Jagdishbhai Vasharambhai Italiya Vs ITO (ITAT Ahmedabad)
Disputed Stamp Duty Value Requires DVO Reference: ITAT Remands Agricultural Land Additions
Summary: The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) directed fresh adjudication of additions relating to land transactions after finding that the assessee had not received the remand report relied upon against him. The Tribunal also directed valuation by the Departmental Valuation Officer (DVO) where the assessee disputed stamp duty value as exceeding fair market value.
In Jagdishbhai Vasharambhai Italiya vs. ITO, ITA No. 150/Ahd/2026, concerning Assessment Year 2015-16, the Tribunal set aside the CIT(A)’s order and restored the case to the Assessing Officer.
The order dated 14 October 2026 was passed by Accountant Member Narendra Prasad Sinha and Judicial Member Tapas Ram Misra.
Three Land Transaction Additions Challenged
The appeal concerned additions arising from the sale and purchase of land. These included long-term capital gains, an addition of ₹25,87,755 under Section 56(2)(vii)(b) and ₹36,50,633 under Section 69.
Before the CIT(A), the assessee furnished extensive written submissions, sale and purchase deeds, loan confirmations and a fund-flow statement.
His principal contention was that the properties were agricultural lands, affecting the applicability of the provisions invoked by the Department. Alternatively, he maintained that the Jantri value exceeded fair market value and specifically requested a DVO reference.
Both the Assessing Officer and the CIT(A) rejected the valuation request.
CIT(A) Relies on Dholera SIR Location
Regarding capital gains, the CIT(A) relied on the sale deed’s description of the property as eligible for non-agricultural use. It considered this inconsistent with the assessee’s claim about the land’s agricultural character.
The appellate authority also relied on a Gujarat Government notification dated 22 May 2009, noting that the villages Gorasu, Sandhida and Bhadiyad fell within the Dholera Special Investment Region.
According to the CIT(A), the location and notified status brought the property within the relevant urban-area provisions of Section 2(14)(iii).
It further observed that the assessee had not furnished revenue records, cultivation evidence or agricultural produce records establishing agricultural use of the specific property.
Stamp Duty Valuation and Investment Sources Disputed
For the addition under Section 56(2)(vii)(b), the CIT(A) accepted the remand findings that the notified Jantri values substantially exceeded the consideration recorded in the purchase deeds.
It observed that the assessee had not produced an independent valuation report, comparable sale instances or other evidence rebutting stamp duty value. It also accepted the Assessing Officer’s view that a DVO reference was not permissible during remand proceedings.
For the Section 69 addition, the authorities questioned unsecured loans and the availability of funds. The remand findings referred to unanswered verification notices, inconsistent lender responses, negative cash balances after adjustments and unexplained bank credits.
The assessee also disputed the attribution of one-third ownership in jointly purchased land, claiming that his actual share was 16.21%.
Remand Report Not Supplied to Assessee
Before the Tribunal, the assessee’s representative submitted that additional evidence had been furnished to the CIT(A), together with a request for a remand report.
However, the remand report was never supplied, preventing the assessee from examining the Assessing Officer’s comments and filing a rejoinder.
The Tribunal verified that the CIT(A) had relied on the remand report dated 29 May 2019 across all the disputed issues, although it had not been given to the assessee for response.
This procedural deficiency required correction before a fresh decision could be reached.
Agricultural Classification and Section 54B Distinguished
The representative also argued that the expression “Bin Kheti Pre Patra” had been misunderstood. According to him, it described agricultural land capable of conversion to non-agricultural use upon payment of a premium.
The Revenue contended that the land had not been held and used agriculturally for the two-year period relevant to Section 54B.
The Tribunal noted that neither lower authority’s order referred to agricultural use for less than two years. More importantly, the assessee had not claimed deduction under Section 54B.
His case concerned the agricultural character of the properties and, alternatively, the need for independent valuation.
DVO Reference Directed for Disputed Valuation
The assessee relied on Bhupendrabhai Bhikhalal Patel vs. ITO, an Ahmedabad SMC Bench decision, to support the valuation request.
Considering the precedents discussed in that decision, the Tribunal observed that once stamp duty valuation is disputed, the Assessing Officer is duty-bound to refer the matter to the DVO under Section 50C(2).
It also noted that the claimed 16.21% ownership share had been rejected for want of supporting documents, warranting an opportunity to furnish evidence.
