IMPORTANT POINT
Assessing Officer cannot refer the matter to the Valuation Officer for estimating the cost of construction of the house property.

Headnote:Income Tax Act, 1961-Section 55(A), 131(1), 133(6) and 142(2)-Reference to a Valuation Officer by Assessing Officer-Circumstances under and purposes for which a reference could be made-Assessee built a house between years 1981 to 1983-In her return she disclosed that she had invested an amount of Rs. 1,75,000/- in construction in house-Return accepted by Income Tax Officer-In subsequent assessment year 1983-84, assessee disclosed that she had invested a further amount of Rs.1,70,000/- in construction of house-This was not accepted by Assessing Officer-Assessing Officer referred question of construction cost of house to Valuation Officer under Section 55(A) of the Act-Assessment reopened in respect of assessment year 1982-83-Income Tax Officer made an addition of Rs. 2,79,000/- in respect of assessment year 1982-83 and Rs. 1,77,000/- in respect of year 1983-84 as undisclosed investment-Appeal-Whether Assessing Officer could have referred question of cost of construction of assessee s house to Valuation Officer-Held, no.
       Held : The Assessing Officer in this case had made a reference under Section 55A of the Act. This action cannot be supported by reference to Section 131(1) of the Act read with Order XXVI Rule 9 of the Code since the consequences of reference to a Valuation Officer under Section 55A of the Act and of a commission issued under Section 75 read with Order XXVI Rule 9 of the Code are different. It is not, therefore, a case of correction of an error in mentioning the section by the Assessing Officer, an error which could be ignored by referring the action to the appropriate source of power. Besides section 55A having expressly set out the circumstances under and the purposes for which a reference could be made to a Valuation Officer, there is no question of the Assessing Officer invoking the general powers of enquiry to make a reference in different circumstances and for other purposes. (Paras 16 and 17)
       It is noteworthy that Section 55A was introduced in the Act by the Taxation Laws (Amendment) Act, 1972 when Sections 131(1), 133(6) and 142(2) were already on the statute book. Learned counsel for the appellant has correctly submitted that if the power to refer any dispute to a Valuation Officer were already available in Sections 131(1), 133(6) and 142(2), there was no need to specifically empower the Assessing Officer to do so in certain circumstances under Section 55A. (Para 17)
       The Valuation Officer referred to has, according to the Explanation to the Section, the same meaning as in clause (r) of Section 2 of the Wealth Tax Act, 1957. Under sub-section (2) of Section 269L, the Valuation Officer to whom a reference is made under clause (a) or clause (b) of sub-section (1) is given all the powers he has under Section 38 of the Wealth Tax Act, 1957. And if in an appeal under Section 269G against the order for acquisition of any immovable property, the fair market value of such property is in dispute, the Appellate Tribunal shall, on a request being made in this behalf by the competent authority, give an opportunity of being heard to any Valuation Officer nominated for the purpose by the competent authority. From this it is clear that whenever reference to a Valuation Officer appointed under the Wealth Tax Act is permissible under the Income Tax Act, it has been statutorily so provided. Apart from the aforesaid, a Valuation Officer is appointed under the Wealth Tax Act and can discharge functions within the statutory limits under which he is appointed. It is not open to a Valuation Officer to act in his capacity as Valuation Officer otherwise then 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 Income Tax Act except when a reference is made under and in terms of Section 55A or to a competent authority except under Section 269L. We are therefore of the view that the High Court incorrectly answered the question referred to it in the affirmative. The Tribunal had not erred in holding that the Assessing Officer cannot refer the matter to the Valuation Officer for estimating the cost of construction of the house property. The appeal is accordingly allowed and the decision of the High Court set aside. There will be no order as to costs. (Paras 21 and 22)

JUDGMENT

Ruma Pal, J.-The assessee built a house in a suburb of Kolkata between the years 1981 to 1983. She filed a return in respect of the assessment year 1982-1983 in which she disclosed that she had invested an amount of Rs. 1,75,000 in the construction of the house. The return was accepted by the Income Tax Officer (now known as the Assessing Officer). In respect of the subsequent assessment year, namely 1983-84, the assessee disclosed that she had invested a further amount of Rs. 1,70,000 in the construction of the house. This was not accepted by the Assessing Officer, who referred the question of the construction cost of the house to the Valuation Officer under Section 55(A) of the Income Tax Act, 1961 (hereinafter referred to as the Act). The Valuation Officer submitted a report to the Assessing Officer. On the basis of the report, the Assessing Officer re-opened the assessment in respect of the assessment year 1982-83. The Income Tax Officer then made an addition of Rs. 2,79,000 in respect of the assessment year 1982-83 and Rs. 1,77,000 in respect of the assessment year 1983-84 as undisclosed investment in the construction of the house. The assessee s appeals from the assessment orders were turned down by the Commissioner of Income Tax (Appeals) Guahati. The Income Tax Appellate Tribunal, however, following an earlier decision, allowed the assessee s appeal and held that the Assessing Officer could not have referred the question of the cost of construction of the assessee s house to the Valuation Officer. In this background the following question was referred to the High Court under Section 256(2) of the Act.

"Whether on the facts and in the circumstances of the case, the Tribunal erred in law by holding that the Assessing Officer cannot refer the matter to the Valuation Cell (sic) for estimating the cost of construction of the house property."

2. The Division Bench of the High Court held that although the Assessing Officer could not have referred the question of the cost of construction of the assessee s house to the Valuation Officer under Section 55A of the Act, he had ample power under Sections 131(1), 133(6) and 142(2) of the Act to ask for a Valuation Report from the Valuation Officer. It was held that each of these sections were "enabling machinery provisions which invested ample powers in the Assessing Authority", and that any wrong mention of the provision on the requisition memo would not be material. Accordingly the question referred was answered in the affirmative and against the assessee.

3. In the appeal before us, it was contended on behalf of the assessee that a reference to a Valuation Officer could only be made strictly in terms of Section 55A of the Act and that if the circumstances justifying the reference under that Section were not prevailing, the Assessing Officer did not have the jurisdiction to otherwise refer the matter to the Valuation Officer. It was further pointed out that Section 55A of the Act only allows for reference to the Valuation Officer for the purposes of computing the market value of property in connection with the computation of capital gains. It was also submitted that reference to the Valuation Officer had been specifically provided for under Section 55A and that this implied that a reference to the Valuation Officer could not be made under any of the other provisions which generally empowered the Assessing Officer to ascertain the income of the assessee. The submission of the appellant was that if the power to refer the determination of the cost of construction to the Valuation Officer was otherwise available to the Assessing Officer under the other provisions of the Act, it was not necessary to specifically empower the Assessing Officer under Section 55A. Finally, it is submitted that the Valuation Officer is appointed under the Wealth Tax Act and that he could exercise the power only in the manner prescribed by that Act or by any other statutory provision like Section 55A

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2003 Supreme(SC) 599

IMPORTANT POINT Assessing Officer cannot refer the matter to the Valuation Officer for estimating the cost of construction of the house property.

Cases Referred (2)

IMPORTANT POINT
Assessing Officer cannot refer the matter to the Valuation Officer for estimating the cost of construction of the house property.