1979 (2) TMI 84 - HC - Income Tax

Court rules valuation report post-assessment cannot be considered for revision. Commissioner's power limited to original record.

The High Court of Calcutta ruled in a case challenging a notice issued by the Commissioner of Income-tax under section 263 of the Income Tax Act, 1961. ... Valuation Officer Issues involved: Challenge to notice u/s 263 of the Income Tax Act, 1961 for assessment year 1971-72 based on valuation report discrepancy.Summary:The High Court of Calcutta heard a case challenging a notice issued by the Commissioner of Income-tax u/s 263 of the Income Tax Act, 1961. The petitioner, an existing company, had sold a portion of its land and declared the consideration received for computation of capital gains. The Income Tax Officer (ITO) accepted this value as the full consideration. Subsequently, a valuation report by the Valuation Officer valued the land higher than the declared amount. The Commissioner sought to revise the assessment order based on this valuation report, claiming it was prejudicial to revenue interests. The petitioner challenged the jurisdiction of the revisional proceeding, arguing that the valuation report did not exist at the time of the original assessment. The Court analyzed the provisions of s. 263(1) of the Act and concluded that the valuation report, not available during the original assessment, could not be considered part of the record for revisional purposes. The Court held that the revisional proceeding was without jurisdiction and invalid, quashing the same.The Court emphasized that the Commissioner's power to revise under s. 263(1) is based on the record as it stood at the time of the original order by the ITO. Any material that comes into existence later cannot form part of the record for revisional purposes. The Court differentiated between rectifying mistakes u/s 35 of the 1922 Act or s. 154 of the 1961 Act and the revisional jurisdiction of the Commissioner u/s 263(1). It highlighted that the Commissioner's power is to examine the record before the ITO to determine if the order is erroneous and prejudicial to revenue interests. The Court also noted that the Valuation Officer's subsequent order was not part of the original record and could not be considered for revisional purposes.The Court further explained that the Commissioner's revisional jurisdiction cannot overlap with the ITO's powers under s. 147(b) or s. 154 of the Act. Considering the scheme and provisions of the Act, the Court held that the word 'record' in s. 263(1) refers to the record at the time of the ITO's order, not at the time of examination by the Commissioner. As the Valuation Officer's order was not part of the original record, the revisional proceeding was deemed without jurisdiction and invalid. The Court referenced previous decisions supporting this interpretation and quashed the Commissioner's proceeding.In conclusion, the Court made the rule absolute, quashing the proceeding initiated by the Commissioner u/s 263. No costs were awarded, and the operation of the order was stayed for 8 weeks as requested by the respondents.