Fresh Adjudication with Specific Safeguards
The Tribunal directed the Assessing Officer to decide the case afresh after supplying the remand report, obtaining DVO valuation wherever stamp duty value was challenged as excessive, and allowing evidence regarding the assessee’s ownership share.
The appeal was allowed for statistical purposes. The Tribunal did not finally determine the agricultural classification, accept the claimed ownership percentage or delete the additions on merits. Those matters remain open for examination during the fresh proceedings.
List of Cases Discussed
Bhupendrabhai Bhikhalal Patel vs. ITO — ITA No. 1005/Ahd/2005
FULL TEXT OF THE ITAT JUDGMENT/ORDER
The present appeal has been filed by the Assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi (hereinafter referred to as “CIT(A)”), dated 26.11.2025 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2015-16.
2. The assessee has raised the following grounds of appeal:
“01. That the Ld. CIT(A) has erred both in law and on facts while adjudicating the appeal of the appellant and as such the order passed by CIT(A) may please be quashed.
02. That the appellant has provided all the details during the course of assessment proceedings, as well during the appeal proceedings, however without appreciating the facts and documents on records Ld. A.O has made addition and sustained by the CIT(A) is against the facts on record and therefore the addition made by A.Ο. for Rs. 80,82,888/- requires to be deleted.
03. The appellant has sold an agriculture land for Rs. 18,44,500/, however without considering the documents available on records and wrong interpretation of law the CIT(A) has sustained the addition on account of long term capital gain of Rs. 18,44,500/-is required to be deleted.
The appellant has purchased agriculture land Without prejudice to the above, Ld. A.O. as well as CIT(A) has not allowed the cost of acquisition of land and assessed total sale consideration as LTCG is against the provision of law, which requires to be re-consider.
04. That the appellant has asked for the DVO report at the time of assessment proceedings for valuation of Land purchased less than the stamp valuation amount, however without considering the same heavy addition made by the A.O and sustained by the CIT(A) of Rs. 25,87,755/- u/s 56(2)(vii)(b) is against the principal of natural justice as such the addition made may please be deleted.
05. That the appellant has purchased agriculture lands at the market price of the land, however the addition made on the basis of notional income as per rate adopted by stamp value authority is against the facts on record, therefore the addition made of Rs. 25,87,755/- require to be deleted.
06. That the appellant has explained source of Investment made in agriculture lands, however without appreciating the facts on record the addition made by A.O. and confirmed by CIT(A) u/s 69 of the Income Tax Act, 1961 is bad in law and against the facts on record which required to be deleted.
07. That the CIT(A) has not given opportunity to file rejoinder to remand report and as such without giving opportunity of being heard the whole addition sustained of Rs. 36,50,633/- is against the facts on record and therefore the addition made u/s 69 of Rs. 36,50,633/- is required to be deleted.
08. That the appellant has neither concealed any Income nor furnished inaccurate particulars of Income and therefore the penalty initiated u/s 271(1)(c) of the Income Tax Act, 1961 is require to be dropped.
09. That the appellant has neither committed default of Sec. 210 nor made any default in payment of advance tax and therefore unwanted interest charged u/s 234A 234B, 234C and 234D requires to be deleted.
10. Your appellant craves leave to add, amend, deleted or alter any of the grounds till the appeal is finally heard and decided.”
3. To summarize the issues, the assessee has challenged the confirmation by the CIT(A) of the following three additions:
(i) Addition of Rs.16,44,500/- as long-term capital gains arising from sale of agricultural land.
(ii) Addition of Rs.25,87,755/- under section 56(2)(vii) (b).
(iii) Addition of Rs.36,50,633/- under section 69 of the Act.
4. Before the CIT(A), the assessee has submitted voluminous written submissions, sale and purchase deeds, loan confirmations and a fund flow statement. In addition, the assessee had taken a stand before the A.O. and the CIT(A) that the lands in question, for the issues of long-term capital gains and section 56(2)(vii)(b), were agricultural lands and therefore section 50C and section 56(2)(vii)(b) had no application. As an alternative argument, the assessee had contended that the Jantri value (the value for stamp duty purposes) was higher than the fair market value and had raised as specific request for the valuation of the lands in question to be referred to the DVO. This request was rejected by both the authorities below.
