The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that the Income Tax Department cannot extend the statutory limitation period for completing an assessment by invoking the general valuation provision under Section 142A of the Income Tax Act when the dispute specifically falls under Section 50C, which contains its own mechanism for valuation of capital assets. 

The bench of Anubhav Sharma (Judicial Member) and M. Balaganesh (Accountant Member) quashed the assessment as being barred by limitation and deleted the addition of ₹69.40 lakh made on account of alleged understatement of sale consideration. 

The assessee, a non-banking financial company engaged in financing and investment activities, had filed its return declaring income of approximately ₹9.25 crore. During the relevant assessment year, it sold a commercial property situated at Nariman Point, Mumbai, for ₹2.16 crore and offered the resulting capital gains to tax. However, the stamp valuation authority valued the property at ₹2.85 crore for stamp duty purposes, creating a difference of ₹69.40 lakh. 

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During the assessment proceedings, the assessee disputed the stamp duty valuation and contended that the actual sale consideration represented the fair market value of the property. To substantiate its claim, it furnished an independent valuation report prepared by a Government-approved valuer, which assessed the property’s value at ₹2.13 crore—very close to the declared sale consideration. 

Despite the objection, the Assessing Officer referred the matter to the Departmental Valuation Officer (DVO) on 11 November 2019. However, the reference was never communicated to the assessee, and no valuation report was received from the DVO before completion of the assessment. Nevertheless, on 28 September 2021, the Assessing Officer completed the assessment by adopting the stamp duty value under Section 50C and making an addition of ₹69.40 lakh. 

Before the Tribunal, the assessee argued that the assessment itself was invalid because it had been completed beyond the limitation period prescribed under Section 153 of the Act.

It was contended that where an assessee disputes the stamp duty valuation, Section 50C(2) specifically mandates reference to the Valuation Officer. Since Section 50C is a special provision dealing exclusively with valuation of capital assets for capital gains purposes, the Assessing Officer could not rely upon the general valuation provision contained in Section 142A merely to obtain an extended limitation period available under Explanation 1 to Section 153.

The assessee further submitted that even after making the reference, no DVO report was received before completion of assessment. Instead of relying upon the Government-approved valuer’s report furnished by the assessee, the Assessing Officer mechanically adopted the stamp duty valuation without waiting for the DVO’s determination. According to the assessee, the assessment ought to have been completed by 31 December 2019, with any subsequent modification permissible after receipt of the valuation report under Section 155(15). 

The first appellate authority had upheld the assessment, holding that the reference had been made under Section 142A and that the Assessing Officer was entitled to the extended limitation period available under Section 153. It also accepted the Department’s contention that after the Finance Act, 2014, Section 142A was broad enough to cover references made in connection with Section 50C. Accordingly, the assessment completed on 28 September 2021 was held to be within limitation after considering the statutory extension and COVID-related relaxation. 

The Tribunal disagreed with the appellate authority and held that Section 50C is a special statutory code governing valuation disputes arising in computation of capital gains.

The Bench observed that Section 142A is only a general or residuary provision enabling valuation of assets for determining fair market value, whereas Section 50C specifically governs situations where an assessee disputes the value adopted by the stamp valuation authority for transfer of immovable property.

Applying the well-established legal maxim “Generalia specialibus non derogant”—meaning a special provision prevails over a general one—the Tribunal held that the Assessing Officer ought to have acted strictly under Section 50C(2). Consequently, the Department could not invoke Section 142A merely to obtain the benefit of an extended limitation period. 

The Tribunal further observed that Section 153 does not grant any extension of limitation where the reference is made under Section 50C(2). Therefore, the assessment should have been completed within the normal statutory time limit, namely on or before 31 December 2019. If the DVO’s report was received later, the Act itself provided a mechanism under Section 155(15) to amend the assessment accordingly. 

The Tribunal also found fault with the Assessing Officer for completing the assessment without receiving the DVO’s report while simultaneously ignoring the valuation report submitted by the assessee through an approved Government valuer.

According to the Bench, once no DVO report was available, the Assessing Officer could not simply disregard the evidence produced by the assessee and adopt the stamp valuation without proper adjudication. 

Holding that the Assessing Officer wrongly invoked Section 142A and consequently availed an impermissible extension of limitation, the Tribunal concluded that the assessment order dated 28 September 2021 was barred by limitation. Since the assessment itself was invalid, the addition of ₹69.40 lakh made under Section 50C was deleted, and the assessee’s appeal was allowed in full.

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