Estimation of value of assets by Valuation Officer [Section 142A of the Income Tax Act, 1961]

Section 142A of the Income Tax Act, 1961 was initially inserted by the Finance (No. 2) Act, 2004, with retrospective effect from 15.11.1972. It was amended by Finance Act, 2010 with effect from 01.07.2010. It was further amended by Finance (No. 2) Act, 2014 with effect from 01.10.2014.

Section 142A as it existed at the time of amendment on 01.07.2010

The Section 142A as it existed at the time of amendment on 01.07.2010 provided that: 

“For the purposes of making 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 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”.

After the amendment on 01.10.2014

After the amendment on 01.10.2014, it is provided that 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 and such reference can be made to the Valuation Officer under sub-section (1) whether or not the Assessing Officer is satisfied about the correctness or completeness of the accounts of the assessee.

Text of Section 142A of the Income Tax Act, 1961

^[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, section 142A, as inserted by the Finance (No. 2) Act, 2004, with effect from 15.11.1972 and amended by the Finance Act, 2010, with effect from 01.07.2010, read as under :

‘142A. Estimate by Valuation Officer in certain cases. –

(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 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).’

Scope of reference under section 142A of the Income Tax Act, 1961

An idea about scope of section 142A may be drawn from the judgement of Hon’ble Apex Court in Smt. Amiya Bala Paul's case (supra). Hon'ble Apex Court in that case held that no reference u/s. 55A can be made for determination of cost of construction. In order to overcome the absence of enabling power to make reference for determination of cost of construction or investment in the Act, section 142A was inserted by Finance (No. 2) Act 2004. The Memorandum explained the provision as under:

“ESTIMATES BY VALUATION OFFICER IN CERTAIN CASES:

For determining the cost of construction of properties, an Assessing Officer has been taking the assistance of a Valuation Officer by exercising his power vested in him under section 131 of the Income-tax Act which provides 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 is of “issuing commission” provided under clause (d) of sub-section (1) of the said section which inter alia empowers the court “to make a local investigation” and also “to hold a scientific, technical or expert investigation”. The authority of Valuation Officer was created under the Wealth-tax Act by Taxation Laws (Amendment) Act, 1972 with effect from 15.11.1972. The scope of power under section 131 vested in an Assessing Officer to make a reference to the Valuation Officer for estimating the cost of construction of properties has been a matter of different legal interpretations.

With a view to remove any doubt in this regard, it is proposed to insert a new section 142A, with retrospective effect from 15.11.1972, so as to clarify that Assessing Officer has and always had the power to make a reference to the Valuation Officer.

Sub-section (1) of proposed 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 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 proposed 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 proposed 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 reassessment.”

Thus, there was a clear intention of the Legislature to insert the provision of section 142A for the purposes of determination of cost of construction and value of other investments referred to in section 69 or 69B. Since enabling power for making reference for the purposes of computing capital gains was already existing under section 55A as clarified by Hon’ble Apex Court in the case of Smt. Amiya Bala Paul v. CIT, Shillong  (2003) 130 Taxman 511 (SC), such power could not be deemed to be further provided in section 142A. Thus, clear dividing line is made for references under section 55A and 142A, the former being confined to Chapter IV-E and the latter in respect of other matters covered under sectionss 69, 69A and 69B.  

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

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

Extension of limitation for completing assessment/ reassessment is available, if correct legal reference is made under section 142A only [clause (v) of Explanation 1 to section 153]

Extension of limitation for completing assessment/reassessment is provided by clause (v) of Explanation 1 to section 153 only when correct legal reference to valuation is made under section 142A. Clause (v) of Explanation 1 reads as under -

Text of clause (v) of Explanation 1 to section 153

Explanation 1. - For the purposes of this section, in computing the period of limitation -

Xxxx

Xxxx

(v) the period commencing from the date on which the Assessing Officer makes a reference to the Valuation Officer under sub-section (1) of section 142A and ending with the date on which the report of the Valuation Officer is received by the Assessing Officer;

Shall be excluded.

