Section 55A valuation reference limits clarified: DVO cannot substitute sale consideration, and pre-1981 valuation reference was invalid.

A reference to the Departmental Valuation Officer could not be used to determine the full value of consideration for capital gains under section 48, because section 55A is confined to ascertaining fair market value and does not govern sale consideration; the separate deeming rule in section 50C was not applicable on the facts. A further reference to value the asset as on 1 April 1981 was also incompetent, as the statutory conditions then in force under section 55A were not satisfied in a registered valuer case. The Revenue's challenge to deletion of the capital gains addition therefore failed.

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Issues: (i) whether a reference to the Departmental Valuation Officer for determining the fair market value of the capital asset on the date of sale was competent for the purposes of computing capital gains; (ii) whether a reference to the Departmental Valuation Officer for determining the fair market value of the capital asset as on 1 April 1981 was competent under section 55A.

Issue (i): whether a reference to the Departmental Valuation Officer for determining the fair market value of the capital asset on the date of sale was competent for the purposes of computing capital gains.

Analysis: Section 48 of the Income-tax Act, 1961 requires computation of capital gains on the basis of the full value of consideration received or accruing on transfer, after allowing the deductions specified in the provision. A reference under section 55A is only for ascertaining fair market value of a capital asset, and that exercise does not govern the full value of consideration for section 48 purposes. Section 50C was noted as a separate deeming provision applicable to land or building transfers in specified circumstances, but the case did not fall within that provision.

Conclusion: The reference to the Departmental Valuation Officer for determining the fair market value on the date of sale was not competent, and the addition based on that reference could not be sustained.

Issue (ii): whether a reference to the Departmental Valuation Officer for determining the fair market value of the capital asset as on 1 April 1981 was competent under section 55A.

Analysis: On the material time frame relevant to the case, section 55A permitted a reference under clause (a) only where the assessee's declared value, supported by a registered valuer, was less than fair market value. Clause (b) applied in other cases and could not be invoked where the assessee had relied on a registered valuer's estimate. The Assessing Officer had not shown that the statutory conditions then in force were satisfied for a reference regarding valuation as on 1 April 1981.

Conclusion: The reference to the Departmental Valuation Officer for valuation as on 1 April 1981 was not competent.

Final Conclusion: The statutory preconditions for the valuation reference were not satisfied, and the Revenue's challenge to deletion of the capital gains addition failed.

Ratio Decidendi: For the relevant period, section 55A could not be used to refer valuation to the Departmental Valuation Officer in a manner inconsistent with the statutory conditions then governing registered valuer cases, and such a reference cannot be used to alter the full value of consideration under section 48.

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