A valuation proceeding under Section 55a of the I. T. Act is invalid if the ITO does not form an independent opinion before making the reference for valuation and if the valuation report cannot be used for the purpose of completing the assessment.

( 1 ) THE petitioner, in this case, has challenged a proceeding arising out of a reference under Section 55a of the I. T. Act. The above reference was made by the ITO for valuation of a property sold by the petitioner resulting in loss which was incorporated in the income-tax return filed by the petitioner. Before such sale, the petitioner got the property valued through its own valuer. The reference was made on or about December 12, 1975, when the assessment was still pending. Prior to receipt of the valuation report, however, the assessment was completed by the ITO.

( 2 ) THE main point that has been urged on behalf of the petitioner is that the valuation proceeding has become infructuous in view of the completion of the assessment (before receipt of report) and, as such, is liable to be quashed.

( 3 ) DR. Debi Prasad Pal, appearing on behalf of the petitioner, has drawn my attention to the terms of Section 55a of the I. T. Act. He has argued that, in the first place, before referring any particular case for valuation, the ITO has to form an opinion that one of the circumstances as mentioned in Section 55a of the I. T. Act exists and (a reference) should be made. As far as the present case of reference for valuation is concerned, the petitioner has challenged the same as not bona fide. It is alleged that the same has been made to carry out a fishing and roving investigation for finding out materials for reopening or revising a completed assessment. It may be pertinent to note in this connection that, in the course of the hearing, the letter of the ITO referring the matter to the valuer dated December 12, 1975, was produced before me along with the records relating to the valuation proceeding and in compliance with my desire a true copy of the said letter has also been placed on the records of the present case by the learned counsel representing the Department. It has been submitted by Dr. Pal that the letter of reference does not indicate compliance with the pre-condition of Section 55a of the I. T. Act. It clearly shows that the necessary reference was made in compliance with a direction given to the ITO without formation of any independent opinion by him as required by the terms of the said Section 55a.

( 4 ) DR. Pal has also drawn my attention to a decision of M. N. Roy J. in the case of Rajeshwari Birla v. WTO [1979] 119 ITR 629. In that case, a completed proceeding under the W. T. Act was sought to be reopened on the basis of records to the effect that unquoted shares were not properly valued. It has been contended on the basis of the principle laid down in that decision that where discretion was vested in a statutory authority to take a particular course of action upon fulfilment of a particular pre-condition, the said action cannot be taken unless such condition or prerequisite has been fulfilled. In the instant case, the reference to the Valuation Officer could be made only when the ITO concerned "was of opinion" that having regard to the nature of the asset and other relevant circumstances, it was necessary to do so. From the letter subsequently issued making the reference, it appears that the ITO did not form any independent opinion of his own but in referring the matter to the Department's valuer under Section 55a of the I. T. Act, he was merely carrying out the directions of some other officer. In that context, it has been contended by Dr. Pal that the entire reference is void ab initio and, further, the proceeding arising out of such reference is liable to be quashed at least on this ground. Reference was also made to the Supreme Court in the case of Varghese v. ITO. where in considering Section 52, Sub-section (2) of the I. T. Act, 1961, their Lordships laid down that before a particular statutory provision could be invoked, the statutory pre-conditions must have to be fulfilled. In that case, it was held that for the application of Sub-Section (2) of Section 52 of the I. T. Act, two condition