CBDT Circular explains amendments carried out by Finance (No. 2) Act, 2014 whereby provisions of Section 142A of the Act was substituted with effect from 01.10.2014 [Circular No. 1/2015 dated 21.01.2015]

The Circular reads as under:-

43. Estimate of value of assets by Valuation Officer and time limit for completion of assessments where reference made

43.1 The provisions contained in section 142A of the Income-tax Act, before its amendment by the Act, provided that the Assessing Officer may, for the purpose of making an assessment or reassessment, require the Valuation Officer to make an estimate of the value of any investment, any bullion, jewellery or fair market value of any property. On receipt of the report of the Valuation Officer, the Assessing Officer may after giving the assessee an opportunity of being heard take into account such report for the purposes of assessment or reassessment.

43.2 Section 142A of the Income-tax Act does not envisage rejection of books of account as a pre-condition for reference to the Valuation Officer for estimation of the value of any investment or property. Further, the said section 142A does not provide for any time limit for furnishing of the report by the Valuation Officer.

43.3 Accordingly, section 142A has been substituted so as to provide that the Assessing Officer may, for the purposes of assessment or reassessment, require the assistance of a Valuation Officer to estimate the value, including fair market value, of any asset, property or investment and submit the report to him. 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. The Valuation Officer, 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. The Valuation Officer is required to 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 or gathered, after giving an opportunity of being heard to the assessee. 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.

43.4 It has also been provided that the Valuation Officer shall send a copy of his estimate 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. 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 the assessment or reassessment.

43.5 Sections 153 and 153B of the Income-tax Act have also been amended to provide that the time period beginning with the date on which the reference is made to the Valuation Officer and ending with the date on which his report is received by the Assessing Officer shall be excluded from the time limit provided under the aforesaid section for completion of assessment or reassessment.

43.6 Applicability:- These amendments take effect from 1st October, 2014.

Assessing Officer is empowered to make a reference to DVO, however, stage for making reference is after rejection of books of account

Section 142A empowers Assessing Officer to make a reference to DVO, however, stage for making reference is after rejection of books of account. Where essential facts with respect to making of reference to DVO had not been dealt by Tribunal, order of Tribunal was to be set aside and matter was to be remitted to Tribunal to determine if books of account of assessee had been rejected before reference was made to DVO. [Matter remanded] (Related Assessment year : 1997-98) – [Kay Flames (P) Ltd. v. CIT (2024) 162 taxmann.com 349 (All.)]

Assessing Officer cannot refer matter to DVO without first rejecting books of account

Assessee filed its return of income for relevant year which was supported by its audited books of account - Assessing Officer without rejecting books of account proceeded to make reference under section 142A to Departmental Valuation Officer (DVO) and on strength of estimation made by DVO in his report, Assessing Officer proceeded to reject books of account and make best judgment assessment of investment made by assessee, as disclosed by DVO. Since Assessing Officer cannot refer matter to DVO without first rejecting books of account, impugned order passed by Assessing Officer was to be set aside. [In favour of assessee] (Related Assessment year : 2004-05 – [PCIT v. Parmarth Iron (P) Ltd. (2024) 161 taxmann.com 709 (All.)]

Report of DVO was prepared, completed and furnished by DVO to department beyond stipulated time provided in section 142A(vi), same was against mandate of law and, therefore revisionary proceedings initiated under section 263 based upon such report were illegal/bad in law and consequently unsustainable

Assessee was a partnership firm deriving income from real estate business. The Assessing Officer observed that the assessee has raised certain observations regarding valuation of Work-in-Progress (WIP), which had been kept on record. A reference under section 142A(1) was made to the Departmental Valuation Officer (DVO) for elucidation of valuation of immovable property for assessment, with a request to submit the report in 45 days. Subsequently, the Principal Commissioner observed that the issue pertaining to discrepancies found in WIP in respect of the assessee were left open by the Assessing Officer to be decided after the receipt of the report of DVO. From the case records, he further gathered that on receipt of the DVO’s report dated 24.12.2020, there was a huge difference in valuation as per books and DVO’s report as on dated of survey. And, finally, he invoking the provisions of Explanation 2 of section 263 had set aside the assessment order passed under section 143(3) by the Assessing Officer considering the same as erroneous insofar as it is prejudicial to the interest of the revenue. On the assessee's appeal to the Tribunal:

Held : In the instant case the controversy raised by the assessee was with respect to initiation of revisionary proceedings under section 263 based on the DVO’s report called for under the provisions of section 142A(1) by the Assessing Officer, which was received after the culmination of the assessment.

