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2012 (5) TMI 505 - HC - Income TaxValidity of Valuation proceedings referred to DVO, once the assessment u/s 143(3) was completed reference made to DVO by AO on the basis of his opinion that the valuation as on 01.04.1981 provided by assessee was on the higher side leading to reduction in capital gains assessment completed without waiting for the report from the DVO on ground of assessment getting time barred assessment reopened u/s 147 on getting valuation report from the DVO after the completion of the assessment Held that - Reference to the DVO does not become invalid on the completion of the assessment proceedings before the receipt of the valuation report and that after the receipt of the valuation report after completion of the assessment proceedings, the report would become part of the record which may enable the income tax authorities to take action as permissible under the Act, such as Section 147, Section 263, appellate power under Section 250 or Section 251 etc. If any action is taken by the departmental authorities on the basis of the report of the DVO received after the completion of the assessment, such action will be open to challenge by the petitioner and it is at that point of time that the Court may be called upon to examine the validity of the action taken by the revenue authorities. That stage has not yet arisen in the present case. Writ petition dismissed.
Issues Involved:
1. Validity of the reference to the District Valuation Officer (DVO) after the completion of assessment. 2. Legality of the DVO's valuation report and its impact on the petitioner's declared capital gains. 3. Petitioner's fundamental rights and the authority of the Assessing Officer under Section 55A of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Validity of the Reference to the District Valuation Officer (DVO) After the Completion of Assessment: The petitioner argued that the reference to the DVO became invalid once the assessment under Section 143(3) of the Income Tax Act was completed on 29.12.2010. The court examined Section 55A of the Act, which allows the Assessing Officer to refer the valuation of a capital asset to the DVO if the officer believes the claimed value is less than its fair market value or if it is necessary given the nature of the asset and other relevant circumstances. The court found that the Assessing Officer had a basis to form the opinion that the valuation report submitted by the petitioner was on the higher side, leading to a significant reduction in the capital gains computation. Therefore, the reference to the DVO was made within the lawful exercise of power under Section 55A(b)(ii). The court rejected the contention that the reference became invalid after the assessment was completed, noting that the assessment order cannot be deferred due to the limitation period and that any action based on the DVO's report received post-assessment can be challenged by the petitioner. 2. Legality of the DVO's Valuation Report and Its Impact on the Petitioner's Declared Capital Gains: The petitioner received a notice from the DVO proposing to estimate the fair market value of the Okhla land at Rs. 71,71,352/- as on 01.04.1981, significantly lower than the petitioner's declared value of Rs. 21,72,95,000/-. The court noted that the DVO's report, even if prepared, would not automatically affect the petitioner's declared capital gains unless acted upon by the income tax authorities. The court emphasized that the validity of any action taken based on the DVO's report can be contested by the petitioner. The court referenced judgments in ACIT v. Dhariya Construction Co. and CIT v. Smt. Suraj Devi, which held that the DVO's opinion alone is not sufficient for reopening an assessment and that the Assessing Officer must independently apply their mind to the information collected. 3. Petitioner's Fundamental Rights and the Authority of the Assessing Officer Under Section 55A: The petitioner claimed an infringement of fundamental rights, arguing that the respondents assumed jurisdiction without proper authority and that there was no valid formation of opinion for invoking Section 55A. The court found that the Assessing Officer had material to form the opinion that a reference to the DVO was necessary due to the significant reduction in capital gains declared by the petitioner. The court held that the Assessing Officer's reference to the DVO was within the lawful exercise of power under Section 55A(b)(ii) and that the petitioner's contention of arbitrary exercise of power was not acceptable. The court concluded that preventing the Assessing Officer from collecting evidence would be unjustified and that the petitioner could challenge any future actions taken based on the DVO's report. Conclusion: The writ petition was dismissed, with the court holding that the reference to the DVO was valid and within the lawful exercise of the Assessing Officer's powers under Section 55A. The court noted that any action taken based on the DVO's report could be challenged by the petitioner, and the petitioner's contentions in the present writ petition would not prejudice any future proceedings. All interim orders were vacated, and no costs were awarded.
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