Capital gain FMV determination: dispute over valuation must be referred to valuation officer before computing long-term capital gains.

Dispute concerns capital gain computation where the assessing officer adopted its own valuation without referring to the competent valuation officer. The legal basis emphasises the assessing officers duty to refer valuation disputes to the District Valuation Officer even if the assessee did not specifically request it; consequence: matters should be referred to the DVO to determine fair market value and enable correct long-term capital gain computation. Where the assessee files a valuation report from a registered valuer and stamp valuation differs from purchase price, the assessing officer must refer to the DVO before making additions; consequence: issue remitted for fresh determination and recomputation.

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Issues: (i) Whether, where an assessee files a valuation report from a registered valuer, the Assessing Officer is required to refer the matter to the Departmental Valuation Officer (DVO) for determination of fair market value as on the relevant date; (ii) Whether stamp duty/DSR based valuation can be substituted for fair market value without reference to the DVO and without affording the assessee opportunity to be heard.

Issue (i): Whether, where an assessee files a valuation report from a registered valuer, the Assessing Officer is required to refer the matter to the Departmental Valuation Officer (DVO) for determination of fair market value as on the relevant date.

Analysis: The facts show the assessee produced a registered valuer's report contending a FMV substantially higher than the value adopted by stamp duty authorities and co-owners. Precedents cited establish that the statutory machinery contemplates valuation by the DVO to avoid miscarriage of justice and that an Assessing Officer has a duty to give the assessee the option of referral to the DVO even where no specific request is made by the assessee.

Conclusion: The Assessing Officer was required to refer the valuation issue to the DVO for determination of FMV as on the relevant date; failure to do so warrants restoration for fresh consideration.

Issue (ii): Whether stamp duty/DSR based valuation can be substituted for fair market value without reference to the DVO and without affording the assessee opportunity to be heard.

Analysis: The record shows substitution of DSR/stamp duty derived value for FMV without DVO reference and without providing the assessee adequate opportunity to rebut third-party data. Authorities indicate that stamp valuation is an administrative instrument for revenue collection and is not automatically equivalent to FMV under the Income-tax Act; hence substitution without invoking statutory valuation procedure and hearing is improper.

Conclusion: Stamp duty/DSR based valuation cannot be substituted for FMV in the assessment without following the statutory valuation procedure (reference to DVO) and affording the assessee an opportunity to be heard; the matters must be remitted for fresh determination.

Final Conclusion: The valuation issue is restored to the file of the Assessing Officer with a direction to refer the matter to the DVO for determination of fair market value as on the relevant date, to afford the assessee opportunity of being heard, and thereafter to determine long term capital gain in accordance with fact and law; the appeal is allowed for statistical purposes.

Ratio Decidendi: Where an assessee files a valuation report by a registered valuer disputing stamp duty/DSR valuations, the Assessing Officer must, in order to ensure fair treatment, refer the matter to the Departmental Valuation Officer for determination of fair market value and afford the assessee an opportunity to be heard before substituting stamp duty valuation for FMV.

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