It was observed that certain admitted facts of the case are that the PCIT has not dealt with the objections raised by the assessee regarding anomalies in the report of the DVO, which was the sole basis for invoking and initiating the proceedings under section 263. Moreover, as per sub-section (4) of section 142A, it was incumbent upon the Valuation Officer to "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, apparently no such opportunity was provided to the assessee. Further as per sub-section (6) of section 142A. “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)”, in instant case the report of the DVO was send to department way beyond the stipulated time period which shows complete violation of provisions of section 142A. Under such circumstances the report of DVO being barred by limitation should be categorized as non est, thus, cannot be the basis for revisionary proceedings under section 263.

The co-ordinate bench of the Tribunal in the case of Zulfi Revdjee v. ACIT in [IT Appeal No. 2415 (HYD) 2018, order dated 05.09.2019, wherein the tribunal has held that the report of the Valuation Officer has to be filed within the time given under section 142A(vi) and therefore, the assessment order passed on the basis of such report of Valuation Officer beyond the time limit is not sustainable.

Following the aforesaid decision of Tribunal, in absence of any contrary information or decision by the revenue to counter these observations, it is to be held that the non-disposal of the objections of the assessee on DVO’s report by the Principal Commissioner in revisionary proceedings against the principle of natural justice, though set aside to Assessing Officer for opportunity to assessee, however the report of DVO was prepared, completed and furnished by the DVO to the department beyond the stipulated time provided in section 142A(vi), thus the same is against the mandate of law and literal interpretation of provisions of section 142A, therefore the revisionary proceedings initiated under section 263 based such report are unjustified as well as against the intent of law and, thus, the same is illegal/bad in law, consequently unsustainable. [In favour of assessee] (Related Assessment year : 2017-18) – [Shree Krishna Colonisers (2024) 159 taxmann.com 247 (ITAT Raipur)]

 

Assessee not liable for DVO’s lapse on delay in report submission; Stamp duty valuation indicative of price

Cuttack ITAT observes that the Assessee should not be held liable on account of DVO’s failure to submit the report within the stipulate period; Further holds that the valuation ascertained by stamp authority is indicative of the price computed for charging stamp duty, and cannot be considered for charging capital gains, and therefore the consideration received by the Assessee in terms of registered sale deed should be taken for computing capital gains; In the present case, Assessee sold land for through ten sale deeds separately executed, and offered long term capital gains of Rs 5.60 Lakhs; Assessing Officer observed that the valuation of the property was made at Rs 1.15 Cr by stamp valuation authority, that was contested by the Assessee; Consequently a reference was made to the District Valuation Officer (DVO), but due to delay by DVO in issuing report, Assessing Officer substituted the sale consideration with the valuation adopted by the stamp authority; Tribunal observes that reference to the DVO was duly made in accordance to provisions outlined in Section 50C, but no report was tendered/received, and therefore the Assessee cannot be held liable for the inordinate delay which is solely attributable to the DVO; Notes that Section 50C and 55A are special provisions drawn within the statute for determination of fair market value of capital asset for computing capital gains, whereas Section 142A are general provisions for estimation of value of asset/property or investment for purposes of assessment/reassessment; Outlines that as Sections 50C and 55A are special provisions, the maxim ‘Generalia specialibus non derogant’ i.e., special provision prevail over general provision applies, and therefore reference to DVO can only be made under Section 50C and Section 55A and not under Section 142A; Highlights that on perusal of Sections 43CA, 50C, 55A and 142A, it is clearly evident that except Section 142A no statutory time limit for submission of valuation report has been drawn in any other sections; Emphasizes that even though Section 142A is not a special provision, for purpose on limitation for submission of valuation of report, time limit drawn in Section 142A(6) could be considered as a guiding factor in other sections where reference is made to DVO; However, asserts that this can be done only in special circumstances where the submission of the report has been delayed by the DVO for indefinite time period; Adopts view laid down in the decision of Zulfi Revdjee v. ACIT (2019) 75 ITR(T) 219 (ITAT Hyderabad) to observe that any report submitted after inordinate delay should be held as time barred, and no cognizance of the same should be taken even where reference is made under Section 50C; ITAT opines the Assessee should not be punished for the lapses on the part of the DVO even after expiry of such a long period; Rejects Revenue’s submission and articulates that DVO is guilty for breach of law for failing to submit the said report within the stipulated period, and the Revenue should not receive consideration for enhancing the limitation period by leaving the assessment open for indefinite period; Further states that where the Assessing Officer is allowed to modify the order after receipt of report from DVO, which is otherwise barred by limitation such consideration would not only reward the Revenue with enhanced limitation but embolden unscrupulous tax officials to manipulate orders or mistreat the Assessee; Thus allows Assessee’s appeal. [In favour of assesse] (Related Assessment year : 2018-2019) - [Lalit Kumar Jalan v. ITO [TS-788-ITAT-2024(CTK)] – Date of Judgement : 17.10.2024 (ITAT Cuttack)]

