Estimate of value of assets by Valuation Officer [Section 142A]

The Assessing Officer may, for the purposes of assessment or reassessment, make a reference to a Valuation Officer to estimate the value, including fair market value, of any asset, property or investment and submit a copy of report to him.

Prior to 2014, in the absence of specific provision for reference to Departmental Valuation Officer (DVO), for estimating the cost of construction of a property/investment, the Assessing Officers were using the power of summons under section 131, survey under section 133 and power of enquiry under section 142(1). The use of these powers by Assessing Officer’s for reference to DVO, were being questioned and the various judicial forums and High Courts had taken conflicting views as to the legitimacy of use of such powers. This had been put on rest based on the judgment of Supreme Court in the case of Amiya Bala Paul v CIT (2003) 262 ITR 407 (SC), wherein the Apex Court has categorically concluded that there no power to Assessing Officer for making reference to DVO for valuation of investments for assessment purpose. 

Finance (No. 2) Act, 2004 has inserted Section 142A as a new section, with retrospective effect from 19th November 1972 to neutralise the decision of the Supreme Court in Amiya Bala Paul v CIT 2003 (262 ITR 407). As per section 142A, as introduced by Finance (No. 2) Act, 2004 the Assessing Officer can refer to Valuation Officer to make an estimate of value of any investment referred to in Section 69 or Section 69B. Therefore, section 142A has given power to Assessing Officer to refer to the DVO for the purpose of estimating value of any investment for making assessment subject to certain conditions.

Text of Section 142A

^[1][142A. Estimation of value of assets by Valuation Officer.

(1) The Assessing Officer may, for the purposes of assessment or reassessment, make a reference to a Valuation Officer to estimate the value, including fair market value, of any asset, property or investment and submit a copy of report to him.

(2) The Assessing Officer may make a reference to the Valuation Officer under sub-section (1) whether or not he is satisfied about the correctness or completeness of the accounts of the assessee.

(3) The Valuation Officer, on a reference made under sub-section (1), shall, for the purpose of estimating the value of the asset, property or investment, have all the powers that he has under section 38A of the Wealth-tax Act, 1957 (27 of 1957).

(4) The Valuation Officer shall, estimate the value of the asset, property or investment after taking into account such evidence as the assessee may produce and any other evidence in his possession gathered, after giving an opportunity of being heard to the assessee.

(5) The Valuation Officer may estimate the value of the asset, property or investment to the best of his judgment, if the assessee does not co-operate or comply with his directions.

(6) The Valuation Officer shall send a copy of the report of the estimate made under sub-section (4) or sub-section (5), as the case may be, to the Assessing Officer and the assessee, within a period of six months from the end of the month in which a reference is made under sub-section (1).

(7) The Assessing Officer may, on receipt of the report from the Valuation Officer, and after giving the assessee an opportunity of being heard, take into account such report in making the assessment or reassessment.

Explanation. - In this section, “Valuation Officer” has the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).]

KEY NOTE

1.  Substituted by the Finance No. 2) Act, 2014, with effect from 01.10.2014. Prior to its substitution, it was inserted by the Finance (No. 2) Act, 2004, with retrospective effect from 15.11.1972 read as under:

“Estimate by Valuation Officer in certain cases. 142A. (1) For the purposes of making an assessment or reassessment under this Act, where an estimate of the value of any investment referred to in section 69 or section 69B or the value of any bullion, jewellery or other valuable article referred to in section 69A or section 69B 27[or fair market value of any property referred to in sub-section (2) of section 56 is required to be made, the Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to him.

(2) The Valuation Officer to whom a reference is made under sub-section (1) shall, for the purposes of dealing with such reference, have all the powers that he has under section 38A of the Wealth-tax Act, 1957 (27 of 1957).

(3) On receipt of the report from the Valuation Officer, the Assessing Officer may, after giving the assessee an opportunity of being heard, take into account such report in making such assessment or reassessment:

PROVIDED that nothing contained in this section shall apply in respect of an assessment made on or before the 30th day of September, 2004, and where such assessment has become final and conclusive on or before that date, except in cases where a reassessment is required to be made in accordance with the provisions of section 153A.

Explanation. - In this section, “Valuation Officer” has the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).”

Reference by Assessing Officer to the Valuation Officer for estimate of the value including fair market value of any asset, property, or investment [Section 142A(1) and (2)]

The Assessing Officer may, for the purposes of assessment or reassessment, make a reference to the Valuation Officer to estimate the value, including fair market value, of any asset, property or investment and submit the report to him. [Section 142A(1)]

The Assessing Officer may make a reference to the Valuation Officer whether or not he is satisfied about the correctness or completeness of the accounts of the assessee. [Section 142A(2)]

Power of Valuation Officer and procedure to make the estimate of the value of the asset, property or investment [Section 142A(3), (4) and (5)]

The Valuation Officer, on a reference being made, shall, for the purpose of estimating the value of the asset, property or investment, have all the powers of section 38A of the Wealth-tax Act, 1957. [Section 142A(3)]

The Valuation Officer shall estimate the value of the asset, property or investment after taking into account the evidence produced by the assessee and any other evidence in his possession gathered, after giving an opportunity of being heard to the assessee. [Section 142A(4)]

If the assessee does not co-operate or comply with the directions of the Valuation Officer, he may, estimate the value of the asset, property or investment to the best of his judgment. [Section 142A(5)]

Time period of submitting valuation report [Section 142A(6)]

The Valuation Officer shall send a copy of the report of the estimate made by him under section 142A(4) and (5) to the Assessing Officer and the assessee within a period of six months from the end of the month in which the reference is made.

Assessing Officer may take such report into account in making assessment or reassessment [Section 142A(7)]

The Assessing Officer on receipt of the report from the Valuation Officer may, after giving the assessee an opportunity of being heard, take into account such report in making the assessment or reassessment.

Consequences of Non-compliance of Section 142(2A)

Failure to get accounts audited as per directions issued under section 142(2A) may result in:

 (a)      Best judgment assessment under section 144;

 (b)     Penalty under section 272A(1)(d) which has been fixed at Rs. 10,000;

(c)      Prosecution under section 276D, if a person wilfully fails to comply with a direction issued to him under 142(2A), he shall be punishable with rigorous imprisonment for a term which may extend to one year and with fine.

Issue of a warrant of authorisation under section 132 for conducting search.

If the assessee proves that the non-compliance with the direction under section 142(2A) was not because of his fault but negligence or refusal of the auditor, then best judgment assessment shall not be made and the proceedings shall be dropped.

