ITAT Lucknow Deletes ₹1,95,92,277 Addition Under Section 50C — AO's Failure to Refer Valuation to DVO Renders Assessment Invalid

Background and Overview

A significant ruling has emerged from the Income Tax Appellate Tribunal, Lucknow, in the matter of Vijay Pal Singh Vs Assessment Unit (ITAT Lucknow), where the Tribunal has categorically held that an addition made under Section 50C of the Income Tax Act, 1961, cannot survive if the Assessing Officer fails to make a valid reference to the Departmental Valuation Officer (DVO) despite an explicit request from the assessee. The Tribunal directed deletion of an addition of ₹1,95,92,277 made on account of Long Term Capital Gain (LTCG), finding that the mandatory procedural requirements prescribed under law were blatantly ignored by the Assessing Officer.

This decision carries far-reaching implications for assessees involved in property transactions where stamp duty valuations are disputed, reinforcing that statutory procedural safeguards cannot be bypassed even under the pressure of approaching limitation deadlines.

Facts of the Case

Assessment Proceedings and Addition Made

An assessment order dated 21.03.2024 was passed by the Assessing Officer under Section 147 read with Section 144B of the Income Tax Act, 1961. Through this order, the total income of the assessee was computed at ₹1,99,26,867 as against the returned income of ₹3,34,590 — a staggering difference arising primarily from a single addition.

The Assessing Officer noted that the circle rate (stamp duty valuation) of the immovable property sold by the assessee stood at ₹2,52,34,000, whereas the sale consideration declared in the registered sale deed was ₹65,00,000. Invoking the deeming provisions of Section 50C, the AO proceeded to treat the stamp duty value as the full value of consideration for the purpose of computing capital gains, resulting in an addition of ₹1,95,92,277 on account of LTCG.

Assessee's Request for DVO Reference

During the course of assessment proceedings, the assessee specifically contested the stamp duty valuation of ₹2,44,34,000 adopted as per circle rates and formally requested the Assessing Officer to refer the valuation of the property to the Departmental Valuation Office (DVO), as is the assessee's statutory right under Section 50C(2) of the Act.

The Assessing Officer claimed in the assessment order that a reference was made to the DVO on 14.03.2024, just seven days before the assessment order was passed on 21.03.2024. The relevant extract from the assessment order reads as follows:

"As requested by the assessee, the matter of valuation of the above property has been referred to the Departmental Valuation Officer on 14.03.2024 u/s 55A of the Income-tax Act, but report in this regard has not yet been received. Since the assessment is time barring on 31.03.2024, the assessment order is passed on the basis of material available. In case of any variations of the FMV of the property as per the Departmental Valuer's Report, the order may be modified accordingly with reference to such report of the Valuation Officer."

Without awaiting the DVO's report, the assessment was finalized, citing the imminent limitation date of 31.03.2024.

CIT(A) Upholds the Addition

Aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). However, vide appellate order dated 08.12.2025, the CIT(A) dismissed the appeal and confirmed the addition, prompting the assessee to approach the ITAT, Lucknow.

What the RTI Reply Revealed

A crucial development in the appellate proceedings before the ITAT was the production of an RTI reply dated 18.02.2026, obtained by the assessee under the Right to Information Act, 2005. This document exposed the ground reality behind the AO's claim of having made a reference to the DVO.

The RTI response, reproduced in the order, stated: