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TMI Blog2016 (11) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of assessment proceedings, the petitioner received a notice under Section 142(1) of the Income-tax Act,1961 (for short 'the Act') asking the petitioner as to why an amount of Rs. 5 lacs should not be added to the purchase price of a property referred to above as the petitioner has got a loan of Rs. 55 lacs from ICICI Bank and incidentally, the amount of interest component to the extent of Rs. 3,97,334/- came to be disallowed on the aforesaid loan obtained by the petitioner. Of course the appeal proceedings were initiated by the petitioner but, since the same are not related to the controversy involved in the petition, no reference is made on that. 2.2 The petitioner says that regular scrutiny assessment came to be passed on 31.12.2010 under Section 148(3) of the Act wherein, the reference about this property is already taken into consideration and explanation with regard to that has also been submitted to the department by the petitioner. However, as per the say of the petitioner that after receipt of assessment order, he received a communication whereby, it has been noticed that on 29.12.2010 a reference is made by the Assessing Officer to Valuation Officer in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Road, Ellisbridge, Ahmedabad - 380 006. 4. Amount declared by the assessee as filed in the return of income for the assessment year or as admitted during survey / search. (1) Rs. 37 lacs (2) Rs. 60 lacs 5. Estimated cost of investment (1) Rs. 60 lacs (2) Rs. 90 lacs 6. Cost estimated by the Registered value if any (copy of the valuer's report to be submitted if available) N.A. 7. Whether valuation of Plant and Machinery is also required or whether a separate reference has been made directly to the Valuation Officer (M & P) or the same is attached with the reference. N.A. 8. Period for which valuation is required (Date of commencement and completion be given) 1.4.2007 to 31.3.2008 9. Grounds on which the opinion of the assessing officer is based. Cost of property shown by the Assessee is very law apparent to Market value. In the cases of my own assessee, cost of property in the same locality is shown as under : The assessment is likely to get time barred on 31.12.2010 for assessment year 2008-09. You are requested to submit the report at the earliest. In order to elucidate the correctness of the cost of investment, I require and authorize you u/s 142(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al available with the Assessing Officer. Learned counsel further has drawn attention that while estimating the value of property to the extent of Rs. 90 lacs and the particulars which are mentioned in clause (9) of the said reference in abstract form relied upon and certain properties without any details have been narrated which would not give an exact idea about what material is based upon by Assessing Officer for resorting to Section 142A of the Act. It was also contended by learned counsel that the reference has been made on 29.12.2010 when the assessment was likely to get time barred after few days i.e. on 31.12.2010. He for the purpose of elucidating the correctness of cost of investment referred to Section 142A of the Act which is in view of settled position of law is simply not permissible. Learned counsel further submitted that under the scheme of the Act, before referring to the Valuation Officer, there must be some prima facie cogent material based upon which satisfaction must be arrived at by the Assessing Officer and only thereafter to re-ensure a reference can be made. But here learned counsel submitted that no such material even primarily available with the authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt as prayed for in the petition. 5. To oppose the petition, learned counsel, Mr.Sudhir Mehta appearing for the department has contended that the Assessing Officer has rightly made the reference to the Valuation Officer. He further contended that reference order came to be passed during the pendency of assessment proceedings and therefore, the same was well within the right of the Assessing Officer and therefore, learned counsel submitted not to entertain the petition. Learned counsel has further contended that reference was made by the Assessing Officer for determining the fair market value on the property and more so because the additional amount on stamp duty was required to be paid at Rs. 1,34,256/- and therefore, the Assessing Officer was justified in making reference so as to ascertain unaccounted investment in the purchase of property made by the petitioner. He further submitted that such value of the property has been shown undervalued by both the purchasers as well as the seller and therefore, the action of making reference is just and proper. While contending this, learned counsel has drawn the attention of this Court to a decision of the Andhra Pradesh High Court in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect to very property under Section 142(1) of the Act and in compliance to this, a communication issued under Section 142(1) of the Act. On 24.12.2010 a clarification has been made with respect to this very controversy and the scrutiny assessment has taken note of this particular submitted by the petitioner and passed an assessment order on 31.12.2010. (3) It is also reflecting from the record that just before 2 days prior to the final order of assessment on 31.12.2010, a reference is made under Section 142A of the Act only on 29.12.2010 mainly appearing to be on the premise to evaluate and elucidate the investment made by the petitioner in respect of this property. It is also reflecting from the record that ex-facie there appears no cogent material available with the Assessing Officer to arrive at an estimate of Rs. 90 lacs and it appears that just for the purpose of making an inquiry about correct value of the property, in a casual manner, the reference is straightway made under Section 142A of the Act. (4) It is also emerging from the record that Valuation Officer while calling for certain information from the petitioner on 10.3.2011 as well as a later communication dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. [Explanation 1].-For the purposes of this section, "Valuation Officer" shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). [Explanation 2.-For the purposes of this section, the expression "assessable" means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty.] (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed [or assessable] by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed [or assessable] by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.]" " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving an opportunity of being heard to the assessee. (5) The Valuation Officer may estimate the value of the asset, property or investment to the best of his judgment, if the assessee does not co-operate or comply with his directions. (6) The Valuation Officer shall send a copy of the report of the estimate made under sub-section (4) or subsection (5), as the case may be, to the Assessing Officer and the assessee, within a period of six months from the end of the month in which a reference is made under sub-section (1). (7) The Assessing Officer may, on receipt of the report from the Valuation Officer, and after giving the assessee an opportunity of being heard, take into account such report in making the assessment or reassessment. Explanation.-In this section, "Valuation Officer" has the same meaning as in clause (r) of section 2 of the Wealthtax Act, 1957 (27 of 1957).]" 8. From the bare reading of aforesaid statutory provisions, it appears that Section 50C of the Act which has been introduced is applied to a seller and not to the purchaser and therefore, ascertaining an amount of capital gain, it will be the tax in the hands of seller on the basis of jantri price and making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls under Section 69, as the case may be, that he can, to estimate the value of such unexplained investment or expenditure in bullion, jewellery, etc. and can call for the report of the valuer and therefore, the Division Bench of this Court has observed that initial starting point for triggering a reference to the valuer, therefore, has to be invocation of Section 69 of the Act and therefore, unless and until such contingencies are reflecting on the record, reference under Section 142A of the Act cannot be resorted to. Relevant paragraphs of the said decision which have analyzed entire scheme of Section 142A of the Act are required to be reproduced hereinafter : "10. Power of the Assessing Officer for making a reference to the Valuation Officer seeking the estimate flows from sub-section (1) of section 142A. It provides that for the purposes of making assessment or reassessment under the Act, where an estimate of the value of any investment referred to in section 69 or section 69B or the value of any bullion, jewellery or other valuable article referred to in section 69A or section 69B or fair market value of any property referred to in sub-section (2) of section 56 is required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 our notice. Thus quite apart from the petitioner's grievance that 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, in absence of any valid reasons for making a reference, in our opinion, the order must fail." 11. Considering the aforesaid proposition of law laid down by this Court, it appears that here also, the Assessing Officer had no cogent material available nor to satisfy himself about the requirement of Section 69 of the Act and therefore, in the absence of it, the reference could not have been made under Section 142A of the Act. Simply because prior to 2 days the reference order came to be made, it cannot be said that the action of making reference during the period of assessment is justified. In fact, no purpose would be served to make such reference especially when the contingencies reflected hereinabove are not satisfied on the background of present facts. Therefore, considering this set of circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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