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TMI Blog2024 (6) TMI 513X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act, 1957, contains the provisions relating to making a reference to the valuation officer for making assessment under the Wealth-tax Act. Apart from the provisions of section 55A, section 142A also empowers the Tax Authorities to make a reference to a Valuation Officer. The provisions of section 142A empowers the AO for the purposes of assessment or reassessment, make a reference to a Valuation Officer to estimate the value, including fair market value, of any asset, property or investment. Valuation Officer has the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957. AO may make a reference to the Valuation Officer as above whether or not he is satisfied about the correctness or completeness of the accounts of the taxpayer. The Valuation Officer, on a reference made by the Assessing Officer, shall, for the purpose of estimating the value of the asset, property or investment, have all the powers that he has u/s 38A of the Wealth-tax Act, 1957. Valuation Officer shall, estimate the value of the asset, property or investment after taking into account such evidence as the taxpayer may produce and any other evidence in his possession gathered, after giving an op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. DR submitted that the matter pertaining to ITA No. 647/JP/2023 and Co No. 08/JP/2023 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are identical in other assessment year except the difference in the amount added and disputed. The ld. AR did not raise any specific objection against taking that case as a lead case. Therefore, for the purpose of the present discussions, the case of revenue in ITA No. 647/JP/2023 and cross of the assessee in CO No. 08/JPR/2023 for assessment year 2019-2020 are taken as a lead case. 4. Before moving towards the facts of the case we would like to mention that the revenue has assailed the appeal in ITA No. 647/JP/2023 on the following grounds and whereas the assessee preferred cross objections and the grounds of cross objection are also reiterated here in below; Grounds of revenue s appeal: 1.(i) Whether on the facts and circumstances of the case for the assessment year under consideration, the ld. CIT(A) is justified in deleting the addition of Rs. 1,39,76,229/- made on account of unexplained investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous appeal. 5. The fact as culled out from the records is that the search and seizure action 132 of I.T. Act, 1961 was carried out on 13.02.2020 at the residential and business premises of the assessee group and her family members i.e Saini Gupta Jain Somani Malpani Group of Ajmer. Various assets had been found at the time of search and some of them were also seized at various places of the group at the time of action u/s 132 of IT. Act. Certain incriminating documents/Loose papers/Books of accounts etc. were also found, inventorized and some of them also seized or impounded at the time of search/survey u/s 132/133A of the IT. Act. The assessee is engaged in business of Manufacturing Activities of Natural Stones like Granite, Sand Stone, Tiles etc. 5.1 Consequent upon to the search notice u/s. 153A was issued on 06.03.2021 which was duly served upon the assessee by E mail. In response to the notice u/s. 153A, the assessee submitted return of income on 15.08.2021 declaring income of Rs. Nil. 5.2 During the course of search proceeding conducted at the premises of the assessee. It has been observed that valuation of the property being land, construction work and extra items was undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch action relating to construction expenses which were incurred but the same was not recorded in books. 2. No evidence for any unrecorded expenditure was found during search for purchasing the land on which construction was made. 3. Search was conducted in the year 2020 (13/04/2020) 4. Reference was made to Valuer on the basis of physical overview as written by AO in its assessment order para 7. 5. The factory building was referred for valuation to a private registered valuer Shri Nagendra Chaudhary. He submitted his report on 14.02.2020. The search date was 13.02.2020. Thus, the report had submitted within one day. The appellant had claimed that the valuation officer has not got any explanation or information from the appellant company on the valuation facts, which seems to be on merit. 6. Provision of section 142A has not been followed. 7. The AO had Not made any reference to Valuation officer following the section 142A in which Valuation Officer has the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957. 8. No incriminating document was during found course the of search for undisclosed investments. No document / evidences were found or seized regarding out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch assessment, any undisclosed income, which can ultimately be added, is only to the extent of any unrecorded assets/material found or any corroborative or supporting evidences document found as representing undisclosed income earned. Further, the facts of the present case remains that AO had not gathered any evidences and there is no supporting evidence related to unaccounted expenditure. Thus, the addition made by the A.O. on the basis of private valuer report in the absence of any incriminating material found during the search operation conducted u/s 132 of the Act is liable to be deleted. TAX DEPA 6.4 Considering the above discussion the addition made by AO based upon the valuation report is hereby deleted. Thus, the ground of appeal on this issue is herby allowed. Decision on Ground no. 2 3 before the ld. CIT(A) 7.2 I have considered the facts of the case and written submission of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration from which following facts comes out: 1. There are two types of Valuer (1) Registered Valuer and (2) Valuation Officer. 2. Registered Valuer work in private capacity and can be ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake a reference to the valuation officer. The only requirement is that the Assessing Office should be of the opinion that the value of the asset claimed by the taxpayer and the fair market value of the asset are in variation i.e. both the values differ. The variation i.e. the difference could be of any amount. 