Section 50C Addition Cannot Survive When AO Fails to Refer Valuation Dispute to DVO: ITAT
Assessee disputed stamp duty value and specifically requested DVO reference, but AO proceeded with assessment due to limitation – ITAT deletes ₹1.95 crore addition
When an assessee sells an immovable property, the stamp duty value can sometimes become more important for income-tax purposes than the actual consideration mentioned in the sale deed. Section 50C of the Income-tax Act, 1961 contains a deeming provision under which, subject to the statutory conditions, the value adopted or assessed by the stamp valuation authority can be substituted for the declared sale consideration while computing capital gains.
But what happens when the assessee disputes the stamp duty valuation and specifically asks the Assessing Officer to refer the matter to the Departmental Valuation Officer (DVO), and the Assessing Officer does not effectively make such a reference?
The Lucknow Bench of the Income Tax Appellate Tribunal has provided a strong answer: the Assessing Officer cannot simply proceed with the stamp duty value and sustain the addition under section 50C, particularly when the failure to obtain the DVO’s valuation is attributable to the Revenue.
In Vijay Pal Singh v. Assessment Unit, NFAC, ITA No. 56/LKW/2026, order dated 30 March 2026, the ITAT deleted an addition of ₹1,95,92,277 made towards long-term capital gains under section 50C. The Tribunal also declined the Revenue’s request to restore the matter to the Assessing Officer for obtaining a DVO report, holding that doing so would effectively extend the limitation period for completing the assessment.
The Facts of the Case
The assessee had sold an immovable property during the relevant previous year.
The sale consideration disclosed in the sale deed was ₹65 crore. However, the Assessing Officer noticed the circle value of the property at ₹2,52,34,000 and proceeded to invoke the provisions of section 50C while determining the capital gains.
The assessment was ultimately completed under section 147 read with section 144B of the Income-tax Act, 1961.
The Assessing Officer made an addition of ₹1,95,92,277 on account of long-term capital gain, substantially increasing the assessee’s taxable income.
The important point, however, was that the assessee did not accept the valuation adopted by the stamp valuation authority.
The assessee specifically disputed the valuation and requested the Assessing Officer to refer the matter to the DVO for determining the appropriate value of the property.
That request became the central issue before the Tribunal.
What Does Section 50C Say?
Section 50C is a special deeming provision dealing with the computation of the full value of consideration in respect of transfer of land or building or both.
Broadly, where the consideration declared by the assessee is less than the value adopted or assessed by the stamp valuation authority for stamp duty purposes, the stamp duty value may be deemed to be the full value of consideration for computing capital gains, subject to the safeguards contained in the section.
However, section 50C(2) provides an important protection to the taxpayer.
Where the assessee claims before the Assessing Officer that the value adopted or assessed by the stamp valuation authority exceeds the fair market value of the property as on the date of transfer, the Assessing Officer is required to deal with the valuation dispute in accordance with the statutory mechanism, including reference to a Valuation Officer.
The purpose is quite logical.
A stamp valuation authority determines value primarily for stamp duty purposes. A DVO, on the other hand, is a technical valuation authority equipped to determine the fair market value of the property.
Therefore, once a genuine valuation dispute is raised, the law provides a mechanism for obtaining an expert valuation instead of mechanically adopting the stamp duty value.
The AO’s Dilemma: Limitation Was Approaching
In the present case, the Assessing Officer referred to the valuation issue in the assessment proceedings and ultimately passed the assessment order on 21 March 2024.
The assessment order stated that a reference had been made for valuation, but the valuation report had not been received.
The assessment was completed because the limitation date for completing the assessment was approaching.
At first glance, this may appear to be a practical difficulty: the AO has to complete the assessment within the statutory limitation period, while the DVO may require additional time to complete the valuation.
But the Tribunal examined what had actually happened.
And this is where the case took an interesting turn.
RTI Reply Exposed What Actually Happened
The assessee subsequently obtained information under the Right to Information Act.
The RTI response revealed that the Assessment Unit had sought assistance regarding valuation and that the Technical Unit had submitted a technical assistance report on 14 March 2024 seeking clarification from the Assessment Unit.
However, there was no further communication from the Assessment Unit to the Technical Unit available in the relevant record.
Thus, according to the Tribunal, there was effectively no completed reference to the DVO as contemplated by section 50C.
This distinction was crucial.
It was not a case where the AO had properly referred the matter to the DVO, but the DVO simply could not furnish the report before the assessment limitation expired.
Rather, the Tribunal found that the assessee had disputed the stamp duty valuation and requested a DVO reference, but the required reference had not effectively been made.
ITAT: AO Cannot Ignore the Statutory Valuation Mechanism
The Tribunal noted that the assessee had specifically disputed the valuation adopted by the stamp duty authority and requested reference to the DVO.
Despite this, the AO proceeded without obtaining the DVO valuation.
The Tribunal held that in such circumstances, the addition under section 50C could not be sustained.
The decision was also supported by an earlier Lucknow ITAT decision in Nirmal Singh v. ITO, ITA No. 83/LKW/2024, order dated 10 October 2024.
In that case too, the Tribunal had held that where the assessee disputed the stamp valuation and requested reference to the Valuation Officer, the AO could not simply adopt the stamp duty value without making the reference contemplated under section 50C(2).
The Tribunal also referred to the decision of the Delhi ITAT in ITO v. Aditya Narain Verma (HUF), where the importance of the DVO mechanism under section 50C(2) was recognised.