It may be noted that opportunity of being heard shall have to be given to assessee before making best judgment assessment and before levying penalty or launching prosecution. If the assessee proves that there was a reasonable course for the failure, for e.g. death in the family, some major illness or negligence on the part of chartered accountant, etc., the Assessing Officer shall not make the best judgment assessment or levy penalty, etc.

Specimen order of reference to the Valuation Officer

Office of the

Dated:……

To

The Valuation Officer

Valuation Cell,

Income tax Department,

………..

Sir,

      Subject :- Valuing the cost of investment in the property belonging to M/s. XYZ...

M/s. XYZ has invested in the construction/renovation of the property as per the details indicated below:—

DETAILS:

1.	Description of the Assets/ property giving exact location with complete address
2.	Name & complete address of the Assessee with Telephone No., if any
3.	Name & complete address & Telephone No. of the C.A/Lawyer or Assessee’s Authorised Representative dealing with the case, if any
4.	Amount declared by the assessee as filed in the return of income for the Assessment year or as admitted during Survey/Search
5.	Estimated cost of investment
6.	Cost estimated by the Registered Valuer if any (copy of the Valuer's Report to be submitted if available)
7.	Whether Valuation of Plant & Machinery is also required or whether a separate reference has been made directly to the Valuation Officer (M&P) or the same is attached with the reference
8.	Period for which Valuation is required
9.	Grounds on which the opinion of the assessing officer is based

 

2          The Assessment is getting time barred on ….. for A.Y…... You are requested to submit the report on or before ….. so that case can be finalised, if any variation is found preferably by ……...

In order to elucidate the correctness of the cost of investment, I require and authorize you under section 142(A) of the Income Tax Act, 1961 to inspect the property and to make such investigation and seek clarification and material from the assessee and other concerned persons as are considered necessary and take such measures as are deemed fit for determining the true and correct cost of investment of the said property.

You are requested to send your Valuation report to me in duplicate urgently and preferably by ……..

Yours faithfully,

Sd/-

Income-tax Officer

……

Clarificatory amendments regarding estimates by Valuation Officer in certain cases [CBDT Circular No. 05/2005, Dated 15.07.2005]

The existing provisions of section 131 provide that the Assessing Officer shall have the same powers as are vested in a Court under the Code of Civil Procedure, 1908, when trying a suit. One such power which has been provided in clause (d) of sub-section (1) of section 131, is the power to issue commissions. Section 75 of CPC and order XXVI of the Schedule thereto lays down the power of ‘issuing commission’, which inter alia, empowers the Court to make a local investigation and also “to hold a scientific, technical and expert investigation”. Using this power, the Assessing Officer has been making a reference to the Valuation Officer for estimating the cost of construction of properties.

The scope of power vested in an Assessing Officer under section 131 to make a reference to the Valuation Officer for estimating the cost of construction of properties has been a subject-matter of litigation.

A new section 142A has been inserted by the Finance (No. 2) Act, 2004 to specifically provide that an Assessing Officer has the power to make a reference to the Valuation Officer for estimating the value of investment, expenditure, etc. This section has been inserted with retrospective effect from 15th November, 1972 to save the cases where such references have been made in the past and are still pending in litigation at one stage or the other.

Sub-section (1) of the new section provides that where an estimate of the value of any investment referred to in section 69 or section 69B or the value of any bullion, jewellery or other valuable article referred to in section 69A or section 69B is required to be made for the purposes of making any assessment or re-assessment, the Assessing Officer may require the Valuation Officer to make an estimate of the same and report to the Assessing Officer.

Sub-section (2) of the new section provides that the Valuation Officer to whom such a reference is made under sub-section (1) shall, for the purpose of dealing with such reference, have all the powers that he has under section 38A of the Wealth-tax Act, 1957.

Sub-section (3) of the new section provides that on receipt of the report from the Valuation Officer, the Assessing Officer may after giving the assessee an opportunity of being heard, take into account such report in making such assessment or re-assessment.

It has been provided in the proviso to the new section that the provisions of the same shall not apply in respect of an assessment made on or before the 30th day of September, 2004 and where such assessment has become final and conclusive on or before that date, except in cases where a reassessment is required to be made in accordance with the provisions of section 153A. This amendment takes effect retrospectively from 15th November, 1972.

Section 142A of the Act was substituted vide Finance (No. 2) Act, 2014 with effect from 01.10.2014. As per the said substitution the reference to section 69, 69B etc …. had been removed and it has made as a general provision stating that Assessing Officer can refer to DVO to estimate the value of any asset, property or investment for the purpose of assessment. The sub section (2) of 142A of the Act states that the Assessing Officer may make a reference to DVO whether or not he is satisfied about correctness or completeness of the accounts of the assessee.

Assessing Officer can not complete assessment without taking into account of valuation report if matter was referred to DVO

Where assessee purchased a property for Rs. 80,82,900/-, whereas guideline value of property fixed by Sub-Registrars’ Office (SRO) was at Rs. 2,83,00,000/-. and Assessing Officer on request of assessee referred valuation of property to Departmental Valuation Officer (DVO), however, DVO had not submitted report even when assessment was getting time barred and Assessing Officer completed assessment and made an addition of Rs. 2,02,17,100/- as per provisions of section 56(2)(vii)(b).

In this case, there is no dispute with regard to the fact that there is a difference in the consideration paid for purchase of a property and the guideline value fixed by the SRO. The Assessee claims to have paid a sum of Rs. 80,82,900/- as consideration; whereas the SRO had fixed the guideline value of the property at Rs.2,83,00,000/-. Thus, there is a difference of Rs.2,02,17,100/-. The contention of the Assessee was that the guideline value fixed by the SRO is not the fair market value of the property and thus, had requested the Assessing Officer to refer the valuation of the property to the DVO. The Assessing Officer as per the request of the Assessee referred the valuation of the property to the DVO. However, the DVO had not submitted the report when the assessment was getting time barred and therefore, the Assessing Officer completed the assessment without waiting for the DVO’s report and had made the additions towards the differential amount as per the provisions of section 56(2)(vii)(b) of the Income-tax Act, 1961.

