2006 (4) TMI 95 - HC - Income Tax

Unexplained investment - no opportunity of hearing was given - Assessing Officer made an addition of Rs. 12,98,328 on account of unexplained investment under section 69 to the income of Rs. 33,646 shown in the revised return and determined the total income as Rs. 13,31,974 - assessment in the present case has not become final and conclusive, particularly when the very issue with regard to valuation of the investment made on construction of Bagria Towers for the purpose of section 69 and for the purpose of assessment is still pending- this revenue s appeal is allowed and matter is remitted to the Assessing Officer and decide the valuation of the construction and make the assessment afresh after giving reasonable opportunity of hearing to the respondent - we hold that under section AO had the jurisdiction to make the reference to the Valuation Officer to determine the estimate of the value of the construction of Bagria Towers.

Issues Involved:
1. Validity of the assessment made on the basis of the revised return.
2. Jurisdiction of the Assessing Officer to rely on the valuation submitted by the District Valuation Officer.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Made on the Basis of the Revised Return:

The Tribunal held that the assessment made by the Assessing Officer on the revised return was invalid and void ab initio. The Tribunal reasoned that since the revised return was filed after the expiry of the period prescribed for issuing a notice under section 143(2) of the Act, the intimation issued under section 143(1)(a) of the Act partook of the character of an assessment. Consequently, the revised return filed after the intimation had become an assessment was not valid under section 139(5) of the Act.

The court, however, disagreed with the Tribunal's view. It clarified that an intimation under section 143(1)(a) is not an assessment but merely a notice of demand for tax or interest found due on the basis of the return filed by the assessee. The court emphasized that an intimation does not involve verification of the return's truthfulness, unlike an assessment under section 143(3), which involves a detailed examination and an order in writing. Therefore, the court concluded that the intimation dated October 17, 1994, did not partake the character of a regular assessment and the revised return filed on August 31, 1995, was valid under section 139(5). The assessment made on the basis of the revised return was thus valid.

The court answered the first substantial question of law in favor of the appellant, holding that the Tribunal was not justified in concluding that the assessment made on March 27, 1997, was invalid.

2. Jurisdiction of the Assessing Officer to Rely on the Valuation Submitted by the District Valuation Officer:

The Tribunal held that the valuation report by the District Valuation Officer was not in accordance with the terms of reference and could not be used as evidence against the respondent. The Tribunal noted that the valuation was started beyond the time-limit fixed in the commission issued to the Valuation Officer.

The court examined the provisions of section 142A, which was inserted by section 34 of the Finance (No.2) Act, 2004, with retrospective effect from November 15, 1972. Section 142A empowers the Assessing Officer to refer the matter to the Valuation Officer for estimating the value of any investment referred to in section 69 of the Act. The court held that the reference made by the Assessing Officer to the District Valuation Officer was valid under section 142A, as it was deemed to have been in force from November 15, 1972. The court also clarified that the proviso to section 142A, which states that the section shall not apply to assessments made on or before September 30, 2004, except in cases where reassessment is required, did not apply to the present case as the assessment had not become final and conclusive and was still pending in appeal.

The court concluded that the Assessing Officer had the jurisdiction to make the reference to the Valuation Officer and set aside the Tribunal's order. The matter was remitted to the Assessing Officer to comply with the directions of the Commissioner of Income-tax (Appeals) and make a fresh assessment after giving a reasonable opportunity of hearing to the respondent.

The court answered the second substantial question of law in favor of the appellant, holding that the Tribunal was not justified in concluding that the Assessing Officer had no jurisdiction to rely on the valuation submitted by the District Valuation Officer.

← Previous Next →