ITAT Rajkot Remands Section 50C Addition After Condoning 580-Day Delay and Admitting DVO Valuation

Background of the Dispute

The Rajkot Bench of the Income Tax Appellate Tribunal, in the case of Krishna Ginning and Pressing Factory Vs DCIT/ACIT (ITAT Rajkot), dealt with two key issues:

  1. Whether a 580-day delay in filing the appeal could be condoned, where the assessee attributed the delay to reliance on a tax consultant and late awareness of the appellate order; and
  2. How to deal with an addition under Section 50C when a subsequent Departmental Valuation Officer (DVO) report substantially reduced the gap between declared consideration and the value adopted for stamp duty purposes.

The appeal related to Assessment Year 2015-16 and arose from an order passed under Section 143(3) read with Section 263 of the Income Tax Act 1961, which had been confirmed by the Commissioner of Income-tax (Appeals) under Section 250 on **10.06.2024`.

Facts in Brief

  • The assessee sold an immovable property for ₹3,07,00,000.
  • The stamp duty value (SDV) adopted by the Assessing Officer (AO) was ₹3,41,02,040.
  • Relying on Section 50C, the AO treated the difference of ₹34,02,040 as deemed consideration and made an addition of that amount.

During the assessment, the assessee:

  • Objected to the adoption of SDV; and
  • Requested a reference to the Departmental Valuation Officer for determination of fair market value.

The AO, acting on this request:

  • Referred the matter to the DVO on 02.06.2021.
  • However, by the time the assessment was completed on 27.09.2021 under Section 143(3) read with Section 263, the DVO’s report had not been received.
  • Consequently, the AO completed the assessment using the SDV and retained the Section 50C addition of ₹34,02,040.

Subsequently, the DVO issued a report dated 15.11.2021, valuing the property at:

  • ₹3,08,15,700, resulting in a difference from the declared sale consideration of:
    • ₹1,15,700 (₹3,08,15,700 − ₹3,07,00,000),
    • approximately 0.38% of the consideration.

According to the assessee, the valuation report:

  • Was forwarded to the National Faceless Assessment Centre, Delhi in response to the original departmental reference; and
  • A copy was received by the assessee, who claims to have forwarded it to its then consultant for necessary use before the income-tax authorities.

Appeal Before CIT(A) and Subsequent Delay

The Section 50C addition was challenged before the CIT(A), but:

  • The order dated 10.06.2024 sustained the addition of ₹34,02,040.
  • The DVO’s report dated 15.11.2021 was not considered during the appellate proceedings.

The assessee then filed an appeal before the Tribunal, which was late by 580 days. To explain this delay, the assessee filed an affidavit detailing the circumstances leading to the late filing.

Explanation for the 580-Day Delay

In its affidavit, the assessee (through a partner) outlined the following key points:

  • It had requested a DVO reference during assessment proceedings and the AO had duly made such a reference.
  • The assessment order itself recorded that the DVO report was not available as on the date of completion of assessment, leading the AO to adopt SDV.
  • The DVO later valued the property at ₹3,08,15,700 as per report dated 15.11.2021, which was:
    • Forwarded to the National Faceless Assessment Centre; and
    • Also received by the assessee, who promptly gave it to its earlier consultant.

The affidavit further stated: