Capital gain – Computation: Reference to DVO – Sections 48, 50C and 55A – A. Y. 2006-07 – Sale of immovable property in July 2005 – Consideration more than stamp duty valuation – Reference to DVO not justified:

In July 2005, the assessee had sold an immovable property for a consideration of Rs. 8,51,00,000/- which was more than the stamp duty value of the property. In the course of the assessment proceedings for the A. Y. 2006-07, the Assessing Officer referred the case to the DVO for valuation as on the date of sale and also as on 01-04-1981. The DVO valued the property as on the date of sale at Rs. 13,73,90,000/-. The DVO also valued the property as on 01-04-1981 at Rs. 94,00,000/- as against Rs. 1,03,00,000/- determined by the registered valuer of the assessee. As a result the Assessing Officer made an addition of Rs. 81,57,643/- to the total income. CIT(A) deleted the addition on the ground that the reference to the DVO was not valid. This was affirmed by the Tribunal.

On appeal by the Revenue, the Gujarat High Court upheld the decision of the Tribunal and held as under:

“i) The sale consideration reflected in the sale deeds was higher than the valuation adopted by the stamp valuation authority. The reference to the DVO for ascertaining the fair market value of the capital asset as on the date of sale in the present case was wholly redundant.

ii) The reference to the DVO for ascertaining the fair market value as on 01-04-1981 also was not competent. The assessee had relied on the estimate made by the registered valuer for the purpose of supporting its value of the asset. Any such situation would be governed by clause (a) of section 55A of the Act and the Assessing Officer could not have resorted to clause (b) thereof.”