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2013 (10) TMI 710 - HC - Income TaxPower to make inquiry versus power to make reference to valuation officer u/s 133 - Reference to DVO u/s 131(1)(d) when no assessment proceedings are pending - issuance of notice under Section 147/148 on the basis of DVO s report - Held that - The AO did not have authority to refer the matter to DVO under Section 131 (1) (d) on 15.5.1998 as no proceedings were pending on that date - Neither any return was filed nor any notice under Section 147/148 was issued by the AO to the assessee by that date. Whether a letter written by senior revenue officer to AO would make an assessment pending - Held that Since no return of income was filed till 11.2.1998, there was no question of any assessment proceedings pending before the AO prior to that date - No other proceedings were pending for the assessment year 1997-98 - Any internal correspondence between an officer of the department to AO would not amount to pendency of the proceeding before the AO - There was no other material for recording reasons for the AO for re-opening the proceedings under Section 148 of the Act. Relying upon Smt. Amiya Bala Paul vs. Commissioner of Income Tax 2003 (7) TMI 4 - SUPREME Court - the power of enquiry under Section 133 (6) and 142 (2) does not include the power to refer the matter to the Valuation Officer for an enquiry by the latter - If the power to refer any dispute to a Valuation Officer is available under Section 131 (1), 133 (6) and 142 (2), there was no need to specifically empower the Assessing Officer to do so under Section 55-A - It is not open to the Valuation Officer to act in his capacity as Valuation Officer otherwise than in discharge of his statutory functions - He cannot be called upon, nor would he have the jurisdiction, to give a report to the Assessing Officer under the Act except when a reference is made under and in terms of Section 55A or to a competent authority under Section 269-L Decided against Revenue.
Issues Involved:
1. Justification for initiating proceedings under Section 147/148 of the Income Tax Act, 1961. 2. Validity of reference to the District Valuation Officer (DVO) under Section 131 (1) (d) in the absence of pending proceedings. 3. Impact of the retrospective introduction of Section 142-A on the Tribunal's order. 4. Legality of using the DVO's report for initiating proceedings under Section 147/148. Issue-wise Detailed Analysis: 1. Justification for Initiating Proceedings under Section 147/148 of the Income Tax Act, 1961: The Tribunal held that there was no material on record for the Assessing Authority to initiate proceedings under Section 147/148. The initiation of proceedings was based solely on the DVO's report, which was deemed insufficient. The Tribunal emphasized that the reasons for initiating proceedings under Section 148 were based on the DVO's report, which does not legally exist, and therefore, the AO was not justified in relying upon the report for initiating proceedings. 2. Validity of Reference to the DVO under Section 131 (1) (d) in the Absence of Pending Proceedings: The Tribunal found that no proceedings were pending under the Income Tax Act when the reference to the DVO was made. The AO issued a notice under Section 142 (1) on 20.7.1998 for the assessment year 1997-98, but the DVO's report was obtained on 30.6.1999, without any proceedings pending at that time. The Tribunal cited the Supreme Court's decision in Smt. Amiya Bala Paul vs. CIT, which held that the power of enquiry under Sections 133 (6) and 142 (2) does not include the power to refer the matter to the Valuation Officer. 3. Impact of the Retrospective Introduction of Section 142-A on the Tribunal's Order: The Tribunal considered the retrospective introduction of Section 142-A, which empowers the AO to require the Valuation Officer to estimate the value of movable/immovable property. However, it held that this amendment did not validate the AO's actions in this case, as the reference to the DVO was made without any pending proceedings. The Tribunal concluded that the amendment did not retrospectively authorize the AO's actions. 4. Legality of Using the DVO's Report for Initiating Proceedings under Section 147/148: The Tribunal ruled that the DVO's report could not be used as a basis for initiating proceedings under Section 147/148. It cited the Supreme Court's decision in Assistant Commissioner of Income Tax vs. Dhariya Construction Co., which held that the DVO's opinion per se is not information for reopening assessment under Section 147. The AO must form a belief based on information, and the DVO's report alone does not constitute such information. Conclusion: The High Court dismissed all the appeals filed by the Revenue, upholding the Tribunal's findings. It concluded that the entire foundation of the assessments was the DVO's report, which was not a valid basis for initiating proceedings under Section 147/148. The Tribunal's decision was based on the lack of pending proceedings when the reference to the DVO was made and the insufficiency of the DVO's report as a basis for reopening assessments. The amendments to Section 142-A did not retrospectively validate the AO's actions. The questions of law were decided in favor of the assessee and against the revenue, leading to the dismissal of all the Income Tax Appeals.
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