5. On the first issue, addition on account of long-term capital gains, the Ld. CIT(A) held as under:
Ground No. 1
The appellant has argued that the land sold on 14-05-2014 constituted agricultural land and, therefore, did not fall within the ambit of “capital asset as defined under section 2(14) of the Income-tax Act. However, a meticulous examination of the registered sale deed, coupled with the factual findings recorded by the Ld. AO in the remand report, clearly establishes that the land in question has nowhere been described as agricultural land. On the contrary, the sale deed explicitly and unambiguously records the land as “eligible for Non-Agricultural (NA) use”, which is inconsistent with the appellant’s assertion that the land was agricultural in character at the time of transfer. This description is not incidental; it forms part of the operative clauses of the document and reflects the nature, classification and permissible usage of the land as recognized by the registering authorities.
Further, the Ld. AO, during the remand proceedings, has verified from the Government of Gujarat Notification dated 22-05-2009 that the villages Gorasu, Sandhida and Bhadiyad, where the impugned property is situated, are included within the limits of the Dholera Special Investment Region (SIR). The said region is a statutoriły notified area with a population exceeding 10,000, and the inclusion of these villages in such a notified region brings the land squarely within the purview of an urban or municipal area as contemplated in section 2(14)(iii). The statutory definition makes it clear that agricultural land situated within the jurisdiction of a municipality or notified area having population of 10,000 or more ceases to qualify as “agricultural land for capital gains purposes, irrespective of how the appellant subjectively perceives the land. Thus, even assuming the land was once agricultural in distant history, its location within the notified SIR area renders it a capital asset by operation of law.
The appellant has also failed to produce any revenue record, cultivation record, crop receipt, or any contemporaneous evidence showing that the land was put to agricultural use during the relevant previous year. No 7/12 extract, no proof of cultivation, and no evidence of agricultural produce from this specific land has been furnished. Mere assertion, unsupported by documentary corroboration, cannot alter the statutory classification of land. In contrast, the objective evidence on record, i.e., the sale deed description and the Special Investment Region notification, clearly supports the Ld. AO’s view.
Having established that the land transferred is a capital asset, the Ld. AO has correctly invoked the provisions of section 50C, which mandate the substitution of declared sale consideration with the stamp duty valuation wherever the latter is higher. The appellant has not produced any valuation report, independent evidence, or compelling reasons to challenge the applicability of section 50C. The submissions advanced are general in nature and do not rebut or even materially address the detailed and fact-based conclusions drawn in the remand report. The appellant has simply reiterated earlier claims without offering any substantive proof.”
6. On the second issue, addition u/s 56(2)(vii)(b), the ld. CIT(A) held as under:
“During the remand proceedings, the Ld. AO has conducted a detailed verification of the purchase deeds, the corresponding stamp duty valuations, and the location of the properties. It has been categorically reported that the immovable properties purchased by the appellant are situated in the villages of Gorasu, Sandhida, and Bhadiyad, all of which fall within the Dholera Special Investment Region (SIR), a notified zone as per Government of Gujarat notification, and an area where stamp duty valuations are specifically prescribed and periodically updated. The remand report records that the jantri values notified for these locations are substantially higher than the prices shown in the purchase deeds executed by the appellant. This establishes a direct factual basis for invoking section 56(2) (vii)(b).
The appellant, for his part, has not produced any material whatsoever to demonstrate that the properties were purchased at fair market value or that the stamp duty valuation did not reflect the true market rate. No independent valuation report has been produced. No sale instances of comparable properties have been furnished. No evidence has been placed on record to rebut the correctness of the stamp duty valuation. The appellant has merely asserted, without any supporting documentation, that the consideration declared in the purchase deeds represented the actual market value. Such bare assertions cannot override statutory deeming provisions nor rebut the factual verification carried out by the Ld. AO.
It has also been specifically noted by the Ld. AO that a reference to the Departmental Valuation Officer (DVO) is not permissible at the remand stage, as the remand proceedings are confined to factual verification of material already on record and cannot be used to reopen or expand the scope of the assessment. The appellant, having failed to furnish any valuation report at the assessment stage, cannot now seek to introduce new evidence or request a DVO reference at the appellate remand stage, especially when such request is not supported by any valid reason or documentary deficiencies in the stamp duty value.”
7. On the third issue, addition u/s 69, the Ld. CIT(A) held as under:
“ The appellant has further relied upon unsecured loans from multiple individuals in small denominations. The remand report records that most of the notices issued to these persons under section 133(6) evoked no response. Of the individuals who did appear, one denied having advanced any loan, while another provided a version which did not correspond with the appellant’s claim. Even in cases where confirmations were filed, the appellant did not establish the identity or creditworthiness of the lenders or the genuineness of the transactions. Accordingly, the unsecured loans cannot be regarded as proved.
