Rallis India Limited vs Deputy Commissioner Of Income Tax ...
2006 Latest Caselaw 345 Bom

JUDGMENT

R.M. Lodha, J.

Page 1788

1. The writ petition raises an interesting question. The question is : is Assessing Officer competent to seek valuation of the property under Page 1789 Section 55A of the Income Tax Act after he has already assessed the income of the assessee and passed assessment order.

2. We, accordingly, issue rule and dispose of the same at this stage by consent of the counsel for parties.

3. The notice dated 19th April, 2005 issued under Section 55A of the Income Tax Act, 1961 is under challenge in the writ petition.

4. That in respect of assessment year 2002-2003, the Assessing Officer passed an assessment order under Section 143(3) on 24th March, 2005 is not in dispute. After having passed an assessment order, he has sought valuation of the property, 'land located at Suren Road, Plot bearing CTS No.221 to 227, 229 to 233, 236, 237, 244 and 245 village Gundavali Andheri (E), Mumbai 93'.

5. The Assessing Officer in the assessment order applied the formula for valuation of the aforestated property as on 1st April, 1981 by dividing the value at which the property was sold by 7.5. According to him, the value of the property as on 1st April, 1981 was 7.5 time lesser than the value at which it was sold.

6. Section 55A of the Income Tax Act, 1961 reads thus :

55A. With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer

(a) in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the Assessing Officer is of opinion that the value so claimed is less than its fair market value ;

(b) in any other case, if the Assessing Officer is of opinion

(i) that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage 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, and where any such reference is made, the provisions of sub-sections (2), (3), (4) (5) and (6) of section 16A, clauses (ha) and (i) of sub-section (1) and sub-sections (3A) and (4) of section 23, sub-section (5) of subsection 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall with the 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.

7. Section 55 provides that the Assessing Officer may refer the valuation of capital asset to a Valuation Officer with a view to ascertain the fair market value for the purposes of Chapter IV. This chapter deals with computation of total income. In other words, reference to the Valuation Officer for ascertaining the valuation of capital asset is for the purposes of computation of total income of the assessee. Having already completed this exercise and determined the value of the capital assets as on 1st April, 1981 and passed an assessment order on 24th March, 2005, in our view, it was not open to the Assessing Officer to refer the matter to the Valuation Officer for determination of fair market value of the said property.

Page 1790

8. Mr.D.S. Chopra, the counsel for the revenue submitted that Section 55A did not prohibit the ascertainment of the fair market value of the capital asset of the assessee for the purposes of capital gains after the assessment order has been passed by the Assessing Officer. He is right that Section 55A does not specifically prohibit so but it was not required to be prohibited specifically in Section 55A as the very purpose of ascertaining the fair market value of the capital assets of an assessee for capital gains by the Assessing Officer is for the purposes of computing the total income of the assessee which may enable him to pass the assessment order. If the counsel for revenue wants to suggest that even after the assessment order has been passed by the Assessing Officer, by way of an academic exercise or to satisfy himself that he correctly determined the value of the property while computing the total income, he referred the matter for valuation, we are afraid, he is wrong. The entire exercise of reference to the Valuation Officer for ascertaining the fair market value of the capital assets of an assessee is for the purposes of computation of income from capital gains and for completion of assessment order and once that has been done, the Assessing Officer has no competence to refer to the Valuation Officer.

9. In our view, therefore, the reference made by the Assessing officer to the Valuation Officer for determination of the fair market value of the aforestated property is without competence and as a consequence thereof, the notice dated 19th April, 2005 issued under Section 55A of the Income Tax Act, 1961 is rendered bad-in-law and we quash the said notice.

10. Rule is disposed of accordingly. No costs.