1993 (9) TMI 50 - HC - Income Tax

Summary

Issues Involved:
The issues involved in this judgment include the valuation of land for capital gains assessment, the authority of the Income-tax Officer to make a reference to the District Valuation Officer under section 55A of the Act, and the challenge to the order determining the fair market value of the land.

Valuation of Land for Capital Gains Assessment:
The official liquidator executed a conveyance deed for the sale of land to P. R. Damani, and subsequently filed the return of income for the assessment year 1973-74 to ascertain any capital gains arising from the transfer. The Income-tax Officer challenged the valuation of the land as on January 1, 1954, leading to a reference to the District Valuation Officer under section 55A of the Act. The District Valuation Officer determined the fair market value of the land at Rs. 4 per sq. yard, which was contested in this petition.

Authority of Income-tax Officer to Make Reference:
The petitioner contended that the Income-tax Officer could only make a reference to the District Valuation Officer under section 55A if the value claimed by the assessee was less than the fair market value. The petitioner argued that in cases where the value claimed aligns with the estimate made by a registered valuer, only clause (a) of section 55A would be applicable, not clause (b). Conversely, the Revenue argued that section 55A distinguishes between valuations based on a registered valuer and other cases, justifying the reference made by the Income-tax Officer in this instance.

Challenge to the Order and Action of Income-tax Officer:
The court considered the interpretation of section 55A and the specific application of clause (b)(ii) in the context of the valuation dispute. Despite the potential applicability of clause (b)(ii), the court found that the Income-tax Officer's decision to make a reference was not justified by the circumstances of the case. The court concluded that the action of the Income-tax Officer in making the reference was not in accordance with the law and therefore quashed the reference and subsequent order, directing the Income-tax Officer to proceed in compliance with the law.

In conclusion, the petition was allowed, and the actions of the Income-tax Officer in making the reference and the order of the District Valuation Officer were quashed and set aside. The court directed the Income-tax Officer to proceed further with the matter in accordance with the law, making the rule absolute without any order as to costs.