1999 (8) TMI 977 - HC - Income Tax

Summary

Issues:
1. Opportunity of hearing to the respondent-writ petitioner before referring the matter to the Valuation Officer.
2. Justification for seeking assistance from the Valuation Officer without providing an opportunity of hearing.
3. Validity of the notice issued by the ITO for valuation by the Valuation Officer.

Analysis:

1. The primary issue in this case was whether the ITO was required to afford an opportunity of hearing to the respondent-writ petitioner before referring the matter to the Valuation Officer. The respondent argued that principles of natural justice were not followed as no hearing was granted before appointing the Valuation Officer. The Court acknowledged the importance of natural justice but held that in this instance, the initial step of issuing a commission did not necessitate a prior hearing. The Court emphasized that the respondent had already presented its own valuation, and the appointment of the Valuation Officer was to verify this valuation, not to prejudge the matter.

2. The second issue revolved around the justification for seeking assistance from the Valuation Officer without providing an opportunity of hearing to the respondent. The appellant contended that the assessing authority was justified in seeking assistance due to discrepancies in the valuation of construction costs. The Court examined the relevant provisions of section 131 and section 55A, highlighting the power of the ITO to call for information necessary for assessment. It was established that the appointment of the Valuation Officer was in line with the objectives of the Income-tax Act, specifically Chapter IV, to ascertain the fair market value of a capital asset. The Court referenced a previous Full Bench decision to support the validity of such references to Valuation Officers.

3. Lastly, the Court addressed the validity of the notice issued by the ITO for valuation by the Valuation Officer. The Court reiterated that the purpose of the assessment was to determine the fair market value of the capital asset for Chapter IV compliance. It was clarified that the Valuation Officer, being a statutory authority, had the right to conduct the assessment as per the commission issued under section 131(1)(d). The Court emphasized that while the Valuation Officer must provide an opportunity of hearing, the initial referral did not necessitate a hearing for the assessee. Consequently, the Court allowed the appeal, upholding the validity of the notice issued by the ITO for valuation by the Valuation Officer.

In conclusion, the judgment clarified the procedural requirements regarding the appointment of a Valuation Officer, emphasizing the distinction between the roles of the assessing authority and the Valuation Officer in determining the fair market value of a capital asset under the Income-tax Act.