Stamp duty value versus fair market value under section 56(2)(x): AO should refer matter to DVO; appeal allowed

Addition under section 56(2)(x) challenged on ground that stamp duty value does not reflect fair market value due to title defects and encroachment; tribunal finds that where assessee contests stamp duty valuation the Assessing Officer must refer valuation to the District Valuation Officer for FMV determination. Because the AO did not refer the matter, the tribunal set aside the assessment and remitted the matter to the AO to obtain a DVO valuation after giving the assessee reasonable opportunity. The appeal is allowed for statistical purposes and the AO is directed to act in accordance with this procedure.

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Issues: Whether, where the assessee disputes adoption of stamp duty value on grounds including defective title and encroachment, the Assessing Officer was required to refer the matter to the Valuation Officer (DVO) for determination of the fair market value before invoking section 56(2)(x) of the Income-tax Act, 1961.

Analysis: The issue involves the correct valuation procedure under section 56(2)(x) when the stamp duty value is contested by the assessee. The tribunal examined the factual contentions presented by the assessee that the property suffered title defects, encroachments and other factors diminishing marketability and that these matters were recorded in the purchase deed. Given the contestation of the stamp duty value, the appropriate statutory and valuation process requires an independent determination of fair market value by the Valuation Officer rather than automatic adoption of stamp duty value. The facts and appellate record showed that the Assessing Officer did not make a reference to the DVO and the appellate authority upheld the assessment without directing such a reference. The tribunal found that where stamp duty valuation is disputed with supporting factual basis, the Assessing Officer ought to have referred the matter to the DVO and afforded the assessee opportunity to furnish documentation to the DVO.

Conclusion: The Assessing Officer's invocation of section 56(2)(x) without referring the disputed stamp duty valuation to the Valuation Officer is not sustainable; matter set aside to the Assessing Officer to refer the valuation to the DVO and provide the assessee reasonable opportunity to file documentation.

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