Reference to DVO for roving enquiries without rejecting Assessee’s books not valid; Deletes addition under section 69

Assessee, engaged in the business of building and developing filed its return of income for Assessment year 2011-12 and 2012-13 declaring Nil. Revenue, during the course of assessment, referred the matter to Departmental Valuation Officer (DVO) to determine the exact cost of construction undertaken by the Assessee, however the DVO report was received by the Revenue only after the assessment proceeding was completed. Subsequently, Assessee was subject to reassessment notice and rejected Assessee’s books of account under Section 145(3) and accepted the cost of construction estimated by the DVO; Revenue, accordingly made addition of Rs. 2.45 Cr and Rs. 3.78 Cr, Assessment years 2011-12 and 2012-13 respectively, being the difference between cost of construction declared by the Assessee and cost of construction estimated by the DVO, as unexplained investments. CIT(A) held that the Revenue failed to reject the books of account of the Assessee for Assessment year 2013-14, before making reference to the DVO for verifying the cost incurred for the project undertaken by the Assessee and therefore no addition can be made on the basis of difference of cost of construction between the amounts declared by the Assessee in the books and that determined in DVO’s report and deleted the impugned addition. Aggrieved, Revenue preferred the present appeal.

Pune ITAT dismisses Revenue’s appeal for Assessment years 2011-12 and 2012-13 and confirms deletion of Rs. 2.45 Cr and Rs. 3.78 Cr, respectively made towards the difference between cost of construction declared by the Assessee and cost of construction estimated by the DVO, as unexplained investments under Section 69; ITAT observes that as per Section 69 it is sine-qua-non that the assessee must have made investments which are not recorded in the books of account; Points out that it must be proved by the Revenue first that the Assessee has made investment outside the books, then only the burden shifts upon the Assessee to prove the source of investments; Further points out that if it is not so proved, the Assessee cannot be called upon to prove the source of such hypothetical investments; On perusal of the reassessment order, ITAT observes that except for relying on the DVO’s report, nothing has been brought on record to indicate that the Assessee made investments in a project over and above that declared in the regularly maintained books of account; Rejects Revenue’s contention that satisfaction of the Revenue as to the correctness or completeness of the books of account is not necessary for making reference to the DVO as the said submission is based on the amended provision of Section 142A applicable with effect from 01.10.2014, and the said amendment is not applicable for the relevant Assessment years 2011-12 and 2012-13, as amended provision is applicable prospectively; Relies on Supreme Court judgment in Sargam Cinema v. CIT (2010) 328 ITR 513 (SC), wherein it was held that the Revenue cannot refer the matter to the DVO without the books of account being rejected, thus concurs with CIT(A)’s finding that the Revenue cannot make a reference to DVO under Section 142A for making roving and fishing enquiries; ITAT, on verification of books of account produced by the Assessee, finds that the same are duly supported by the bills/vouchers to prove the cost of construction declared in the books of account, thus no defects could be found so as to reject the books of account under Section 145(3); Thus holds that the impugned additions to be not sustainable. [In favour of assesse] (Related Assessment years : 2011-12 & 2012-13) - [ITO, Aurangabad v. Royal Estates [TS-561-ITAT-2024(PUN)] – Date of Judgement : 22.07.2024 (ITAT Pune)]

Assessee purchased a ready built house, provisions of section 142A were not attracted