The Ld. AO has also reworked the appellant’s cash flow by removing unsubstantiated items such as agricultural income, alleged cash receipts, and unverifiable loans. Upon such correction, the cash book reflects substantial negative cash balances, which indicates that the appellant did not have the funds claimed to be available for investment. In addition, the appellant failed to offer any explanation supported by documentary evidence for several substantial bank credits of Rs. 5,00,000/-, Rs. 8,28,000/-, Rs. 2,50,000/- Rs. 44,000/- and Rs. 9,50,000/- These deposits remain wholly unexplained.”
The appellant has also contended that his share in the jointly purchased land was 16.21 percent and not one-third as adopted by the Ld. AO. However, no co-ownership agreement, no contemporaneous record, and no supporting material has been produced to substantiate this claim. In the absence of any evidence to the contrary, the Ld. AO was justified in determining the appellant’s share on the basis of the registered deed and the information available on record.”
8. At the time of hearing before us, the Ld. Sr. DR Shri Amit Pratap Singh stated that the land in question needed to be used for agricultural purpose for at least two years preceding the date of transfer. In this case, it was stated, the assessee had owned the land for less than two years and therefore this essential condition laid down in section 54B was not satisfied. In respect of other issues the Ld. Sr. DR placed reliance on the orders of the authorities below.
9. Shri Jaimin Shah, Ld. A.R. submitted that while the assessee had submitted additional evidence before the CIT(A) alongwith an application dated 12-02-2019 with a request to seek remand report from the A.O, a copy of the said remand report was never provided to the assessee, who could not file a rejoinder after examining the comments of the A.O.
10. The Ld. A.R. also submitted that the A.O. and the CIT(A) misunderstood the term “Bin Kheti Pre Patra” as non-agricultural. He stated that this term actually means the agricultural land which can be used for non-agricultural purposes by paying a premium.
11. The Ld. A.R. emphasized on the legal issue, that both section 50C and 56(2)(vii)(b) refer to “capital asset” which term, as defined in section 2(14), does not include agricultural land. In the alternative, he contended that if section 50C were to be applied, the issue of determination of fair market value was of critical importance as the Jantri value was higher than the fair market value. It was for this purpose that the assessee had asked the A.O. to refer to the DVO for valuation of land but this plea was rejected by the A.O. and the CIT(A). To support this plea of reference to the DVO, the Ld. A.R. relied upon the decision of ITAT Ahmedabad ‘SMC’ Bench in Bhupendrabhai Bhikhalal Patel vs. ITO: ITA No. 1005/Ahd/2005.
12. We have given our careful consideration to the facts and the submissions by the Ld. A.R. and Ld. Sr. DR. We notice that the Ld. CIT(A) has made a reference to the remand report dated 29-05-2019 in respect of all the issues. The report was however never given to the assessee for his rejoinder. We also note, from the precedents used in the decision of the SMC Bench in the case of Bhupendrabhai Bhikhalal Patel (supra), that once the assessee disputes the stamp duty valuation, the A.O. is duty bound to refer the matter to the DVO under section 50C(2). Further, the issue raised by the assessee, that his share in the jointly owned property was 16.21% and not one-third as adopted by the A.O., has been rejected by the CIT(A) alleging non-availability of supporting documents.
13. At the same time, we did not find any reference in the orders of the A.O. or CIT(A) regarding use of the land for agricultural purposes for less that two years. Besides, the assessee has not made a claim u/s 54B of the Act. The assessee’s claim is that the lands in question were agricultural land and, in the alternative, the said ought to have been referred to the DVO for valuation.
14. Considering the totality of facts and circumstances, we deem it proper to set-aside the order of the CIT(A) and restore the case to the A.O. to be decided afresh after; (i) giving the assessee a copy of the remand report dated 29/05/2019, (ii) referring the valuation of land to the DVO in cases where the assessee has contended that the stamp duty value was in excess of the fair market value and (iii) giving the assessee opportunity to produce evidence to show that his share in the jointly purchase land was 16.21% and not the one-third as adopted by the A.O.
15. In the result, the appeal of the assessee is allowed for statistical purposes.
This Order is pronounced on 14/10/2026
