’s report. The learned CIT Appeal by the appellate order confirmed the action of the learned AO.

2. In appeal before us the learned Authorized Representative furnished a paper book containing 53 pages wherein he has submitted that assessee has objected to the adoption of stamp duty value under Section 50C of the Act by submitting the valuation report of the authorized valuer dated 20^thApril 2017. He further submitted that on 19^thAugust 2025 the Departmental Valuer in case of Mrs. Revathi, another seller of the same another party who sold the property was valued at the total property at Rs. 2,15,3000/-. He therefore submitted that in case of the another party who was the joint seller of the same the departmental valuation has already shown it to be at Rs. 2,15,00,000/-. Thus his submission was that assessee has substantiated the sale consideration by furnishing the report of the registered valuer, the department valuation has also been obtained in case of other party which does not support the market value adopted by the learned Assessing Officer for computation of capital gain by invoking the provisions of Section 50C of the Act.

3. The learned Departmental Representative vehemently supported the orders of the learned lower authorities.

4. We have carefully considered the rival contention and perused the orders of the learned lower authorities. The same facts shows that assessee has sold a property along with Mrs. Revathi and Jaya Shivappa and others comprising of 12 sellers for a sale consideration of Rs. 1,90,00,000/- out of that the share of the assessee was Rs. 11,87,500/-. The assessee substantiated the sale consideration by obtaining the valuation report dated 20^thApril 2017 of Shri. S.N. Bhat wherein the valuation of the property was made at Rs. 1,95,00,000/-against the sale deed of Rs. 1,90,00,000/-. The assessee has stated that it has paid a commission of Rs. 30,000/- for sale which is not in dispute. Assessee has further incurred the expenditure of Rs. 25,000/-for compound wall and further Rs. 30,000/- for khata registration also. It so happened that in case of Mrs. Revathi, who is also one of the seller along with the assessee, in her case the valuation report was obtained of fair market value from the District Valuation Officer who valued the same property under Section 55A of the Income Tax Act at Rs. 2,15,03,000/-. Thus, the value to be adopted for computation in case of the assessee is only Rs. 2,15,03,000/- instead of value adopted for the purposes of stamp duty. As out of the total sale consideration of Rs. 1,90,00,000/- the assessee has received 6.25% the sale consideration is required to be taken at Rs. 13,43,937/-against Rs. 18,90,000/- computed by the learned AO. Further the assessee is also required to be granted deduction of share of construction cost of compound wall at its indexed value. Thus, based on the above findings, the learned Assessing Officer is directed to re-compute the capital gain as directed above.

5. The appeal of the assessee is partly allowed.

Order pronounced in the open court on 19^th May, 2026.