Once the Assessing Officer has referred the valuation of the property to the DVO, then he ought to have waited for the DVO’s report to ascertain the fair market value of the property for the purchase as per the provisions of section 56(2)(vii)(b) of the Income-tax Act, 1961. Since the Assessing Officer has made the additions without waiting for the DVO’s report, we are of the considered view that the issue needs to be remitted back to the file of the Assessing Officer to reconsider the issue afresh after taking into account the report submitted by the DVO. Hence, we set aside the issue and remit back the matter back to the file of the Assessing Officer and direct the Assessing Officer to redo the assessment and consider the issue in accordance with law after taking into account the valuation report submitted by the DVO. – [Sudalaimani Palanivelrajan v. DCIT (2023) 146 taxmann.com 162 (ITAT Chennai)]

Reference to valuation officer under section 142A can be made to ascertain value of any investment referred to in section 69 or section 69B or value of any bullion, jewellery or any other valuable article referred to in section 69A or section 69B and not for purpose of section 69C inasmuch as there is conspicuous exclusion of section 69C

Assessing Officer had made assessment under section 69C of the Act and he had referred the matter to DVO under section 142A of the Act. The learned DR submitted that merely because there was an error in writing section 69C by the Assessing Officer, would not vitiate the entire proceedings. The Assessing Officer was dealing in substance with the subject matter relating to the investment made by the assessee in immovable property. He submitted that by mistake the Assessing Officer has stated section 69C, that has been correctly construed to be section 69B by the learned CIT(Appeals).

The objection of the assessee regarding erroneous reference to the DVO, it was submitted that the Assessing Officer was not empowered to refer the matter to DVO, where the assessment was being made under section 69C of the Act. There is no dispute with regard to the fact that the Assessing Officer in the assessment order has stated addition regarding unexplained expenditure under section 69C of the Act. The Revenue has not brought on record that mentioning of section 69C was on account of any typographical error. It is also clear from the assessment order that the Assessing Officer had referred the issue of market value of the property in question under section 142A of the Act. However, as per section 142A such reference can be made to ascertain the value of any investment referred to in section 69 or section 69B or the value of any bullion, jewellery or any other valuable article referred to in section 69A or section 69B of the Act. There is conspicuous exclusion of section 69C. In the present case, reference under section 142A was not made regarding ascertaining the correct market value of the investment in property. But, it was in fact for the purpose of ascertaining expenditure which the assessee made on the purchases. I find merit into the contention of the assessee that the reference to DVO under section 142A for the purpose of section 69C is not valid.

Now coming to the question regarding action of the learned CIT(Appeals) to treat the reference under section 142 for the purpose of section 69B, I find merit into the contention of the assessee that there is no power conferred upon the learned CIT(Appeals) to assess a particular item under different provision of the Act what the Assessing Officer had done without giving a specific notice to the assessee regarding such action. The Revenue has not brought any material to suggest that the assessee was put to notice by the learned CIT(Appeals) before taking such action. I am of the considered view that law does not permit for such change of provision of law. As per section 250 of the Act, the learned CIT(Appeals) is empowered to make further inquiry as he thinks fit or may direct the Assessing Officer to make further inquiry and report to the learned CIT(Appeals). As per section 251(1)(a), in appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment, but there is no such power provided by the law that learned CIT(Appeals) could change the provision of law qua the item of which assessment was made. Therefore, in the absence of such power, learned CIT(Appeals) could not have treated the addition made under section 69C as the addition made under section 69B and the same is contrary to the spirit of the Act. Reliance placed by the learned counsel for the assessee on the judgment of the Hon’ble Delhi high Court, rendered in the case of CIT v. Aar Pee Apartments (P) Ltd. (2010) 319 ITR 276 : 188 Taxman 39 (Del.), has held that from the reading of sub-section (1) of section 142A, it is clear that legislature referred to the provisions of sections 69, 69A and 69B but specifically excluded 69C. The principle of casus omissus becomes applicable in a situation like this. What is not included by legislature and rather specifically excluded, cannot be interpreted by the Court through the process of interpretation. The only remedy is to amend the provision. It is not the function of the Court to legislate or to plug the loopholes in the law. In the light of the above binding precedent the action of the learned CIT(Appeals) in treating the addition made by the Assessing Officer u/s 69C as have been made under section 69B is contrary to the law laid down by the Hon'ble Jurisdictional High Court. I, therefore, respectfully following the decision of the Hon'ble Jurisdictional High Court in the case of Aar Pee Apartments (P) Ltd. (supra), the impugned order is therefore set aside. The addition made under section 69C on the basis of the report of the DVO by the Assessing Officer deserves to be deleted. Hence, impugned addition is hereby deleted. Grounds of appeal taken by the assessee are allowed accordingly. [In favour of assessee] (Related Assessment year : 2006-07) – [Toffee Agricultural Farms (P) Ltd. v. ITO (2022) 141 taxmann.com 429 (ITAT Delhi)]

Difference between valuation shown by assessee and estimated by Departmental Valuation Officer was less than 10 per cent, Assessing Officer was not justified in substantiating valuation determined by Departmental Valuation Officer for cost shown by assessee and therefore, addition made by Assessing Officer on account of difference in valuation as determined by DVO and as shown by assessee in its regular books of account was to be deleted

Cost of construction - During course of assessment proceedings, Assessing Officer made addition in hands of assessee on account of difference in valuation relating to cost of construction of showroom as determined by Departmental Valuation Officer (DVO) and as shown by assessee in its regular books of account. However, it was found that assessee asked for benefit of 10 to 15 per cent on account of self-supervision but valuation officer had given a benefit of only 3.75 per cent and even valuation officer applied CPWD rates which were higher than local PWD rates. Valuation Officer ought to have applied local PWD rates. If PWD rates had been applied and benefit at 10 per cent was given for self-supervision, difference between valuation as worked out by DVO and that shown by assessee in books of account would be less than 10 per cent. Therefore, when difference between valuation shown by assessee and estimated by DVO was less than 10 per cent, Assessing Officer was not justified in substantiating valuation determined by DVO for cost shown by assessee. Therefore, addition made by Assessing Officer was to be deleted. [In favour of assessee] (Related Assessment year : 2017-18) – [Smt. Charu Aggarwal v. DCIT (2022) 140 taxmann.com 588 : 96 ITR(T) 66 (ITAT Chandigarh)]

There was huge difference in cost of building between books of account of assessee and valuation report, Assessing Officer ought to have referred matter to DVO for valuation; without referring matter to DVO, Assessing Officer could not consider difference between entries made by assessee and its registered valuer to make addition

Assessee-company had invested in a building and had shown cost of same in depreciation schedule after capitalizing interest on loan. Assessing Officer noted that cost of said building as shown in depreciation schedule was different from amount computed by assessee’s valuer, and thus, made addition of differential amount as unexplained investment under section 69. It was noted that difference in cost of building as shown in assessee’s books of account and as against in valuation report was very huge and thus, Assessing Officer ought to have referred matter to DVO for valuation. To make addition on account of difference in cost of building, Assessing Officer was duty bound to reject books of account of assessee and refer matter to DVO as prescribed under section 142A. Since Assessing Officer failed to make such reference to DVO and made addition based on assessee’s valuer’s report, such impugned addition were liable to be deleted. [In favour of assessee] (Related Assessment year : 2003-04) – [VRL Logistics Ltd. v. ACIT (2022) 140 taxmann.com 69 : 95 ITR(T) 221 (ITAT Bangalore)]

