Section 50C(2) – By virtue of section 23A(1)(i) being incorporated with necessary modifications in section 50C, the correctness of a DVO’s report can indeed be challenged before CIT(A) in an appeal – In the event of the correctness of the DVO’s report being called into question in an appeal before Commissioner (Appeals), the DVO is required to be given an opportunity of a hearing

Section 50C(2) – By
virtue of section 23A(1)(i) being incorporated with necessary modifications in
section 50C, the correctness of a DVO’s report can indeed be challenged before
CIT(A) in an appeal – In the event of the correctness of the DVO’s report being
called into question in an appeal before Commissioner (Appeals), the DVO is
required to be given an opportunity of a hearing

FACTS

The
assessee, an individual, sold a bungalow for Rs. 1,15,00,000; the stamp duty
value of the same was Rs. 1,40,00,000. The assessee contended that the fair
market value of the bungalow was lower than its stamp duty value. The AO made a
reference to the DVO u/s. 50C(2). The valuation as per the DVO was Rs.
1,27,12,402. The assessee made elaborate submissions on the incorrectness of
this valuation. But the AO completed the assessment by adopting the valuation
done by the DVO as he was of the view that the valuation done by the DVO binds
him and it is his duty to pass an order in conformity with the DVO’s report.
Aggrieved, the assessee preferred an appeal to the CIT(A), who upheld the
action of the AO.

Aggrieved,
the assessee preferred an appeal to the Tribunal where the Revenue contended
that the AO is under a statutory obligation to adopt the valuation as done by
the DVO and as such no fault can be found in his action; therefore, the
appellate authorities cannot question that action either.

HELD

The Tribunal considered the question whether it can deal
with the correctness of the DVO’s report particularly when the AO apparently
has no say in this regard. Upon examining the provisions of section 50C(2) and
also the provisions of sections 23A(6) and 24(5) of the Wealth-tax Act, 1957
the Tribunal held that what follows from these provisions is that in the event
that the correctness of the DVO’s report is called in question in an appeal
before the Commissioner (Appeals), the DVO is required to be given an
opportunity of a hearing. The provisions of section 24(5) of the Wealth-tax
Act, 1957 make a reference to section 16A and the provisions of section 50C
specifically refer to the provisions of section 16A of the Wealth-tax Act,
1957.

The Tribunal held that the correctness of the DVO report
can indeed be challenged before it as well, as a corollary to the powers of the
CIT(A) which come up for examination before it, once again the rider being that
the Valuation Officer is to be given an opportunity of a hearing. This
opportunity of a hearing to the DVO is a mandatory requirement of law. This is
the unambiguous scheme of the law.

It also held that the CIT(A) ought to have examined the
matter on merits. Of course, before doing so the CIT(A) was under a statutory
obligation to serve notice of hearing to the DVO and thus afford him an
opportunity of a hearing. The Tribunal held that the correctness of the DVO’s
report is to be examined on merits and since there was no adjudication, on that
aspect, by the CIT(A), the Tribunal remitted the matter to the file of the
CIT(A) for adjudication on merits in accordance with the scheme of the law,
after giving a due and reasonable opportunity of hearing to the assessee, as
also to the DVO, and by way of a speaking order.

As
such, the Tribunal allowed the appeal filed by the assessee.