1986 (9) TMI 118 - AT - Income Tax

Assessment Order, Assessment Year, Capital Gains, Computation Of Capital, Reference To IAC, Reference To Valuation Officer, Wealth Tax Return

Summary

Issues Involved:

1. Application of Sections 144A and 144B of the Income-tax Act, 1961.
2. Validity of reference to the Valuation Officer under Section 55A(b).
3. Determination of the fair market value of the property as of 1-1-1954 for capital gains computation.

Issue-wise Detailed Analysis:

1. Application of Sections 144A and 144B of the Income-tax Act, 1961:

The assessee argued that Sections 144A and 144B are mutually exclusive and that the order under Section 144B sought to review the order under Section 144A. Additionally, it was contended that the assessment was time-barred as the revised return filed on 21-9-1979 could not be considered binding on the ITO, and the reference under Section 144B was made on 23-3-1980. The assessee also claimed that the ITO was not competent to make a reference under Section 144B as the difference between the second return and the income assessed was less than Rs. 1 lakh.

The departmental representative countered that Sections 144A and 144B are not mutually exclusive, and no review of the order under Section 144A was involved. The representative also pointed out that the variation in income exceeded Rs. 1 lakh if the second revised return was considered.

The Tribunal held that Sections 144A and 144B operate in different fields and are not mutually exclusive. It was observed that the IAC's order under Section 144A did not contain any binding directions for the ITO. The Tribunal agreed with the Commissioner (Appeals) that the limitation for making the assessment order should be counted from the date of the second revised return. Therefore, the assessment was not time-barred, and the reference under Section 144B was valid as the variation in income exceeded Rs. 1 lakh.

2. Validity of reference to the Valuation Officer under Section 55A(b):

The assessee contended that the reference by the ITO to the Valuation Officer under Section 55A(b) was invalid as the ITO did not form any opinion by recording reasons.

The Tribunal noted that Section 55A(b) does not require the ITO to record reasons for holding the requisite opinion. The ITO's letter to the Valuation Officer expressed the requisite opinion, thus complying with Section 55A(b). Therefore, the reference was valid.

3. Determination of the fair market value of the property as of 1-1-1954 for capital gains computation:

The Tribunal examined the material on record, including the wealth-tax assessment proceedings and the reports of various valuers. It was noted that the property consisted of both land and buildings, and the value of the building as on 1-1-1954 was determined to be Rs. 1,08,183 based on scientific data from the report of Shri C.H. Sanghvi.

Regarding the valuation of the land, the Tribunal considered various sale instances and concluded that the appropriate rate for the land as on 1-1-1954 was Rs. 10 per sq. yard, resulting in a total land value of Rs. 70,800. Combining the values of the land and building, the Tribunal determined the total fair market value of the property as on 1-1-1954 to be Rs. 1,78,983.

The Tribunal directed the ITO to compute the capital gain based on this fair market value, thus partially allowing the appeal.