Reference to DVO without rejecting Assessee’s books, invalid; 2014 amendment to Section 142A not retrospective

Bangalore ITAT allows Assessee’s appeal, deletes the disallowance made on account of earth filling and land levelling based on DVO's report as unsustainable since Revenue had accepted Assessee’s books of accounts; Further holds that material collected during the course of survey under Section 133A has no evidentiary value, thus, cannot be a basis for addition; Also holds that the reference made to DVO under Section 142A by Revenue was not justified without rejection of Assessee's books since the amendment introduced by the Finance Act, 2014 is not retrospective in nature; Assessee-Individual, a land developer, was subject to survey under Section 133A, during which the Revenue discovered self-made vouchers of cash payment below Rs.20,000, claimed to be made towards earth filling expenses, however Revenue doubted if such expenses were actually incurred and asked Assessee to  furnish the name and address of the parties to whom the payment has been made; Assessee failed to produce the name and address of the service provider, however furnished the certificate to support the expenditure from one party and supported the claim of expenditure by filing an affidavit; Revenue did not accept the documents filed by Assessee and referred the matter to DVO, whereby the report was obtained after lapse of 2 years of incurring this expenditure, stating that Assessee has incurred an expenditure of Rs. 9.30 Lacs only, towards earth filling and levelling; Accordingly, the Revenue disallowed the expenditure incurred towards earth filling and land levelling expenses of Rs. 6.42 Cr. for Assessment year 2007-08, and on CIT(A)’s direction made the addition of the earth filling and land levelling expenditure incurred in Assessment year 2006-07 of Rs. 7.55 Cr. on a protective basis totalling the disallowance to Rs. 13.88 Cr.; CIT(A) dismissed Assessee’s appeal in limine, on the ground that the Assessee had not paid the taxes in full in respect of the admitted income but ITAT restored the matter to CIT(A) for fresh consideration, pursuant to which CIT(A) held that the claim of earth filling and levelling expenses is only a paper entry with sole purpose of inflating the cost to reduce the profit, thereby evade the tax and sustained the addition of Rs. 13.88 Cr. by allowing a deduction of only Rs. 9.30 Lacs out of total claim of expenditure; On Assessee's appeal, ITAT notes that the Revenue made addition on the basis of DVO’s report, however Assessee’s books of accounts maintained and duly audited under Section 44AB were not rejected; Opines that disallowance of expenditure without rejecting Assessee’s books of accounts is not sustainable especially when the regular books of accounts are maintained with supporting evidence, which are duly audited; Further notes that Assessee failed to produce the service providers to whom the payment was made, as they left the city (Bangalore) after completion of Assessee’s work, since they do not have the permanent address or residence (in Bangalore); Holds that Revenue’s finding that there was no evidence to support the claim of expenditure is erroneous since Assessee had furnished regular books of accounts and supporting vouchers and bills; Points out that the evidences were filed during the course of assessment including the survey report by M/s. Guideline Survey and Assessee’s affidavit, were not examined by the Revenue in accordance with law; Observes that material collected during the course of survey proceedings was the provocation to doubt the expenditure incurred on earth filling and land levelling and reference to DVO to decide the quantum of amount spent on the said expenses; Relies on Supreme Court ruling in Khader Khan v. CIT (2003) 352 ITR 480 : 254 CTR 228 (SC), wherein it was held that the material collected during the course of survey under Section 133A which have no evidential value, cannot be basis for addition; Thus, holds that the addition of expenses incurred towards earth filling is not sustainable, accordingly deletes the addition of Rs. 13.88 Cr by relying on jurisdictional High Court ruling in Sri Ganesh Shipping Agency in ITA No.366/2015 vide order dated 06.02.2021; ITAT notes Assessee’s contention that reference made to DVO under Section 142A is bad in law since  142A does not empower Revenue to make reference to DVO to determine the cost of development works incurred by Assessee; Observes that Section 142A provides that a reference could be made to DVO for making an estimate of the value of investment referred to in section 69, or for the valuation of any bullion, jewellery or other valuable article referred to in section 69 & 69B but it does not empower Revenue to make a reference to the Valuation Officer to estimate the expenditure incurred by Assessee, as provisions of section 69C is not included in section 142A, as it stood at the relevant point of time; Relies on Supreme Court ruling in Amiya Bala Paul v. CIT (2003) 262 ITR 407 : 182 CTR 489 : 30 Taxman 511 (SC), wherein it was held that a Valuation Officer can only have jurisdiction to give a report under the Income-tax Act in terms of the statutory provisions of the Act, i.e. Section 142A; Relies on Supreme Court ruling in Sargam Cinemas v. CIT 262 ITR 513 (SC), wherein it was held that rejection of books of accounts is a pre-condition for making a reference to DVO; Holds that the reference made to DVO under Section 142A by Revenue is not justified, thus the addition of Rs. 13.88 Cr based on DVO’s report cannot be sustained. [In favour of assessee] (Related Assessment year : 2007-08) – [K. Satish Kumar v. Addl. CIT – Date of Judgement : 01.08.2022 (ITAT Bangalore)]

Accepts FMV/actual consideration sans DVO reference, despite Assessee’s request; Distinguishes ​​Ansal Housing​ ruling​​ ​on notional rent

