If the assessing officer is of the view that value of the asset as on 01.04.1981 adopted by the assessee is more than the fair market value; can reference be made to the valuation officer under section 55Aof the Income Tax Act 1961?

[Rakesh Gupta]

 Topic: In the context of computation of capital gains, if the assessing officer is of the view that value of the asset as on 01.04.1981 adopted by the assessee is more than the fair market value; can reference be made to the valuation officer under section 55Aof the Income Tax Act 1961? If not, is the assessing officer bound to accept the value as returned by the assessee?

Discussion: No, reference can not be made to the valuation officer under section 55Aof the Income Tax Act 1961. Under section 55A, situations are clearly mentioned when with a view to ascertaining the fair market value of a capital asset the assessing officer may refer the valuation of the capital asset to a valuation officer. There are only two situations when the assessing officer may refer the valuation of the capital asset to a valuation officer as given below:-

In a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the assessing officer is of opinion that the value so claimed is less than its fair market value.

In any other case, if the assessing officer is of opinion, inter-alia, that the fair market value of the asset exceeds the value of the asets as claimed by the assessee by more than such percentage of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf

Thus it is clear from the above that reference can not be made to the valuation officer under section 55A when according to the assessing officer value of the asset as on 01.04.1981 adopted by the assessee is more than the fair market value of that asset.   

This however does not mean that the assessing officer is bound to accept the value as returned by the assessee. In that case he will have to follow general provisions of the assessment. He can make such enquiries as deemed fit, gather materials to show what is the correct value as on 01/04/1981 and after affording to the assessee, an opportunity of rebutting the evidence gathered he can proceed to determine the FMV as on 01/04/1981in a scrutiny assessment.

Discussions to this article

[Sunil K. Jain]

In my opinion it will serve no purpose even if the assessing officer refer the matter to the valuation officer. In case A O is of the view that value shown is on the higher side, he can not take any action in the matter u/s 147/148 being beyond 6 years.Even if the valuation officer assess the FMV figure more or less it can not be and should not be acted upon, if the assessee is able to prove the cost with the help of documentary evidences or vide report of a approved valuer obtained as on 1.4.81 the matter is over and A.O is bound to accept that.

[DEV KUMAR KOTHARI]

The general rule or practice is that the matter can be referred to the DVO to increase the value over and above that claimed by asssessee and not to decrease. Therefore, in case of claim of FMV as on 31.03.1981, any purpose will bnot be served for the revenue becaseu increased FMV as on cut off date means lower tax on capital gians. When valuation is based on otherwise then valuation by registered valuer, reference can be made in the prescribed circumstances. In such prescribed circumsances, also there was no scope to reduce value claimed by assessee- latest position need to be re-checked in this regard.