A reference to the District Valuation Officer for determining the Fair Market Value of a capital asset during the computation of capital gains must be made specifically under Section 55A of the Income Tax Act; a reference made under Section 142A is a jurisdictional error and legally unsustainable.

Date of hearing 19.03.2026 Date of pronouncement 19.05.2026 ORDER PER: SUNIL KUMAR SINGH, JM.

The facts and issues involved in both these matters are identical, hence for the sake of convenience and brevity, both these matters are being decided by this common order. The facts of ITA No 50/Agr/2025 are only being narrated as under:

ITA 50/Agr/2025

2. Appellant revenue has preferred this appeal against the impugned order dated 14.11.2024 passed in appeal No. CIT(Appeal) 2, Agra/10010/2018-19 by the ld Commissioner of Income Tax/ National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the “CIT(A)] u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act), for the A.Y. 2015-16, wherein ld CIT(A) has allowed assessee’s appeal.

3. The facts in brief are that the respondent assessee e-filed his return of income on 29.09.2015 for A.Y. 2015-16, declaring total income at Rs. 18,35,16,990/- which was revised on 31.10.2015 as the same income. The return was processed u/s. 143(1) of the Act. The case was selected for limited scrutiny under CASS to examine long term capital gain and business loss. Statutory notice u/s. 143(2) and 142(1) of the Act were issued and served upon the assessee, seeking him to explain the genuineness of assessee’s claim in respect of expenses incurred in relation to the sale of land. Assessee submitted that he had sold land, Khasra No. 660/3KA, Mauza Artoni, NH-2 Agra on 09.04.2014, measuring 11,800 sq m to M/s Maruti Suzuki India Ltd for a consideration of Rs. 27,04,49,066/-. Assessee further submitted that the land was inherited by him from his father, who had purchased it on 25.03.1965. As the land was purchased in 1965, the assessee submitted a valuation report to establish the fair market value (F.M.V) of the land as on 01.04.1981. Assessing Officer did not accept the valuation report submitted by the assessee and made a reference to the District Valuation Officer (DVO). The DVO, vide report dated 24.10.2017, valued the fair market value of the property at Rs. 2,27,900/- as against the valuation of Rs. 71,74,423/- made by the assessee’s registered valuer Shri. A.M. Jain for the computation of LTCG. After considering assessee’s response, the assessing officer computed the long term capital gain on the basis of indexation of cost submitted by the DVO and computed the indexed cost of acquisition at Rs. 23,33,696/-. Ld assessing officer also allowed the expenses towards transfer to the extent of Rs. 33,68,115/- as against assessee’s claim of Rs. 68,33,115/- and computed the long term capital gain accordingly. The assessing officer, thus, disallowed assessee’s claim of Rs. 34,15,000/- as compensation paid to the illegal occupants and encroachers. Further, the amount of Rs. 50,000/- claimed as legal fee paid to the lawyer engaged for the purpose, was also disallowed by the assessing officer.

4. Aggrieved, assessee preferred an appeal before ld CIT(A), who allowed assessee’s appeal.

5. Appellant revenue has raised the following grounds under appeal:

“1) That the CIT(A) has erred on facts and in law in deleting the addition of Rs.7,45,97,396/-by relying upon the report of the Registered Valuer filed by the assessee in which circle rate of Hari Parwat Ward of Nagar Mahapalika Area as on 17.03.1979 was taken by the valuer on the basis that sale deed of plot with M/s. Maruti Suzuki India Ltd. states that the plot is situated in the Hari Parvat area of Agra Municipal Corporation ignoring t