Jaipur ITAT allows Assessee’s appeal on applicability of Section 50C(2), claim for exemption under Section 54F, nature of capital gains from sale of building of a discontinued business and taxability of notional rent; ITAT disagrees with adoption of estimated consideration as sale consideration since Revenue failed to refer the matter to the valuation officer in terms of Section 50C(2), despite Assessee’s specific prayer; Also allows exemption under Section 54F denied by the Revenue where Assessee owned seven house properties in his business which were undisputedly held as stock in trade; Holds Section 50 inapplicable on sale of building from discontinued business which was held by the Assessee as investments; ITAT also factually distinguishes Delhi High Court ruling in Ansal Housing Finance & Leasing Co. Ltd. (2013) 354 ITR 180 (Del.) to delete addition of notional rent, where the property in instant case was old, dilapidated and unfit for habitation; Assessee-Individual sold land and building at Rs.8.81 Cr. (FMV) whereas Revenue adopted SDV of land at Rs. 9.90 Cr. as full value of consideration for the land and retained consideration of the building at Rs. 2.18 Cr.; CIT(A) reduced the value of building at SDV i.e., Rs. 1.28 Cr. while ITAT agrees with Assessee’s contention that Revenue adopting the SDV for the land and actual consideration for the building resulted in the aggregate consideration to be Rs.12.09 Cr. which was higher than the aggregate SDV of the entire property which was Rs.11.19 Cr.; Notes that Assessee’s objection that SDV was higher than the FMV on the date of transfer was ignored by the Revenue in disagreement with valuation report submitted by the Assessee; Opines that if Assessee made an objection for invoking Section 50C(1), the Revenue ought to have referred the matter to the valuation officer to ascertain the market value but without doing so, the Revenue estimated the capital gains by adopting the estimated value, higher than the actual consideration or the fair market value; Relies on the Calcutta High Court ruling in Sunil Kumar Agarwal v. CIT (2015) reported in 372 ITR 83 and the coordinate bench ruling in Smt. Sharda Devi wherein it was observed that if objection is made by the Assessee for the value taken, then the Revenue should comply with the provision of Section 50C; Finds that in the instant case, the Revenue neither discussed Assessee’s contentions for adopting actual consideration as fair market value of the property sold nor referred the matter to the DVO as was required under Section 50C(2) despite Assessee’s specific prayer; Also notes that the lower authorities did not find or allege that Assessee received any excess amount over sale consideration mentioned in the deed, and thus finds no justification in adopting the deemed sale consideration in violation of Section 50C(2); On Section 54F exemption, denied by the Revenue and allowed by the CIT(A), ITAT observes that Assessee owned seven properties in his trading business and reflected as unsold stock in trade, finds that the conditions stipulated under Section 54F were fulfilled, thus, allows the exemption; With respect to Revenue’s treatment of gain from sale of building of discontinued business as short term capital gain in terms of Section 50, ITAT finds Assessee owned land/building which was in business use upto Assessment year 2012-13 and thereafter as investments; Subsequently, Assessee sold the asset and treated it as long term capital asset whereas Revenue held Section 50 to be applicable which was also upheld by the CIT(A); ITAT factually distinguishes the Bombay High Court ruling in Smt. Meena V. Pamnan v. CIT, Bombay on 29 September, 2017. and the Kerela High Court ruling in CIT v. Sakthi Metal Depot reported in (2011) 333 ITR 492 (Ker.) relied on by the Revenue and holds that Section 50 as inapplicable in the instant case; With respect to addition of Rs. 32.28 lakh as notional rent on old and unused property held as stock in trade, which was confirmed by the CIT(A) by relying on the Delhi High Court ruling in Ansal Housing, ITAT finds that the condition of the building was old and dilapidated, unfit for habitation whereas in the aforesaid Delhi High Court ruling, there was a new building, which was ready to use/ habitation; Holds the lower authorities findings based on the above precedent to be devoid of merit and disagrees with the CIT(A)’s order. – [DCIT, Jaipur v. Goverdhan Prasad Singhal [TS-487-ITAT-2022(JPR)] – Date of Judgement : 07.06.2022 (ITAT Jaipur)]

Pursuant to search conducted upon assessee DDIT (Investigation) not being satisfied with value of immovable properties shown by assessee made reference to DVO on 11.07.2014 and on basis of his report made certain addition to income of assessee, in view of fact that DDIT(Inv.) got empowered to make reference to DVO under section 132(9D) only after 01.04.2017 by an amendment by Finance Act, 2017, impugned reference to DVO was unlawful

A search and seizure operation under section 132(1) was conducted at office/residence of assessee on 13.03.2014. Pursuant to search, DDIT (Investigation) made a reference to DVO on 11.07.2014 in respect of valuation of immovable properties held by assessee. DVO furnished valuation report showing value of properties at higher amount than what was shown by assessee. On basis of same, Assessing Officer invoked proceedings under section 153A and passed an assessment order making addition on account of difference in valuation of properties as submitted by DVO. Assessee objected to reference made by DDIT (Investigation) to DVO on ground that only Assessing Officer under section 142A could make reference to DVO for valuation of property and this power was conferred upon DDIT (Investigation) by inserting sub-section (9B) in section 132 on 01.04.2017. It was noted that authorized officer of search DDIT (Investigation)/ADIT (Investigation) was empowered to make reference to Valuation Officer inserted by section 132(9D) only after 01.04.2017 by an amendment by Finance Act, 2017. Therefore, impugned reference to DVO given by DDIT (Investigation) on 11.07.2014 when he did not have power/jurisdiction for same was unlawful. Accordingly, impugned addition made on basis of such valuation report was to be deleted. [In favour of assessee] (Related Assessment year : 2008-09) – [ACIT(C) v. Narula Educational Trust (2021) 189 ITD 31 : 126 taxmann.com 158 : 86 ITR(T) 365 (ITAT Kolkata)]

Power to make reference under section 142A is restricted to matters concerning sections 69, 69A or 69B and since subject matter of examination in said sections is understatement in value of investments acquired during year, reference under section 142A could not have been made for finding out extent of alleged overstatement in value of investment

Assessee sold ancestral land (acquired prior to 01.04.1981) and adopted Fair Market Value (FMV) as on 01.04.1981 as Cost of Acquisition (COA) based on report of Registered Valuer (RV). Assessing Officer made reference to District Valuation Officer (DVO) under section 142A to determine correct value on grounds that purchase documents of ancestral property were not made available. DVO furnished valuation report under section 55A determining value of land at lower figure. Assessing Officer adopted said FMV and enhanced taxable gain. Power to make reference under section 142A is restricted to matters concerning sections 69, 69A or 69B and since subject matter of examination under sections 69, 69A or 69B is understatement in value of investments acquired during year, reference under section 142A could not have been made for finding out extent of alleged overstatement in value of investment. Reference made under section 142A was also unsustainable for another reason that provision of section 142A cannot be invoked without assigning some tangible basis giving rise to doubt on FMV adopted by assessee and Assessing Officer while making reference to DVO had not provided any reasons for doing so except to obtain elucidation on correct value. Section 55A(b)(i) concerns a situation where FMV of assets exceeds value of asset claimed by assessee and since in instant case FMV was sought to be lowered by Assessing Officer than what was claimed by assessee, section 55A could not be applied. [In favour of assessee] (Related Assessment year : 2013-14) – [Chirag Dashrathbhai G. Patel v. DCIT (2020) 182 ITD 327 : 116 taxmann.com 229 (ITAT Ahmedabad)]

Section 142A amendment vide Finance Act 2014, not retrospective; Quashes DVO reference without rejection of books

