1993 (3) TMI 161 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Commissioner to invoke powers under section 263 of the Income-tax Act.
2. Validity of the Departmental Valuation Report obtained after the completion of assessment proceedings.
3. Whether the Valuation Report can be considered part of the 'record' under Explanation to section 263.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commissioner to Invoke Powers Under Section 263:

The primary contention raised by the assessee is that the Commissioner of Income-tax (CIT), Visakhapatnam, lacks jurisdiction to invoke powers under section 263 of the Income-tax Act based on a valuation report obtained after the completion of the assessment proceedings. The Tribunal examined whether the CIT could legally set aside the assessment order under section 143(1) on the grounds that it was prejudicial to the interests of the revenue due to the valuation report indicating a higher construction cost.

2. Validity of the Departmental Valuation Report Obtained After the Completion of Assessment Proceedings:

The Tribunal scrutinized whether a valuation report obtained post-assessment could be considered valid. The assessee argued that any reference to the Valuation Cell should be made before the completion of assessment proceedings. The Tribunal referenced its earlier decision in Sri Harisankar Cashew Mfg. Co. v. ITO, which held that a reference to the Departmental Valuation Cell after the assessment proceedings are over is illegal and the report cannot be considered part of the assessment proceedings.

3. Whether the Valuation Report Can Be Considered Part of the 'Record' Under Explanation to Section 263:

The Tribunal considered whether the valuation report, obtained after the assessment was completed, could be included in the 'record' as defined under Explanation to section 263. The assessee argued that the report should be excluded from the assessment proceedings and considered non est under law. The Tribunal agreed, stating that for a document to be part of the 'record,' it must relate to proceedings under the Income-tax Act and be available at the time of examination by the Commissioner. Since no assessment proceedings were pending when the reference was made or the report received, the valuation report could not form part of the 'record.'

Analysis of the Arguments Presented:

The Tribunal reviewed various case laws cited by both parties. The Departmental Representative cited several cases, including Daulatram v. ITO, Rampyari Devi Saraogi v. CIT, and CIT v. Pushpa Devi, arguing that references to the Valuation Cell can be made even after assessment proceedings are over. However, the Tribunal found these cases distinguishable and not applicable to the present facts.

For instance, in Daulatram's case, the Andhra Pradesh High Court held that a reference under section 55A could be made for any purpose under Chapter-IV of the Income-tax Act, but it did not address whether such a reference could be made after the assessment proceedings were completed. Similarly, the Supreme Court's decision in Rampyari Devi Saraogi did not support the proposition that enquiries made post-assessment could be considered for exercising revisionary powers under section 263.

Conclusion:

The Tribunal concluded that the CIT lacked jurisdiction to invoke powers under section 263 based on the Departmental Valuation Report, as it did not form part of the 'record' of the assessment proceedings. The Tribunal emphasized that the valuation report obtained after the assessment was completed could not be considered part of the assessment proceedings or the 'record' under Explanation to section 263. Consequently, the Tribunal allowed the appeal and set aside the revisionary order of the Commissioner.

Result:
The appeal was allowed, and the revisionary order of the Commissioner was set aside.