Assessee purchased a ready built house - Assessing Officer invoking provisions of section 142A and made a reference to District Valuation Officer (DVO) for estimating value of house purchased by assesse. Assessing Officer further based on report of DVO made addition to income of assessee as unexplained income under section 69. Commissioner (Appeals) held that provisions of section 142A were applicable in instant case. Provisions of section 142A are applicable only when assessee had made investment in construction and as assessee purchased a ready built house, provisions of section 142A were not attracted. Reference to DVO was not valid and consequently addition made to assessee’s income could not be sustained. [In favour of assessee] (Related Assessment year : 2014-15) – [Ananthakrishna Vasudev Aithal v. ITO (2023) 147 taxmann.com 376 (ITAT Bangalore)]

Reference to DVO under section 142A cannot be made for ascertaining expenditure which assessee made on purchases of land

Assessee filed return declaring nil income. The case was selected for scrutiny and a notice was issued under section 143(2). The Assessing Officer noticed that purchased two tracts of land, thus he referred matter to the valuation officer (DVO). DVO estimated the value of the land is less than 10% of the value adopted by the Stamp Valuation Authority. Assessing Officer proceeded to treat the difference as unexplained expenditure under section 69C. On appeal, the CIT(A) upheld the action of Assessing Officer. Aggrieved-assessee filed the instant appeal before the Delhi Tribunal.

 

Held : The Delhi Tribunal held that there is no dispute with regard to the fact that Assessing Officer in the assessment order had stated an addition regarding unexplained expenditure under section 69C. Assessing Officer had not brought on record that the mentioning of section 69C was on account of any typographical error.

 

It was also clear from the assessment order that the Assessing Officer had referred to the issue of the market value of the property in question under section 142A. 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, jewelry or any other valuable article referred to in section 69A or section 69B. There was the 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 to ascertain the expenditure that the assessee made on the purchases. Thus, the reference to DVO under section 142A for section 69C is not valid. [In favour of assessee] (Related Assessment year : 2006-07) – [Toffee Agricultural Farms (P) Ltd. v. ITO (2022) 141 taxmann.com 429 (ITAT Delhi)]

 

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) - [Dashrathbhai G. Patel v. DCIT (2020) 182 ITD 327 : 116 taxmann.com 229 (ITAT Ahmedabad)]

 

Assessee filed instant petition contending that report of DVO was finalized without following requirements of hearing to be granted to assessee in terms of sub-section (4) of section 142A - Provisions of sub-section (7) of section 142A enjoin a duty on Assessing Officer to hear assessee on report of DVO before he can act upon same - Therefore, at said stage, assessee would get ample opportunity to contest report on all grounds including on ground that reasonable opportunity of hearing as envisaged under sub-section (4) of section 142A was not granted - Therefore, there being no merit in instant petition, same was to be dismissed

The petitioner, an individual, has primarily prayed for a direction to be heard before the valuation report is finalized by respondent No. 2 - District Valuation Officer (“the DVO” for short). At the outset, learned counsel for the petitioner stated that though the petitioner has made the additional prayer for setting aside the notice for reopening of assessment, the same is not pressed in this petition, of course, keeping all the contentions of the petitioners open which may be raised at the appropriate stage.

 

The petitioner’s sole prayer pressed before us as noted above, arises out of the petitioner's objection to a report of the valuation by the DVO dated 23.07.2018 which concerns four immovable properties. The contention of the petitioner is that this report was finalized without following the requirements of hearing to be granted to the petitioner in terms of sub-section 4 of Section 142A of the Income-Tax Act, 1961.

Learned counsel for the petitioner submitted that if the petitioner was granted reasonable opportunity of hearing, the petitioner would have been in a position to produce materials on record pointing out that the valuation of the properties in question is far below what the DVO wanted to adopt. He further submitted that some of the properties covered under the report did not even belong to the petitioner.