Bangalore ITAT allows assessee’s appeal for Assessment year 2007-08, holds that amendment in Section 142A cannot be said to have retrospective effect; Assessing Officer had made reference to the DVO without rejecting the books of the assessee, which was challenged by the assessee in view of Supreme Court decision in Sargam Cinemas, wherein it was held that rejection of books of accounts is a pre-condition for making a reference to DVO; Considering the legislative intent of introduction of Section 142A, ITAT notes that pursuant to Supreme Court decision in Sargam Cinemas, the addition made on account of unexplained investments in construction was being deleted, where such criteria was not met; States that the amendment vide Finance Act 2014 was made only to overrule the legal position as interpreted by various High Courts and Supreme Court in the case of Sargam Cinemas; States that The legislature did not make the law retrospective in operation nor were pending proceedings as was done when Section 142A was inserted by the Finance (No. 2) Act, 2004 w.r.e.f. from 15.11.1972. It cannot also be said that Section 142A as inserted by the Finance Act, 2014 has retrospective effect.”, rules that the reference to DVO in the present case is invalid in view of Supreme Court judgement in Sargam Cinemas wherein held that rejection of books of accounts is a pre-condition for making a reference to DVO and there was admittedly no such rejection of books of accounts. [In favour of assessee] (Related Assessment year : 2007-08) – [Shetty Constructions v. ACIT, Kalaburagi [TS-92-ITAT-2020(Bang)] – Date of Judgement : 12.02.2020 (ITAT Bangalore)]

Estimated cost of construction shown in project report submitted to bank for availing loan could not constitute actual cost of construction once assessee had recorded actual cost of construction in books of account and once Assessing Officer was satisfied with cost of fixed assets as shown in balance sheet, it was not mandatory for Assessing Officer to refer valuation to DVO

The assessee-company was engaged in business of hotel. The assessment order was passed under section 143(3) whereby total income was assessed at Nil. The Commissioner found that the order was erroneous and prejudicial to the interest of the revenue. The issue was in respect of investment in construction of hotel building. According to the Commissioner, there was huge difference between investment shown by assessee in its balance sheet and valuation done by surveyor-cum-valuer appointed by bank while granting loan to assessee. The Commissioner was of the view that in such a situation the correct course of action would have been to refer the matter to the Departmental Valuation Officer under section 142A. On appeal, the Tribunal set aside order passed under section 263. On revenue's appeal:

Project report submitted to bank for availing term loan for construction of hotel building could not constitute actual cost of construction once assessee had recorded actual cost of construction in books of account. It was not mandatory for Assessing Officer to refer valuation to DVO once he was satisfied with cost of construction and cost of fixed assets as recorded in books of account. [In favour of assessee] (Related Assessment year : 2013-14) – [PCIT v. Om Rudra Priya Holiday Resort (P) Ltd. (2019) 266 Taxman 97 : 109 taxmann.com 63 (Raj.)]

Quashes Revenue’s action of re-valuing property in ‘search proceedings’ absent ‘seized material’

Delhi High Court upholds ITAT order, deletes additions under section 153A made on the basis of re-valuing  assessee's property sold during Assessment year 2008-09; High Court notes that while the dispute relating to transaction value of property sold by assessee during relevant Assessment year was pending before ITAT, search and seizure proceedings were initiated under section 132 and Assessing Officer made additions by adopting the value of property based on response received from assessee’s bankers under section 133(6); Rejects Revenue's stand that since search and seizure proceedings were conducted, Assessing Officer was justified in going into the matter afresh and derive property value based on replies from assessee's bankers, who held the property as collateral and provided credit to assessee ; High Court notes that Assessing Officer’s order nowhere disclosed what was the fresh document or material seized which made him suspect the valuation of property and ultimately led him to send queries to assessee's banker, rules that absence of any material seized during the search proceeding could not have justified afresh examination of the valuation issue”; Further upholds ITAT order that the valuation by the banker, who provided credit could be different from the valuation report for the transaction given that assessee purchased the property long ago in 1974, also clarifies that observations in this appeal shall not affect the merits of the pending issues.

Assessee had filed its return for Assessment year 2008-09 declaring Rs. 7 lakhs as income and reported sale of its capital asset which was acquired in 1974. Although the assessment was completed, further appeals were pending on behalf of both the parties before the ITAT. Meanwhile, on November 6, 2008, a search and seizure operation was initiated under section 132 in the assessee's premises. The Assessing Officer suspected assessee’s valuation of the property sold during the Assessment year, and accordingly referred the issue to the District Valuation Officer (DVO) under section 142A. The DVO valued the property at Rs. 83.59 lakhs. However, the Assessing Officer based on the replies to the queries received from the assessee's banker determined that the true market value of the property was valued on July 5, 2005, was Rs. 5 crores. The assessee rejected the DVO’s valuation. On appeal, CIT(A) after re-appreciating the entire circumstances, opined that the Assessing Officer was not justified in calculating the considerations on a notional basis. On appeal, ITAT also re-affirmed CIT(A)’s order. Aggrieved Revenue filed an appeal before Delhi High Court. 

High Court noted that evidently, the sale and the consideration received were reported by the assessee in the return filed. The transaction took place on June 29, 2007, and the dispute regarding the transaction value was a matter as yet undetermined. Further, High Court opined that the orders of the adjudicating authorities and the Assessing Officer were unable to substantiate their suspicion on the valuation of property via any fresh document or material seized which could have led him to send queries to the assessee’s banker and also refer the matter to the DVO. High Court re-affirmed ITAT’s order and held that that the valuation by the banker, who provided credit could well be different from the valuation report for the transaction given that the assessee had purchased the property long ago. Thus, High Court commented that the absence of any material seized during the search proceeding could not have justified afresh examination of the valuation issue. No substantial question of law arises”.

Finally, High Court dismissed Revenue’s appeal. However, High Court clarified that the discussion in this appeal shall not be deemed to include the merits of the pending issues in regard to which parties' contentions are kept open.” - [In favour of assessee] (Related Assessment year : 2008-09) – [Anita Rani (2017) 392 ITR 501 : 88 taxmann.com 591 : [TS-83-HC-2017(DEL)] (Del.)]

