Assessing authority lacked power to refer valuation matter pre-assessment date, rendering subsequent notice invalid

The Court held that the assessing authority had no legal authority to refer the matter to the valuation officer for determining the cost of construction as the assessment was made before the specified date, making section 142A of the Income-tax Act, 1961 inapplicable. Consequently, the valuation report could not be used as the basis for initiating proceedings under section 148 of the Act. The Court allowed the writ petition, quashed the notice issued under section 148, and ordered no costs to be incurred.

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Issues:
Challenge to notice issued under section 148 of the Income-tax Act, 1961 for assessment year 1983-84 based on valuation report by Departmental Valuation Officer.

Analysis:
The petitioner, a partnership firm running a cinema hall, challenged a notice issued under section 148 of the Income-tax Act, 1961 for the assessment year 1983-84. The notice was based on a valuation report by the Departmental Valuation Officer, which indicated a difference in the cost of construction declared by the petitioner and the valuation officer. The petitioner contended that the assessing authority had no jurisdiction to refer the matter to the valuation officer for determining the cost of construction, citing a Supreme Court decision. The petitioner argued that the proviso to section 142A of the Act, which empowers the assessing authority to estimate the value of investments, was not applicable in this case as the assessment was made before the specified date.

The respondent, on the other hand, argued that the valuation report justified the initiation of proceedings under sections 147 and 148 of the Act. Despite the time granted, no counter affidavit was filed in response to the petitioner's contentions. The Court examined the legal provisions and relevant case law, including the Supreme Court decision in Smt. Amiya Bala Paul v. CIT, and the provisions of section 142A of the Act. The Court noted that section 142A empowered the assessing officer to refer matters to the valuation cell for estimating the value of investments, but the proviso excluded assessments made before a specific date.

The Court held that since the assessment in this case was made before the specified date, section 142A was not applicable. Consequently, the reference made by the assessing authority to the valuation cell for determining the cost of construction was without legal authority. Therefore, the valuation report could not serve as the basis for initiating proceedings under section 148 of the Act. As a result, the Court allowed the writ petition, quashed the notice issued under section 148, and ordered no costs to be incurred.

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