2. A case other than above If the case is not covered under (1) above, then the Assessing Officer can make a reference to the valuation officer if he is of the opinion: (i) that the fair market value of the asset exceeds the value of the asset as claimed by the taxpayer by more than such percentage (currently 15%) of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do. When any reference is made by the Assessing Officer to the valuation officer under section 55A, then the provisions of following sections of Wealth-tax Act, 1957, shall apply with the necessary modifications, Apart from the provisions of section 55A, section 142A also empowers the Tax Authorities to make a reference to a Valuation Officer. 7.4 An overv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... written submission along with the paper book and relevant case laws relied by the appellant. 8.3 The section 153D reads as under Prior approval necessary for assessment in cases of search or requisition. 153D. No order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of sub-section (1) of section 153A or the assessment year referred to in clause (b) of sub-section (1) of section 153B, except with the prior approval of the Joint Commissioner: Provided that nothing contained in this section shall apply where the assessment or reassessment order, as the case may be, is required to be passed by the Assessing Officer with the prior approval of the Principal Commissioner or Commissioner under sub-section (12) of section 144BA. There is no time limit prescribed in this section for granting approval by Joint Commissioner. The appellant had argued that there was no application of mind by the Addl. CIT as the draft assessment order was approved by the Addl. CIT on the same day. The appellant has advanced this argument without any evidence of non application of mind by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they challenged the addition the assessee submitted that the grounds of the revenue devoid of merit as revenue has accepted the finding of the ld. CIT(A) that no reference can be made to private valuer and upon that finding there is no ground of the revenue and therefore, the appeal of the revenue devoid of the merits. 8. In support of the appeal filed by the revenue the ld. DR vehemently argued that the search team has observed that certain incriminating documents / loose papers / books of accounts etc. were found, inventorised and some of them seized also. She further submitted that as the valuation of the property being land and extra items was under taken as there was significant difference noticed in the cost shown by the assessee in its books of accounts as well as the physical over view of the property. Accordingly, the matter was correctly referred to register valuer Shri Nagendra Choudhry who submitted his report on 14.02.2020 and based on that report and considering the contention of the assessee addition was correctly made for an amount of Rs. 1,39,76,229/-. She further submitted that at page 11 the ld. CIT(A) contended that the assessee was allowed 5 % deduction for se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration conducted u/s. 132 of the Act and the same has rightly been held so. The revenue has not challenged this finding of the ld. CIT(A) and therefore, the contention so raised by the revenue is not correct and not valid in law challenging the addition. Thus, making the reference to the registered valuer is nothing but an action based on the surmises and conjectures. There is no search, but survey conducted at the business premises of the assessee, so the contention of the ld. DR that there was search is also not correct. He also submitted that the ld. CIT(A) rightly observed that there is no incriminating material found. Even the ld. AO through the ld. DR did not bring such records at the time of hearing of the present appeal of the revenue so the finding of the ld. CIT(A) becomes final and binding to the ld. AO. Therefore, there is no merits in the grounds taken by the revenue and the appeal of the revenue is required to be dismissed as there is no incriminating material no reference to the private valuer can be made in the absence of any incriminating material tangible suggesting that the assessee has undervalued the property is merely the assumption and presumption of the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,39,76,229/ without appreciating the settled principle that when there is difference between the book value of the investment recorded by the assessee and the actual investment made, the matter is considered on merits , thereby ignoring the registered valuer s report that prove beyond doubt that the value of investment recorded in the books were not correct. Grounds of appeal for A.Y.2020-21 Gr (i) - Whether on the facts and circumstances of the case for the assessment year under consideration, the Ld CIT(A) is justified in deleting the addition of Rs 75,03,045/ made on account of unexplained investment for construction of factory premises without appreciating the fact that the valuation of construction was taken into account as per the report prepared by the registered valuer during the search proceedings in the presence of authorised person/representative of the assessee. Gr.(ii) Whether on the facts and circumstances of the case for the assessment year under consideration, the Ld CIT(A) is justified in law in deleting the addition of Rs 75,03,045/ without appreciating the settled principle that when there is difference between the book value of the investment recorded by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer, without challenging the legality of the decision rendered by the Ld CIT (A) in this regard, there remain no basis for challenging the deletion of addition which is only consequential. The appellant revenue claims that the report was prepared by the vlauer in the presence of authorised person/representative of the assessee, without stating as to how the presence of authorised representative legitimizes the absolutely illegal and arbitrary act of obtaining report from private valuer. When the action of the DDIT of getting report of the valuer from a Private Valuer in preference to the Departmental Valuation Officer