Assessment had not become final and conclusive because appeal preferred by revenue was pending before High Court, in view of proviso to sub-section (3) of section 142A, a valid reference to DVO could be made

From the order of the Tribunal we find that the Tribunal has even though held that the reference to the Departmental Valuation Officer in question is not valid, in view of the decision of this Court in the Case of Amiya Bala Paul v. CIT (2003) 262 ITR 407 : 130 Taxman 511, but it has also held that it is settled principle of law that in place of Central Public Works Department rates local Public Works Department rates are to be applied and adopted to determine the cost of construction. In view of the fact that Section 142A was inserted by Finance (No. 2) Act, 2004 with retrospective effect from 15.11.1972 and subsequently again substituted by Finance Act, 2010 with effect from 01.07.2010 and Finance (No.2) Act with effect from 01.10.2014, as the proviso to sub-section (3) of Section 142A as it existed during the relevant period, reference to the Departmental Valuation Officer can be made because assessment in the present case had not become final and conclusive because the appeal preferred by the Revenue under section 260A of the Income Tax Act, 1961 was pending before the Rajasthan High Court. However, in view of the finding recorded by the Tribunal that the local Public Works Department rates are to be applied and adopted in place of Central Public Works Department rates, we do not find any good ground to interfere in the impugned judgment on this issue on merits. The appeal fails and is dismissed. In favour of revenue] – [CIT, Ajmer v. Sunita Mansingha (2017) 393 ITR 121 : 295 CTR 590 : 247 Taxman 93 : 80 taxmann.com 258 (SC)]

Assessee filed writ petition challenging power of Assessing Officer to obtain report of DVO for computing capital gain arising from sale of land on ground that same had been assessed on basis of Jantri rates prevailing at time of sale, since those Jantri rates had not been revised for a long time, petition filed by assessee was to be dismissed

During relevant year, assessee sold three pieces of agricultural lands situated in different villages. While scrutinizing such assessment, Assessing Officer desired to obtain valuation of such properties, for which purpose he made a reference to DVO under section 50C(2). Assessee raised a plea that capital gain could not be computed on basis of report of DVO as same had been assessed on basis of Jantri rates prevailing at time of sale. It was noted that Jantri rates had not been revised for a long time. Moreover, in terms of section 142A Assessing Officer had power to obtain valuation reports even in context of issues other than that of capital gains computation. In view of aforesaid, writ petition filed by assessee was to be dismissed. [In favour of revenue] (Related Assessment year : 2008-09) – [Kanaiyalal Dhansukhlal Sopariwala v. District Valuation Officer (2017) 391 ITR 56 : (2016) 243 Taxman 378 : 75 taxmann.com 271 [Guj.)]

Assessing Officer cannot make addition to assessee’s income merely based upon DVO’s report in absence of any corroborative material to point out under valuation of property in question

Section 69, read with section 142A of the Income-tax Act, 1961 - Unexplained investment (Immovable property) - In course of search proceedings carried out in case of assessee, Assessing Officer found that he had purchased a residential house - In response to notice issued, assessee submitted that he had purchased said property for a total consideration of Rs. 62.32 lakhs. Assessing Officer referred property for purpose of valuation to DVO, who estimated investment at Rs. 1.57 crore. Assessing Officer, accordingly, worked out difference and made addition to assessee’s income. Assessing Officer cannot make addition to assessee’s income merely based upon DVO’s report in absence of any corroborative material to point out under valuation of property. Since there was no evidence on record that assessee had made any further investment after purchase of property in question, impugned addition was to be set aside. [In favour of assessee] (Related Assessment year : 2013-14) – [Raj Kumar Mittal v. ITO (2017) 87 taxmann.com 344 (ITAT Agra)]

A report of DVO itself was invalid if it travelled beyond reference period and, thus, reassessment sought on basis of such report, was invalid

Assessee had started construction of a hotel. Assessing Officer had made a reference to Departmental Valuation Officer for his opinion on cost of construction for period 20.09.2005 to 31.03.2006. However, DVO estimated cost of construction of building for period from 01.04.2004 to 01.07.2005. Assessing Officer on basis of such report, sought to reopen assessment. Report of DVO itself was invalid as it travelled beyond reference period and, consequently, reassessment was to be set aside. [In favour of assessee] (Related Assessment year : 2005-06) – [Jagdish P. Bhatt v. ITO (2017) 83 taxmann.com 98 (Guj.)]

Deletes notional profit addition on property sale, quashes reference to DVO

Chandigarh ITAT deletes notional profit addition on sale of property constituting assessee’s 'stock-in-trade' for Assessing Officer 2010-11, holds that reference to the Valuation Officer (‘DVO’) was illegal, being made under general provision under section 131(1)(d); During relevant Assessment year, assessee-individual claimed 'business loss' on account of sale of property, however, Assessing Officer issued commission under section 131(1)(d) to DVO to determine the fair market value ('FMV') of the property, and accordingly substituted the sale-price with FMV and computed profits on sale of property; ITAT cites Supreme Court ruling in Amiya Bala Paul to hold that Assessing Officer is empowered to refer the matter for valuation only where specific powers are contained in the Act, accepts assessee's stand that reference under section 131(1)(d), being a general power could not have been made; Further holds that even assuming that reference was made under section 142A (prevailing at the relevant time), it could have been made only for the purpose of determining cost of construction and not sale value of the property, relies on Delhi ITAT ruling in Namita Singh and memorandum explaining the reasons and objects for inserting Section 142A; Also, ITAT observes that Assessing Officer merely relied on DVO valuation and did not produce any other evidence to prove that assessee earned more than the stated consideration, moreover, notes that the specific provision for substituting sale consideration of immovable property held as stock-in- trade was brought on the Statute only w.e. f. April 1, 2014 by inserting Section 43CA: [In favour of assessee] (Related Assessment year : 2010-11) – [Sumit Aggarwal v. ACIT, Ludhiana [TS-255-ITAT-2017(CHANDI)]– Date of Judgement : 03.04. 2017 (ITAT Chandigarh)]

Matter can be referred to Valuation Officer under section 142A only during pendency of assessment or reassessment proceedings and not afterwards

The assessee was a partnership firm. It had purchased a property for a hospital jointly with a HUF. The assessee declared cost of property in the return at Rs. 83.87 lakhs. The Assessing Officer passed an order requesting the Valuation Officer to calculate the correctness of the cost of investment and authorized the said officer under section 142A to inspect the property and make such investigation as considered necessary. The assessee filed instant petition contending that the Assessing Officer had no reason to call for the valuation and the Valuer’s report was called for only by way of fishing inquiry, which was not permissible.

Held : Initial starting point for triggering a reference to the Valuer, therefore, has to be invocation of section 69, 69A or 69B. It is only when any of these provisions come into play that the Assessing Officer can resort to section 142A for estimating the value of such investment or expenditure. Sequence cannot be put in the reverse. In other words, the Assessing Officer would have no authority to call for the report of the Valuer under section 142A to judge whether there has been any unexplained investment or expenditure as referred to in sections 69, 69A and 69B. It would only amount to fishing inquiry and not investigation under section 142A.