 

Having heard the learned counsel for the parties and having perused the documents on record, we are not inclined to interfere at this intermediary stage when the Assessing Officer has yet to pass any final order of assessment. It is always open for the petitioner to contest the contents of the report before the Assessing Officer. As is clear from sub-section 7 of Section 142A of the Act, this provision provides that 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. Thus, even this provision enjoins a duty on the Assessing Officer to hear the assessee on the report of the DVO before he can act upon the same. At this stage, the petitioner would have ample opportunity to contest the report on all grounds including on the ground that reasonable opportunity of hearing as envisaged under sub-section 4 of Section 142A of the Act was not granted. We have not examined the validity of this contention. This observation would not limit the petitioner's objection only to this limited issue and would enable the petitioner to raise all objections on substance as well as contents of the report. At the stage where the assessment is not yet made, we do not find it appropriate to interference. With these observations, the petitions are disposed of. – [Pratap Vitthal Bandal v. Union of India (2020) 116 taxmann.com 919 (Bom.)]

 

Where reference under section 142A was made for determination of FMV of immovable property for substituting the same as full value of consideration under section 50C and the assessment order was passed beyond the time-limit laid down in section 153(1), was barred by limitation

The assessee sold immovable property on 23.01.2015 for a consideration of Rs. 1,50,00,000/-. On 09.11.2017, the Assessing Officer referred the transaction to the Valuation Officer, Solapur under section  142A to ascertain the property value as on the date of sale. The stamp value of the property as on the date of sale was Rs. 2,21,40,900/-. The Valuation Officer submitted his report on 14.08.2018 valued the Fair Market Value of the property at Rs. 1,80,39,000/-. The Assessing Officer based on the Valuation Report issued a show cause notice on 05.09.2018 as to why the said value as per the Valuation Report amounting to Rs. 1,80,39,000/- should not be considered as Fair Market Value of the said immovable property on the date of sale.

Heard rival parties and perused the materials available on record including the Paper Book and Case Laws cited by the assessee counsel. Section 142A of the Income Tax Act titled as 'Estimate by Valuation Officer in certain cases'. This section prescribes that for the purpose for making an assessment, where an estimate of the value of any investment referred to in sections 69, 69A, 69B are required to be made, the Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to Assessing Officer. Thus the scope of section 142A is limited in its span only to determine the value of investment in respect of certain assets, such as, bullion, jewellery, valuable articles etc. In this section as well there is no power vested with Assessing Officer to seek the help of Valuation Officer in respect of determination of capital gain prescribed undersection 48 of the Income tax Act, 1961.

Reading of the above provisions makes it very clear that the Assessing Officer is necessarily to pass the assessment order within the time limit as prescribed under section 153(1) of the Act which is in this case namely 31.12.2017. However the Assessing Officer has wrongly referred the valuation of the immovable property under section 142A of the Act which is not provided under the provisions of the Income Tax Act. However after receipt of the Valuation Report from the DVO, the Assessing Officer passed the assessment order on 28.09.2008 which is clearly barred by limitation which is not sustainable in law. Therefore, the assessment order is hereby invalid in law. Thus the ground no. 1 raised by the assessee is hereby allowed. [In favour of assesse] (Related Assessment year : 2015-16) - [Smt. Rashidaben Taher Morawala Badri Mohalla v. DCIT (International Taxation) Baroda [IT Appeal No. 1353 (AHD) of 2019 – Date of Judgement : 19.10.2022 (ITAT Ahmedabad)]

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)]

 

Estimate by Valuation Officer in certain cases - An assessing authority can not refer any matter to Departmental Valuation Officer without books of account being rejected

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. For the above reasons, the impugned judgment of the High Court is set aside and the order passed by the Tribunal stands restored to the file. Accordingly, the assessee succeeds. [In favour of assesse] - [Sargam Cinema v. CIT (2010) 328 ITR 513 : (2011) 241 CTR 179 : 197 Taxman 203 (SC)]

 

Matter can be referred to Valuation Officer under section 142A only during pendency of assessment or reassessment proceedings and not afterwards - Where no assessment proceedings are pending, Assessing Officer has no jurisdiction to refer any property for valuation to the DVO

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.

 

In the opening part of section 142A the words used are “for the purposes of making an assessment or reassessment under the Act”. The intent of the legislation is that the matter can be referred to the Valuation Officer only when the proceedings of assessment or reassessment are pending before the Assessing Officer. When no such proceedings are pending, the Assessing Officer has no jurisdiction to refer any property for assessment. – [CIT v. Umiya Co-Operative Housing Society Ltd. (2009) 314 ITR 272 : [TS-32-HC-2006(GUJ)] (Guj.)]