2003 (6) TMI 8 - HC - Income Tax

Whether the Assessing Officer in the instant case had jurisdiction under the Act to refer the question of cost of construction of a building constructed by the assessee to the Departmental Valuation Officer. - According to us, section 142(2) of the Act enables the Assessing Officer to refer the question of cost of construction of a building for the limited purpose of gathering information regarding the cost of construction. It did not have any binding effect on the Assessing Officer. It only had the effect of information gathered in an enquiry. As per sub-section (2) of 142, For the purpose of obtaining full information in respect of the income or loss of any person, the Income-tax Officer may make such enquiry as he considers necessary. Thus, Assessing Officer was well within his power to gather information regarding the cost of construction by making a reference to the Executive Engineer, Valuation Cell.

Summary

Issues:
Jurisdiction of Assessing Officer to refer cost of construction of a building to Departmental Valuation Officer under Income-tax Act, 1961.

Analysis:
The judgment addresses the issue of whether the Assessing Officer had the jurisdiction under the Income-tax Act, 1961 to refer the cost of construction of a building to the Departmental Valuation Officer. The case involved an individual assessee for the assessment year 1977-78. The Assessing Officer had referred the cost of construction of a building to the Executive Engineer, Valuation Cell, resulting in a difference in valuation compared to what the assessee had declared. The Appellate Assistant Commissioner and the Appellate Tribunal upheld the Assessing Officer's jurisdiction based on section 142(2) of the Act.

The applicant contended that the provisions of section 55A of the Act, which deal with valuation for capital gains tax, should not be used for determining unexplained investment. The Revenue argued that even if section 55A did not apply, sections 131, 133(6), and 142(2) empowered the Assessing Officer to collect valuation reports. The court examined various precedents, including decisions from different High Courts, to determine the scope of the relevant provisions.

The court noted that while there was no specific provision for referring the cost of construction for purposes other than capital gains tax, section 142(2) allowed the Assessing Officer to make inquiries to obtain full information regarding income or loss. The Assessing Officer's decision to seek a valuation report was considered within the scope of this provision. The court emphasized that the information gathered through such inquiries did not have a binding effect and was for informational purposes only.

Ultimately, the court held that the Assessing Officer was justified in referring the cost of construction to the Departmental Valuation Officer under the authority of section 142(2) of the Act. The decision was supported by precedents from the Guwahati and Andhra Pradesh High Courts. The judgment was delivered in favor of the Revenue and against the assessee. The court directed the forwarding of a copy of the judgment to the Income-tax Appellate Tribunal, Cochin Bench, as required by law.