Section 91 of the Income-tax Act, 2025 — Reference to Valuation Officer (Capital Gains)

In plain language

What Section 91 actually says

Section 91 of the Income-tax Act, 2025 is titled "Reference to Valuation Officer." It gives the Assessing Officer (AO) the power to send the valuation of a capital asset to a departmental Valuation Officer (VO) so that its fair market value (FMV) can be determined for the purpose of computing capital gains. In simple words, if the tax officer is not convinced by the value you have declared for a property, shares, jewellery or any other capital asset, he can get it independently valued by a government valuer instead of accepting your figure. This section falls in the capital gains chapter and is the successor to Section 55A of the old Income-tax Act, 1961.

When can the AO make a reference?

Section 91 allows a reference in the following situations:

• Value based on a registered valuer (Section 91(1)(a)): Where you have supported your claimed value with a registered valuer's report, but the AO forms the opinion that the value you claimed is at variance with the fair market value. Here even a difference in the AO's opinion is enough to trigger a reference.
• Value not based on a registered valuer (Section 91(1)(b)): In any other case, the AO can refer if either (i) he is of the opinion that the FMV exceeds the claimed value by more than a prescribed percentage or amount (under the Income-tax Rules, 2026 the threshold is a variance of 15% of the value or a stated rupee amount), or (ii) having regard to the nature of the asset and other relevant circumstances, it is necessary to make a reference.

How the valuation is actually carried out

Section 91(2) borrows the machinery of Section 269(3) to (8) of the 2025 Act (the general "reference to Valuation Officer" provision, equivalent to old Section 142A). This means:

• The Valuation Officer has powers to enter and inspect the property, call for documents, and require the taxpayer's cooperation.
• If the taxpayer does not cooperate, the VO can estimate the value to the best of his judgment.
• The VO must send the valuation report to both the AO and the assessee, and must do so within six months from the end of the month in which the reference was made.
• The taxpayer gets an opportunity to be heard before an adverse value is fixed.

Who does it apply to?

It applies to any assessee — individuals, HUFs, firms, LLPs and companies — who reports a capital gain (or claims a cost/FMV) on the sale or transfer of a capital asset. It is used most often for land and buildings, unlisted shares, jewellery and works of art, and especially where a taxpayer adopts the fair market value as on 1 April 2001 as the cost of acquisition for assets acquired before that date.

How it interacts with other sections

• Cost of acquisition / FMV rules: The FMV determined by the VO feeds directly into the capital gains computation — chiefly the cost of acquisition where FMV as on 1 April 2001 is adopted.
• Section 269: Supplies the procedure, powers and the six-month time limit.
• Stamp-duty value provisions (successor to old Section 50C / 56): For immovable property, a separate mechanism already substitutes stamp-duty value; Section 91 typically operates where those provisions do not cap the issue.

Practical implications for taxpayers

• A VO's report can increase your taxable capital gain if it fixes a lower cost of acquisition or a higher sale-side FMV — so keep strong documentary support.
• Get valuations from a registered valuer and retain the report; a credible, reasoned valuation is harder to disturb.
• Courts have consistently held (under old Section 55A) that a reference cannot be used merely to reduce your claimed value when the value is fair; the AO must have a genuine basis. This jurisprudence is expected to guide Section 91 too.
• The valuation is appealable — you can contest the AO's assessment (built on the VO report) before the CIT(Appeals) and tribunals.