2013 (10) TMI 366 - HC - Income Tax

Reference to Valuation officer (DVO) - Powers of assessing officer u/s 142A of the Income Tax - Revenue submitted that section 142A was insterted by the Parliament by Finance (No. 2) of the Act 2004 with effect from 15.11.1972 - Held that - Proviso to section 142A makes it abundantly clear that the provisions of Section 142A would not be applicable to the assessment made on or before 30.9.2004 and which has become final and conclusive on or before that date - In the present case the assessment order was passed on 5.2.2001. The Commissioner of Income Tax Appeals passed the order on 22.11.2001 and the Tribunal decided the matter on 30.6.2004 Therefore in the present case assessing officer has no power to refer to the Valuation Officer Reliance has been placed upon the judgment in the case of Commissioner of Income Tax V. Gulam Mohammad 2009 (8) TMI 635 - ALLAHABAD HIGH COURT Decided against the Revenue.

Summary

Issues:
1. Jurisdiction of Assessing Officer to refer valuation to DVO.
2. Applicability of Section 142A to assessment made before 30.9.2004.

Analysis:

Issue 1: Jurisdiction of Assessing Officer to refer valuation to DVO
The appeal pertains to the assessment year 1988-89, where the respondent-assessee declared an income of Rs. 1,25,000 and claimed exemption of long-term capital gain from the sale of shares. The Assessing Officer referred the valuation of a residential house to the Valuation Officer under section 131(1)(d) of the Income Tax Act. The Valuation Officer determined the investment in the construction of the house to be Rs. 12,99,000, leading to an addition under section 69 of the Act. The assessee appealed to the Commissioner of Income Tax, who partially allowed the appeal. The Tribunal, relying on a Supreme Court judgment, held that the Assessing Officer had no jurisdiction to seek a report from the Valuation Officer during assessment. The Tribunal's decision was challenged in the High Court.

Issue 2: Applicability of Section 142A to assessment made before 30.9.2004
The Revenue argued that Section 142A, inserted with retrospective effect from 15.11.1972, empowers the Assessing Officer to seek a valuation report from the Valuation Officer. However, the High Court noted that a proviso under Section 142A exempts assessments finalized before 30.9.2004 from its applicability. The assessment in question was completed on 5.2.2001, and subsequent appellate orders were passed before the cut-off date. Citing a previous judgment, the Court held that Section 142A does not apply to assessments concluded before 30.9.2004. Therefore, the High Court ruled in favor of the assessee, upholding the Tribunal's decision and dismissing the appeal by the Revenue.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing that the Assessing Officer lacked jurisdiction to refer the valuation to the Valuation Officer in this case. Additionally, the Court clarified that the provisions of Section 142A do not apply to assessments finalized before 30.9.2004, thereby ruling in favor of the assessee and dismissing the appeal by the Revenue.