as prescribed under section 142A, presence or absence of the authorised representative of the assessee is of no ocnseuqnece. Revenue further states that it is the settled principle of law that when there is difference between the book value of the investment recorded by the assessee and the actual investment made, the matter is considered on merits, and that the registered valuer s report that prove beyond doubt that the value of investment recorded in the books were not correct cannot be ignored but miserably failed in citing a single authority in support of it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luer work in private capacity under a license issued by the Board. Valuation Officer can be termed as Departmental Valuer. They are recognised by the Income Tax Department and are authorized valuer of Income Tax Department. Departmental Valuer, i.e Valuation Officers the Valuation officer approved/authorised by the Income Tax Department. The Tax Authorities will take the recourse of the value estimated by these valuers. In other words, if the tax authorities need to ascertain the value of an asset, then they will request the valuation officer to ascertain the value of the capital asset and the value determined by them will be taken into consideration by the tax authorities. 11. The reference was made by the DDIT to the private registered valuer during the course of search. No fresh reference was made to the valuation officer (Departmental valuer) u/s 142A either during search, post search or during the course of assessment proceeding and assessment order has been passed without reference to Valuation Officer. 12. The appellant had argued and contended that other than private valuer report no corroborative evidences were found during the search regarding unrecorded expenditure of fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired in clause (r) of Section 2 of Wealth Tax Act 1957. (ii) The Valuer has also not provided an opportunity of being heard to the appellant assessee, which is a mandatory requirement. Ld CIT(A) after considering the detailed factual and legal submissions made before him and after analysing the statutory provisions of Section 55A and Section 142A of the Income Tax Act, while allowing the grounds of appeal in toto observed as under; Para 7.5- In the present case the procedure laid down u/s 142A r.w.s Section 55A of the Income Tax Act as stated above has not been followed. The reference was made by the DDIT to the Private registered valuer during the course of search. No fresh reference was made to the valuation officer (Department Valuer) u/s 142A r.w.s Section 55A of the Income Tax Act either during search, post search or during the course of assessment proceedings and assessment order has been passed without referring to Valuation Officer. The addition was made only on the basis on report of private valuer. Since, all the ground, legal and factual included, forming the basis of decision of Ld CIT(A) quashing the absolutely illegal addition made by the Ld AO remained uncontrovert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Supreme Court or the statutory provisions mandating making of additions on the basis of report of the private valuer obtained by the department, or even providing for making reference to a private valuer for ascertaining the value of investment. In the circumstances, it is requested that it may please be held that the settled legal position stands to the contrary only, i.e. no tax authorities are allowed to exceed their authority, cannot trample the statutory provisions of the Income Tax Act with such impunity and cannot exercise authority in the indiscreet and arbitrary manner in which the authorities acted in the present case. Submissions in respect of Co Ground No 3- In this case addition has been made by the Ld Assessing Officer merely on the basis of illegal report of the Private valuer from whom a report was allegedly obtained by the DDIT during the course of search proceedings in an illegal manner. The report of private valuer could at best serve as information to the Ld Assessing Officer and in case he was satisfied with the report of the private valuer, the Ld Assessing Officer should have invoked the provisions of section 142A of the Income Tax Act which duly empow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso in continued harassment of the assessee by perpetuating the acts of administrative malfeasance and in malicious prosecution against the assessee. It is submitted that summoning a private valuer in complete abrogation of statutory provisions by the DDIT during the course of search can only be with a malafide intent. Preparation of alleged valuation report by the private valuer in a very hurried manner gives credence to the manifest malafide intent of the Investigating Officer/authorised Officer. It is needless to say that the action of referring to private valuer by officer was with the intent to pressurize/blackmail the appellant for extracting surrender. Except malafide intent, there cannot be any other reason for trampling the statutory mandate by the Investigation Officer. Income Tax Act contains specific provisions for quantification of investment made in a property. No adhoc and arbitrary approach on the whims and fancies of the authorised officer can be justified in any manner. Under the provisions of Section 142A, principles of natural justice are duly ingrained as it provides for report to be submitted by the Valuation Officer in Sixty days. In the present case, as note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reliance placed upon the decision of the Hon ble Apex Court is totally misplaced, out of context and inapplicable to the facts and issues involved in the present appeals. A. In its decision the Hon ble Apex Court has observed as under; As regards the second contention, we are in entire agreement with the learned Solicitor-General when he says that the Income-tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a Court of law, but there the agreement ends; because it is equally clear that in making the assessment under sub-section (3) of section 23 of the Act, the Income-tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under section 23(3). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh v. Commissioner of Income-tax, Punjab (Supra). The Hon ble Supreme Court further added : In this case we are of the opinion that the Tribunal vio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee have not been rejected but estimation of investment in factory Building has been made dehors the statutory provisions. Hon ble Supreme court clearly criticized the unnecessary haste and impatience exhibited by lower authorities which is clearly visible in the present case too. The Assessing Officer has been duly empowered by the statute to make reference to the DVO u/s 142A and requirement of natural justice are duly ingrained under those provisions where, DVO has to provide opportunity to the tax payer (sub section 4 of Section 142) and complete the valuation in Six months ( sub section 6 of Section 142A). Further time taken by the DVO is excluded for the purpose of computing the limitation period u/s 153 of the Income Tax Act. In the present case, during the curse of survey proceedings, the private valuer was called by the Authorised Officer and a very hasty, hurried and illegal report was taken from him and the same has been made basis of addition by the Ld Assessing Officer without considering the objections of the assessee or referring valuation to the DVO. Thus, observations of the Hon ble Supreme Court supports the assessee s case only. Evidently , the extrem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as categorically provided u/s 142A making reference to the DVO, general powers of conducting enquiry u/s 143(2) of the Income Tax Act cannot be applied to a case covered by the provisions of section 142A of the Income Tax Act. It is settled law that the general provision, only, controls cases where the special provision does not apply as the special provision is given effect to the extent of its scope. Hon ble Supreme Court in the case of CIT v. Shahzada Nand Sons [1966] 60 ITR 392 (SC) observed as under: Another rule of construction which is relevant to the present enquiry is expressed in the maxim, generalia specialibus non derogant, which means that when there is a conflict between a general and a special provision, the latter shall prevail. The said principle has been stated in Craies on Statute Law, 5th Edn., at P. 205, thus The rule is, that whenever there is a particular enactment and a general enactment in the same statute, and the latter, taken in its most comprehensive sense, would overrule the former, the particular enactment must be operative, and the general enactment must be taken to affect only the other parts of the statute to which it may properly apply. Hon ble Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistered valuer has completed the job of considering the book cost viz a viz the prevalent material rate based on which the valuation is made in just one day s time. There is no reference to seeking the book cost from the assessee and the registered valuer has just given the estimation without referring the material or the items the assessee used and what he has found at the time of physical verification. The valuation is a subject matter of estimation and expertise job but the same cannot be completed within a day s time, as there is date of reference that has been found mentioned and the bench noted that the date of visit to the property is 14.02.2020 and the date of issue of report is also 14.02.2020. Thus, the estimation is seems to be merely a estimation. Thus, the contention of the assessee that the valuer has not got or obtained any explanation or information from the assessee company and there is also a clear violation granting an opportunity by the valuer before making an estimate of the property. The bench noted that the law in this regard is governed by the provision of section 55A or section 142A of the Act and there is no reference of such action and the related formal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are the valuation officer approved/ authorised by the Income-tax Department. The tax authorities will take the recourse of the value estimated by these valuers. In other words, if the tax authorities need to ascertain the value of an asset, then they will request the valuation officer to ascertain the value of the capital asset and the value determined by them will be taken into consideration by the tax authorities. Circumstances in which reference can be made to valuation officer After understanding the difference between private valuer and valuation officer i.e.departmental valuer, now we shall understand the circumstances in which the Assessing Officer can make a reference to the valuation officer. As per section 55A, with a view to ascertaining the fair market value of a capital asset, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer. The circumstances in which reference can be made by the Assessing Officer to the valuation officer will be broadly classified as follows: (1) A case in which the value of the asset as claimed by the taxpayer is in accordance with the estimate made by a registered valuer. In other words, this will be a case in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (r) of section 2 of the Wealth-tax Act, 1957. The Assessing Officer may make a reference to the Valuation Officer as above whether or not he is satisfied about the correctness or completeness of the accounts of the taxpayer. The Valuation Officer, on a reference made by the Assessing Officer, shall, for the purpose of estimating the value of the asset, property or investment, have all the powers that he has under section 38A of the Wealth-tax Act, 1957. The Valuation Officer shall, estimate the value of the asset, property or investment after taking into account such evidence as the taxpayer may produce and any other evidence in his possession gathered, after giving an opportunity of being heard to the taxpayer. The Valuation Officer may estimate the value of the asset, property or investment to the best of his judgment. The Assessing Officer may, on receipt of the report from the Valuation Officer, and after giving the taxpayer an opportunity of being heard, take into account such report in making the assessment or re-assessment. But here we note that the addition has been made by the ld. AO without any supporting evidence or material found during the search operation and ..... 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