Commissioner of Income-Tax V. Dr.P. Siva Reddy

RC/54/2002

AI Insights

The case revolves around the validity of the Assessing Officer's reference to the Valuation Cell concerning the respondent's property valuation for the Assessment Year 1985-86. Initially, the Assessing Officer added a sum of Rs.3,70,864 based on the Valuation Cell's input, which was later reduced by the Commissioner. Both parties appealed to the Tribunal, which upheld the respondent's position, stating that the reference to the Valuation Cell was unjustified as the Assessing Officer had not found any defects in the financial records or construction costs provided by the respondent. The Revenue's subsequent request for a legal interpretation of this decision led to the present reference to the court.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 718848 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 23-07-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Assessment Year; Capital gains tax; Income Tax; Retrospective amendment; Valuation cell
• Section: 55(a); 142A; 268 A

Judgement Text

"THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM R.C.No.54 of 2002 ORDER: (per the Hon’ble Sri Justice L.Narasimha Reddy) This reference is made at the instance of the Revenue by the Hyderabad Bench ‘A’ of the Income Tax Appellate Tribunal through order dated 17.06.2002 in R.A.No.438/Hyd/1995 in I.T.A.No.819/Hyd/1990. The respondent is an assessee. He filed returns for the Assessment Year 1985-86. The Assessing Officer has chosen to refer the matter to Valuation Cell on certain aspects, through his assessment order dated 31.03.1989. On such reference, a sum of Rs.3,70,864/- was added. Aggrieved by that, the respondent filed appeal before the Commissioner. Through order dated 05.03.1990, the Commissioner upheld the reference to Valuation Cell, but reduced the differential amount to Rs.75,000/-. The appellant on the one hand and the respondent on the other carried the matter to the Tribunal assailing the order of the Commissioner. Through order dated 24.03.1995, the Tribunal upheld the contention of the respondent and took the view that once the Assessing Officer did not express any doubt or find defect in the books of account or cost of construction furnished by the assessee, there is no basis for him to refer the matter to Valuation Cell. Not satisfied with that, the Revenue filed R.A.No.438/Hyd/1995 with a request to refer the relevant question to this Court. Accordingly, the following question is referred: “Whether on the facts and circumstances of the case, the Tribunal is justified in holding that the very reference made to the Valuation Cell is not valid when the Assessing Officer has not pointed out any defects in the books of account or cost of construction maintained by the assessee?” Heard Sri S.R. Ashok, learned Senior Counsel for the appellant and Sri A.V.Siva Kartikeya, learned counsel for the respondent. The exercise of referring any aspect to a Valuation Cell is resorted to under Section 55-A of the Income Tax Act, 1961 (for short ‘the Act’). It is mostly in relation to the ascertainment of the market value of the assets, which are transferred and the resultant sale proceeds are subject to capital gains tax. The Judicial opinion differed as to whether the mechanism of referring the matter to Valuation Cell can be pressed into service, for other purposes. The parliament stepped in and enacted Section 142A in the year 2004, wherein such exercise was made applicable to various other purposes. The provision was given a retrospective effect, from the year 1972. With the retrospective amendment caused by inserting Section 142A, there does exist legal basis for the Assessing Officer to refer the matter to Valuation Cell. However, the existence of power, by itself is not a justification, for exercise thereof. It is only when the situations contemplated under law warrant, that power can be exercised. In the instant case, there is no material to suggest that the Assessing Officer has expressed any doubt, on the books of account, or other particulars of cost of construction of the building as maintained by the respondent. Be that as it may, the tax component in this case is slightly above the amount stipulated in the notification issued under Section 268-A of the Act. We, therefore, decline to answer the question. L.NARASIMHA REDDY, J Date: 23.07.2014 CHALLA KODANDA RAM, J va "