2006 (2) TMI 658 - HC - Income Tax

Summary

Issues: Jurisdiction of AO to refer matter to Valuation Officer for cost estimation. Interpretation of Section 142A of the IT Act. Compliance with retrospective effect of Section 142A.

Jurisdiction of AO to refer matter to Valuation Officer:
In the relevant assessment year, the assessee was involved in real estate development and construction activities. The AO referred the matter to the District Valuation Officer (DVO) to estimate the cost of construction of properties constructed by the assessee. The DVO's estimate differed from the assessee's disclosure, leading to an addition by the AO, which was later deleted by the CIT(A). The Tribunal, citing a Supreme Court decision, held that the AO lacked jurisdiction to refer the matter to the Valuation Officer for property valuation in an income tax assessment. However, the High Court found this view to be incorrect as it overlooked Section 142A of the IT Act introduced with retrospective effect from 1972.

Interpretation of Section 142A of the IT Act:
Section 142A empowers the AO to require the Valuation Officer to estimate the value of certain investments or assets for assessment or reassessment purposes. The Valuation Officer must have the same powers as under the Wealth Tax Act. Upon receiving the Valuation Officer's report, the AO must provide the assessee with an opportunity to be heard before considering the report in the assessment or reassessment process. The proviso to this section excludes its application for assessments finalized before September 30, 2004, unless a reassessment is required under specific provisions.

Compliance with retrospective effect of Section 142A:
The High Court noted that the AO's order and the subsequent appeal decisions were made after the insertion of Section 142A with retrospective effect. The Tribunal, while relying on a previous Supreme Court ruling, failed to consider the implications of Section 142A in the case at hand. Consequently, the High Court set aside the Tribunal's order and remanded the matter for fresh consideration, emphasizing the need for compliance with Section 142A and the Supreme Court's precedent.

In conclusion, the High Court emphasized the importance of considering the provisions of Section 142A of the IT Act in assessment matters and directed the Tribunal to reevaluate the case in light of both Section 142A and the relevant Supreme Court decision.