Reference to valuation officer for revaluation of asset by income tax officer allowed to correct prior incompetent valuation and consider new material

An income tax officer may make a fresh reference to a competent valuation officer where the earlier valuation was made by an officer legally incompetent and where fresh material relevant to valuation emerged later; the fresh reference is justified to ensure a correct, lawful valuation. The court reasoned that the power to obtain valuation includes ensuring the valuation is performed by the appropriate authority and may be exercised afresh to correct an earlier invalid exercise. Information powers under the evidence gathering provision do not extend to treating Revenue officers as equivalent to persons from whom information is sought. Estoppel cannot bar statutory correction.

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Issues Involved:
1. Whether the Income-tax Officer is empowered u/s 55A to ascertain the market value of a capital asset by referring to a Valuation Officer.
2. Whether a second reference to the Valuation Officer is competent.

Summary:

Issue 1: Income-tax Officer's Power u/s 55A
The court examined if the Income-tax Officer is empowered u/s 55A to ascertain the market value of a capital asset by referring to a Valuation Officer. It was held that section 55A enables the Income-tax Officer to ascertain the fair market value of a capital asset through a Valuation Officer. The court noted that section 55A, introduced by the Taxation Laws (Amendment) Act, 1972, effective from January 1, 1973, was intended to empower the Income-tax Officer to determine the market value of a capital asset for the purposes of Chapter IV, which includes various sub-chapters such as salaries, interest on securities, income from house property, profits and gains of business or profession, capital gains, and income from other sources. The court rejected the petitioners' argument that the power could only be exercised in relation to capital gains, emphasizing that the term "Chapter" in section 55A indicates a broader application. Therefore, the court concluded that the reference to the Valuation Officer under section 55A is valid.

Issue 2: Competence of Second Reference
The court addressed whether a second reference to the Valuation Officer is competent. It was found that the first valuation was invalid as it was conducted by a Valuation Officer who was not competent to value assets exceeding Rs. 10 lakhs, as per rule 3A of the Wealth-tax Rules, 1957. Additionally, subsequent to the first valuation, a raid revealed higher investments than initially reported, and the Assistant Director of Inspection provided new material facts. Given these circumstances, the court held that the second reference was necessary and valid. The court also noted that the second reference could be justified under section 142(2), which empowers the Income-tax Officer to make inquiries for obtaining full information regarding the income of any person. The court rejected the petitioners' contention that the authorities were estopped from conducting a fresh valuation, stating that there can be no estoppel against the statute.

Conclusion:
The court concluded that the second reference was proper and legal, traceable to sections 55A and 142(2) of the Act. Consequently, the writ petition was dismissed, and the oral application for leave to appeal to the Supreme Court was rejected, as no substantial question of law of general importance was found to arise in this case.

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