2014 (2) TMI 898 - HC - Income Tax

Reference made to Valuation Officer u/s 142A(1) of the Act -Valuation of investment in the construction/renovation of the property - Whether the requirements of exercising such powers u/s 142A calling for DVO s report are satisfied Held that - The scheme of the provisions read harmoniously would lead to a situation where in case the Assessing Officer, during the pendency of assessment or reassessment, is of the opinion that sections 69, 69A and 69B of the Act can be invoked, in order to estimate such unexplained investment or expenditure in acquisition of bullion, jewellery or valuable article, he can resort to valuation by the Valuation Officer in terms of sub-section (1) of section 142A of the Act. No such material emerges from the record - neither from the order of reference nor from any other material, the revenue could point out that the Assessing Officer had invoked the provisions of sections 69,69A or 69B of the Act and in the process desired to obtain the estimate of unexplained investment or expenditure and for which purpose DVO s report was called - He simply gave no reasons in the order - No independent reasons, either flowing from the file or even in the form of an affidavit assuming the same would be permissible, are brought to notice the Assessing Officer merely acted under the directives of the superior and did not, on his own application of mind, desire to call for the report thus, in absence of any valid reasons for making a reference the order cannot be sustained Decided in favour of Assessee.

Issues Involved:
1. Authority of the Assessing Officer to call for a Valuation Officer's report under Section 142A of the Income Tax Act, 1961.
2. Validity of the reference order dated 30.3.2005.
3. Prematurity of the petition challenging the reference order.
4. Compliance with Sections 69, 69A, and 69B of the Income Tax Act for invoking Section 142A.

Detailed Analysis:

1. Authority of the Assessing Officer to Call for a Valuation Officer's Report:
The petitioner challenged the reference order dated 30.3.2005 made by the Assessing Officer to the Valuation Officer, Baroda, for valuing the investment in the construction/renovation of a hospital building. The petitioner argued that since the assessment was already finalized when the order of reference was passed, the Assessing Officer had no authority to call for the DVO's report under Section 142A of the Income Tax Act, 1961. The court noted that the assessment proceedings were pending when the reference order was passed, thus the Assessing Officer had jurisdiction to call for the report if other parameters of Section 142A were satisfied.

2. Validity of the Reference Order Dated 30.3.2005:
The petitioner contended that the reference order was invalid as it was based on the directives of the superior officer without the Assessing Officer's own satisfaction. The court examined the requirements under Section 142A, which allows the Assessing Officer to call for a valuation report for estimating the value of any investment referred to in Sections 69, 69A, or 69B. The court found that there was no material to show that the Assessing Officer had invoked these sections and desired to obtain an estimate of unexplained investment or expenditure. The reference order lacked independent reasons and was thus deemed invalid.

3. Prematurity of the Petition Challenging the Reference Order:
The respondent argued that the petition was premature as the Valuer's report was yet to be made. The court rejected this objection, stating that if the reference to the DVO was not competent, the petitioner should not be made to go through the process of supplying details for an invalid report. The court emphasized that the inquiry must be terminated at the threshold if the reference itself was invalid.

4. Compliance with Sections 69, 69A, and 69B for Invoking Section 142A:
The court analyzed the provisions of Sections 69, 69A, and 69B, which pertain to unexplained investments, money, and investments not fully disclosed in books of account. These sections give rise to a deeming fiction and consider such unexplained investments or money as deemed income of the assessee. The court highlighted that the Valuer's report under Section 142A is for estimating the value of such unexplained investments or money. Therefore, unless there is prima facie application of Sections 69, 69A, and 69B, a reference to the Valuer is not permissible. The court concluded that the Assessing Officer had no authority to call for the Valuer's report without invoking these sections, and doing so would amount to a fishing inquiry.

Conclusion:
The court quashed the impugned order dated 30.3.2005, allowing the petition and ruling that the reference to the Valuation Officer was invalid. The court made the rule absolute with no order as to costs.

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