Section 50C Addition Finalised Without Awaiting DVO Report – Legality Examined

Rajni Arvind Birla v. ITO, Ward-3(1)(1), Ahmedabad
ITAT Ahmedabad | ITA No. 930/Ahd/2025 | Order dated 28.11.2025

1. Core Controversy

The Tribunal examined whether an assessment completed under section 143(3) r.w.s. 144B—without awaiting the DVO’s valuation, despite a valid reference under section 50C(2)—is legally sustainable. An ancillary question concerned whether such a jurisdictional defect can subsequently be cured through Section 154 rectification based solely on a DVO report that was not available on the assessment date.

2. Key Findings

2.1 Assessment Completed Without DVO Report Held Invalid

Once the AO invokes the statutory mechanism under Section 50C(2), the valuation exercise by the DVO becomes an integral component of the assessment process. Finalising the assessment without receiving this report:

  • defeats the assessee’s substantive right to challenge the deemed stamp-duty valuation;
  • renders the order conditional and contingent, which is impermissible under section 143(3); and
  • vitiates the assessment for want of jurisdiction.

The Tribunal held that the AO’s concern regarding limitation was erroneous, and the assessment could not be justified on that ground.

 

2.2 DVO Report Cannot Be Imported Through Section 154

Section 154 empowers rectification only of mistakes apparent from the record. The DVO report in this case was issued three years after the assessment date and thus did not form part of the assessment record.

Applying it through rectification amounts to:

  • introducing fresh material, and
  • effecting a review of the completed assessment, which is beyond the mandate of section 154.

Consequently, the rectification order was held to be untenable.

 

2.3 Breach of Statutory Procedure Under Section 50C(2) Read With Section 16A

A reference under section 50C(2) incorporates the procedure of Section 16A of the Wealth-tax Act, mandating:

  • a reasoned valuation exercise, and
  • an opportunity of participation to the assessee.

By concluding the assessment before the valuation exercise was completed, the AO denied the assessee the statutory protections and violated principles of natural justice.

 

2.4 Related Disallowances Also Unsustainable

The disallowances relating to cost of improvement and transfer expenses—made without adequate opportunity—were also set aside, as they were founded on an assessment itself void in law.

 

3. Statutory Analysis – Limitation and Corrective Powers

3.1 No Time-Exclusion For 50C(2) Under Section 153

Section 153, Explanation 1 excludes the period of reference and receipt of report only for references made under Section 142A.

There is:

  • no legislative linkage between sections 50C(2) and 142A, and
  • no statutory indication that a 50C(2) reference suspends limitation.

Thus, a 50C(2) reference does not extend the time-bar for assessment. However, this does not legitimise completion of assessment without DVO’s report.

 

3.2 Section 155 Cannot Be Invoked for Delayed DVO Reports

Sections 155(15) and 155(16) permit amendment of assessments only when:

  • stamp-duty value adopted under section 50C(1) is later revised by stamp authority, or
  • compensation/consideration is reduced by a court/tribunal/authority.

These provisions do not apply to:

  • valuation reports issued by the DVO pursuant to Section 50C(2), or
  • valuation reports issued after assessment is concluded.

Accordingly, Section 155 cannot validate or substitute the original computation based on a delayed DVO report.

 

4. Final Determination

The Tribunal held:

  1. The assessment order passed without awaiting the DVO report is invalid and unenforceable.
  2. The rectification order based on a post-assessment DVO report is beyond the scope of section 154.
  3. The assessment is vitiated for non-compliance with statutory provisions and procedural fairness.
  4. All additions and disallowances stand quashed in full.

 

5. Conclusive Legal Position

A DVO report obtained pursuant to section 50C(2) cannot be used to amend or rectify an assessment already completed without such report. A delayed DVO report cannot cure the jurisdictional defect arising from a premature assessment.