The scheme of the provisions when read harmoniously would lead to a situation where in case the Assessing Officer, during the pendency of assessment or reassessment, is of the opinion that sections 69, 69A and 69B can be invoked; in order to estimate such unexplained investment or expenditure in acquisition of bullion, jewellery or valuable article, he can resort to valuation by the Valuation Officer in terms of sub-section (1) of section 142A. In the present case, no such material emerges from the record.

To the contrary, neither from the order of reference nor from any other material, the respondent could point out that the Assessing Officer had invoked the provisions of section 69, 69A or 69B and in the process desired to obtain the estimate of unexplained investment or expenditure and for which purpose DVO’s report was called. He simply gave no reasons in the order. No independent reasons, either flowing from the file or even in the form of an affidavit assuming the same would be permissible, are brought on record.

Thus, quite apart from the assessee’s grievance that the Assessing Officer merely acted under the directives of the superior and did not, on his own application of mind, desire to call for the report, in absence of any valid reasons for making a reference, the order must fail. [In favour of assessee] (Related Assessment year : 2002-03) – [Me & Mummy Hospital v. ACIT (2014) 224 Taxman 65 : 272 CTR 1 : 45 taxmann.com 248 (Guj.)]

Matter cannot be referred to Valuation Officer under section 142A by Assessing Officer without rejecting books of account

Assessee owned a petrol pump and made investment towards construction of petrol pump and same was duly recorded in books of account under the head ‘Building account’, ‘Plant and Machinery account’ and 'Furniture and Fixture account'. Assessing Officer referred matter to Assistant Valuation Officer whereby addition had been made. The Assistant Valuation Officer vide his report dated 21.11.2007 estimated the valuation of the Petrol pump building on the basis of which the Assessing Officer made an addition of an amount of Rs. 5,84,586/-. The CIT(A) allowed the appeal. Not satisfied with the order, the revenue filed appeal before the Tribunal who partly allowed the appeal whereby addition of Rs. 5,79,586/- made by the Assessing Officer as unexplained investment under Section 69 of the Act was sustained. Hence the present appeal by the assessee.

Held : It was not disputed by the learned counsel for the revenue that the books of account produced by the assessee were never rejected. The Apex Court in Sargam Cinema v. CIT (2010) 328 ITR 513 ; (2011) 197 Taxman 203 (SC) held that the assessing authority could not have referred the matter to the DVO when there was no rejection of books of account maintained by the assessee. It was observed as under:-

“In the present case, we find that the Tribunal decided the matter rightly in favour of the assessee inasmuch as the Tribunal came to the conclusion that the assessing authority could not have referred the matter to the Departmental Valuation Officer (DVO) without the books of account being rejected. In the present case, a categorical finding is recorded by the Tribunal that the books were never rejected. This aspect has not been considered by the High Court. In the circumstances, reliance placed on the report of the DVO was misconceived.”

Similar view was taken in CIT v. Chohan Resorts (2013) 33 taxmann.com 644 (P&H), Goodluck Automobiles (P) Ltd. v. ACIT (2012) 210 Taxman 183 : 26 taxmann.com 254 and CIT v. Lucknow Public Educational Society (2011) 339 ITR 588 : 199 Taxman 151 : 10 taxmann.com 260 (All.).  In view of the above, where Assessing Officer referred matter to valuation officer without rejecting books of account or referring to any material/evidence/information on basis of which it could be said that investment reflected by assessee was understated or suppressed, reference was not justified the substantial questions of law are answered in favour of the assessee and against the revenue. Accordingly, the appeal is allowed. [In favour of assessee] (Related Assessment year : 2005-06) – [Nirpal Singh v. CIT, Jalandhar (2013) 359 ITR 398 : (2014) 220 Taxman 152 : 41 taxmann.com 23 (P&H)]

Assessing Officer has power under section 142A to take up issue of valuation of investment in assessee’s plant for a reassessment, if necessary

The assessee challenged the notice under section 142A issued by the Assessing Officer after completion of assessment on the ground that while passing the assessment order, the Assessing Officer neither referred to nor expressed any doubt about the valuation of its plant and, in fact he also accepted certain vouchers and other documents filed by it showing investments in the plant. It was, therefore, contended that section 142A was not applicable to once again probe into the valuation of the assessee’s plant or the investment made on it. The Assessing Officer, in counter affidavit, submitted that despite reminders the assessee did not produce the bills and vouchers necessary for correctly estimating the value of the investments in the plant and went on postponing the matter and as the time limit for completion of assessment was about to expire, he passed the assessment order without touching the valuation of the civil works including the plant.

Held that the circumstance of the case would show that the Assessing Officer did not go into valuation of the plant in the aforesaid assessment order and his plea was that since there was no full information, he refrained from going into the same. In such a situation, he claimed that he took up the issue of valuation of the plant and called for particulars from the Valuation Officer also apart from issuing other communications to the assessee for full information relating to valuation to take up reassessment if necessary and the Assessing Officer was within his power to do so under section 142A.

An Assessing authority under the Act is also given inquisitorial powers while making assessment or reassessment. Thus, it could not be said that the Assessing Officer had accepted the valuation given by the assessee in his books of account and the other bills and vouchers filed by him with regard to its plant and its other civil works in the previous assessment proceedings. It, therefore, followed that the Assessing Officer was well within his power under section 142A to take up issue of valuation of or investment in assessee plant for a reassessment if necessary. [In favour of revenue] (Related Assessment year : 2009-10) – [Bharathi Cement Corporation (P) Ltd. v. CIT (2012) 253 CTR 98 : (2013) 33 taxmann.com 643 (AP]

Where no assessment proceedings are pending, Assessing Officer has no jurisdiction to refer any property for valuation to the DVO

Ahmedabad ITAT held that section 142A empowers the Assessing Officer to require the Valuation Officer for making the estimate of value of any asset provided the Assessing Officer required the same for purpose of making the assessment or reassessment. This provision does not empower the Assessing Officer to refer the matter to the DVO for gathering information for reopening of assessment. When the process of reopening of assessment ends and the assessment is validly reopened, thereafter the process of making the assessment starts. It was therefore held that even after insertion of section 142A, the Assessing Officer should have reason to believe that any income chargeable to tax has escaped assessment as provided under section 147 and thereafter only the notice for reassessment can be issued under section 148.

It was observed that even after insertion of section 142A there is no amendment in the language of section 147 therefore the condition prescribed under section 147 for reopening of assessment still exists. Accordingly, the Tribunal held that notices issued under section 148 were not in accordance with law, the same were quashed and consequently the assessments completed in pursuance to the notices under section 148 were quashed. – [CIT v. Umiya Co-Op. Housing Society Ltd. (2009) 314 ITR 272 (Guj.)]