ITAT Quashes LTCG Assessment as Time-Barred Where AO Invoked Section 142A Improperly

The assessee filed return for AY 2022-23 declaring an income of Rs. 30.81 lakh. During scrutiny, the AO examined long-term capital gains arising from sale of an inherited property and rejected the assessee’s FMV as on 01.04.2001 based on a valuer’s report.

Instead of invoking Section 55A, the AO made a reference to the DVO under Section 142A and, relying on the valuation report, recomputed LTCG and made an addition of Rs. 3.76 crore. The assessment order was passed on 02.07.2024 and upheld by NFAC.

Question of Law: Whether the assessment was barred by limitation under Section 153(1), and whether time could be excluded under Explanation 1(v) based on a DVO reference under Section 142A for capital gains valuation.

ITAT Held: The ITAT held that for AY 2022-23, the assessment had to be completed by 31.03.2024. It ruled that Section 142A permits valuation only for purposes of Sections 69, 69A or 69B and cannot be invoked to determine capital gains under Section 48. Since the DVO reference itself was invalid, the AO could not claim exclusion of time under Explanation 1(v) to Section 153.

Relying on Smt. Rashidaben Taher Morawala, the Tribunal held the assessment order dated 02.07.2024 to be time-barred and quashed both the assessment and appellate orders.

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