DVO Reference Mandatory When Stamp Duty Value Disputed Under Section 56(2)(x): ITAT Mumbai Rules in Favour of Assessee

Case Background and Overview

Rashmi Seventilal Vakharia Vs ITO (ITAT Mumbai)
Assessment Year: 2018-19
Order Date: 28-01-2026

The Income Tax Appellate Tribunal, Mumbai, delivered a significant ruling in the matter of Rashmi Seventilal Vakharia Vs ITO, addressing a crucial procedural question under Section 56(2)(x) of the Income Tax Act, 1961 — whether the Assessing Officer is obligated to refer a property valuation dispute to the Departmental Valuation Officer (DVO) when the assessee raises specific objections against the adoption of stamp duty value as fair market value.

The appeal originated from an order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, concerning Assessment Year 2018-19. The core issue revolved around an addition of Rs. 3,17,30,016/- made by the Assessing Officer, representing the differential between the stamp duty value and the actual purchase consideration paid by the assessee for an immovable property.

This case reinforces the well-established principle that mechanical adoption of stamp duty valuation under Section 56(2)(x) without DVO reference, when the assessee disputes such valuation with valid reasons, constitutes a procedural infirmity that vitiates the assessment.

Facts of the Case

Assessment Proceedings

The assessment in this matter was completed under Section 143(3) read with Section 143(3A) and Section 143(3B) of the Income Tax Act, 1961, vide order dated 13-04-2021. The Assessing Officer invoked Section 56(2)(x) and brought to tax an amount of Rs. 3,17,30,016/-, being the excess of stamp duty value over the actual purchase consideration paid by the assessee for acquiring an immovable property.

Nature and Condition of the Property

The property in question was situated at Pathanwadi, Malad (East), Mumbai, and carried with it a long and complicated history of ownership disputes, encroachments, and legal uncertainties. The assessee's own submissions placed before the Assessing Officer, as reproduced at paragraph 4 of the assessment order, set out the factual background in considerable detail:

"The property under consideration is situated at Pathanwadi, Malad (East), Mumbai. We do not have clear title of property because there are many illegal occupants and encroachments on said property. The illegal occupants constructed temporary structures on land without permission of land owners. The land was originally held by a Parsi Trust after India got independence. They sold land to Muslim family but sale deed was not executed therefore title was defective since beginning. The Muslim family got possession of land but they could not safeguard it because there were many encroachments. The property was therefore disputed and without clear/valid title. In 2008, I took 25% stake in said disputed property along with others and decided to remove encroachments and try to obtain clear title. Even after 10 years we could not succeed in getting all the encroachments removed and getting clear possession and title of the property. Also the property is affected by road setback. So one of the co-owner on account of rising legal costs and uncertainty about the peaceful possession of the property decided to sell his stake in the land. To avoid any further legal complications, I had to unwillingly purchase the remaining stake in the property. The detailed history of property is stated in purchase deed. Hence under these circumstances when the land with temporary structures is not having title defect and the same was purchased at a lesser price, adoption of stamp valuation as sales consideration by applying the provisions of Section 56(2)(x) is not justified. Therefore we would like to humbly request you to not invoke provisions of Section 56(2)(x) of the Income Tax Act, 1961. We also rely on case of Mohd. Yusuf Trust v/s. Assistant Commissioner of Income Tax (ITAT Mumbai Bench "D") in which similar matter arose and ITAT refused to consider stamp valuation authority."