The underlying principle is important:
When the statute provides a particular mechanism for resolving a valuation dispute, the Assessing Officer cannot bypass that mechanism and adopt the disputed stamp valuation as a fait accompli.
Revenue’s Argument: Send It Back to the AO
The Revenue sought another opportunity.
Its contention, in substance, was that the matter could be restored to the AO so that the valuation could be determined by the DVO.
Ordinarily, a remand may appear to be a reasonable solution.
But the Tribunal rejected this approach.
Why?
Because the limitation period for completing the assessment had already become relevant.
The Tribunal observed that the assessee was not responsible for the failure to obtain the DVO valuation. The delay in making the effective reference was attributable to the Revenue.
Therefore, restoring the matter to the AO merely to obtain a DVO report would effectively give the Revenue an additional opportunity beyond the statutory limitation framework.
The Tribunal held that such a course would tantamount to extending the period of limitation for completion of the assessment, which could not be permitted.
Limitation Cannot Become a Revenue’s Second Chance
This part of the ruling deserves particular attention.
The Tribunal’s reasoning is not merely about valuation. It is also about finality of assessment proceedings.
The limitation provisions prescribe a time within which the Revenue must complete the assessment.
If the Revenue fails to take the necessary steps within that period, the consequences cannot automatically be shifted to the taxpayer.
The assessee had already done what was required: the valuation was disputed and a DVO reference was requested.
The Revenue had the statutory machinery available to deal with that objection.
If that machinery was not properly utilised in time, the taxpayer could not be asked to suffer indefinitely by sending the matter back for another round.
In other words:
A procedural lapse of the Revenue cannot become a procedural opportunity for the Revenue.
A Significant Lesson for Taxpayers Selling Property
The decision carries an important practical lesson for taxpayers.
Whenever section 50C is proposed to be invoked, the taxpayer should carefully examine the stamp duty valuation vis-à-vis the actual fair market value.
If the taxpayer genuinely believes that the stamp duty value exceeds the fair market value, the objection should be specifically and clearly raised before the Assessing Officer, along with a request for reference to the DVO wherever legally applicable.
It is advisable that such objection is placed on record in writing rather than being raised merely during oral discussions.
The present case also highlights another practical lesson: maintaining documentary evidence of the request made before the AO can become extremely important.
Here, the assessee’s RTI exercise helped establish what had actually happened in relation to the alleged valuation reference.
Does Section 50C Automatically Mean Stamp Value Is Final?
Absolutely not.
Section 50C is a deeming provision, but it is not an unrestricted licence to substitute the stamp duty value in every case without considering the safeguards built into the section.
The law itself recognises that the stamp valuation may not always reflect the fair market value of a property.
That is why section 50C(2) provides a mechanism for determining the valuation through the Valuation Officer when the statutory conditions are satisfied.
The Vijay Pal Singh ruling reinforces the importance of this safeguard.
The Broader Principle
The case is significant because it brings together three important principles:
First, section 50C cannot be applied mechanically where the assessee has properly disputed the stamp valuation and invoked the statutory valuation mechanism.
Second, where the assessee has requested a DVO reference, the Revenue must follow the procedure prescribed by law.
Third, the Revenue cannot seek a remand merely because its own failure to complete the valuation process has resulted in the limitation period becoming relevant.
The Tribunal accordingly deleted the entire addition of ₹1,95,92,277 made under section 50C.
A Word of Caution for Taxpayers
The decision should not be understood to mean that every objection to stamp duty valuation will automatically result in deletion of a section 50C addition.
The taxpayer must first raise a valid dispute in accordance with section 50C(2). The facts and procedural history of each case will matter.
The real strength of Vijay Pal Singh lies in the combination of circumstances: the assessee disputed the valuation, requested DVO reference, the Revenue failed to effectively carry out that process, the assessment was completed without the DVO valuation, and a subsequent remand would have effectively prolonged the assessment beyond the applicable limitation framework.
Section 50C Under the Income-tax Act, 2025
The issue also assumes relevance under the new Income-tax Act, 2025.
The corresponding provisions have been renumbered, and the special provision dealing with full value of consideration in specified property transfers is now contained in section 78, with the related valuation mechanism referred to in the new statutory framework.
Thus, while the section numbers have changed under the new law, the underlying issue remains relevant: where a taxpayer disputes the prescribed stamp valuation, the statutory valuation mechanism cannot simply be ignored.
Conclusion
The ruling in Vijay Pal Singh v. Assessment Unit, NFAC is a useful reminder that section 50C is a statutory mechanism, not merely a mathematical formula based on the circle rate.
A taxpayer who disputes the stamp valuation is entitled to invoke the valuation safeguards provided by law. Once such a dispute is properly raised, the Assessing Officer cannot simply ignore the statutory procedure and proceed with the disputed valuation.
More importantly, the Revenue cannot use its own failure to complete the DVO process as a reason to seek another opportunity after the limitation period has become an issue.
For taxpayers, the message is simple:
If you disagree with the stamp duty valuation, speak up—and put the objection and DVO request clearly on record.
For the Revenue, the message is equally clear:
The statutory valuation machinery must be used within the statutory time. Limitation cannot be converted into a second innings.
Case Law
Vijay Pal Singh v. Assessment Unit, NFAC
ITA No. 56/LKW/2026
Assessment Year: 2019-20
ITAT Lucknow ‘B’ Bench
Order dated: 30 March 2026
Reported as: [2026] 184 taxmann.com 710 (Lucknow – Trib.)
The copy of the order is as under:
