2021 (3) TMI 57 - HC - Income Tax

Challenges in Valuation Proceedings under Income Tax Act Clarified by High Court

M/s. Sumer Galaxyia Private Limited Versus Union of India & Others

The High Court of Madhya Pradesh addressed challenges to valuation proceedings under Section 142 A of the Income Tax Act, 1961. It clarified the time ... Valuation proceedings u/s 142A - estimation of value of assets by Valuation Officer - period of limitationas contemplated in Section 142 A (6) of the Act of 1961 wherein six months period has been prescribed for Valuation Officer to submit valuation report to the Assessing Officer - HELD THAT:- Section 250(5) of the Act of 1961 enlarges the scope of hearing of appeal because Commissioner may allow the appellant to go into any ground of appeal not specified in the grounds of appeal, if Commissioner is satisfied that omission of that ground from the form of appeal was not willful or unreasonable. Some how similar spirit is echoed in Explanation of sub-section (2) of Section 251 of the Act of 1961, therefore, wide powers are available to the Commissioner (Appeals) as appellate authority. Exercising such power, Commissioner (Appeals) directed the Assessing Officer to obtain valuation report vide letter dated 20-03-2018 (Annexure R/2). In pursuance thereof, District Valuation Officer has issued the notice which is the bone of contention in the matter. When appeal is pending consideration before Commissioner (Appeals) and appellate authority has wide powers to look into the dispute as referred above then assessee/petitioner is always at liberty to raise this ground also in appeal even if the petitioner has not raised the same so far, in the appeal memo about limitation as provided under Section 142A of the Act of 1961. This Court does not intend to venture into the arena to preempt the controversy. Commissioner (Appeals) shall take into consideration the plea of limitation as raised by the petitioner in the case in hand as one of the grounds of appeal as expeditiously as possible preferably within three months from the date of receipt of certified copy of this order and pass an appropriate order taking into consideration the interplay of different provisions of the Act of 1961 in accordance with law and shall decide this point at the first instance, if not already decided. No further indulgence can be shown except to issue above-mentioned directions. Issues:1. Challenge to valuation proceedings under Section 142 A of the Income Tax Act, 1961.2. Interpretation of the time limit for submission of valuation report by the Valuation Officer.3. Jurisdiction and powers of the Commissioner (Appeals) in dealing with appeals and obtaining valuation reports.Issue 1: Challenge to Valuation Proceedings under Section 142 AThe petitioner sought relief under Article 226 of the Constitution of India, challenging the valuation proceedings under Section 142 A of the Income Tax Act, 1961. The dispute arose when the District Valuation Officer issued a notice to the petitioner for valuation of a property named 'The Legacy.' The petitioner contended that the valuation report should have been submitted within six months as per Section 142 A, but no such report was provided within the stipulated time frame. The petitioner argued that the subsequent notice issued in 2020 was time-barred and contrary to the statutory mandate of Section 142 A.Issue 2: Interpretation of Time Limit for Valuation Report SubmissionThe crux of the matter revolved around the time limit for the Valuation Officer to submit the valuation report under Section 142 A. The Assessing Officer had requested the valuation report in 2017, but as the assessment for the relevant year was completed by December 2017, the Valuation Officer did not submit the report within the specified six-month period. The petitioner contended that the subsequent notice in 2020 was invalid due to being time-barred. However, the respondents argued that the Commissioner (Appeals) had the authority to call for a valuation report even after assessment, as evidenced by a letter directing the Income Tax Officer to expedite the valuation process.Issue 3: Jurisdiction and Powers of the Commissioner (Appeals)The judgment delved into the powers of the Commissioner (Appeals) as provided under Sections 250 and 251 of the Income Tax Act, 1961. These sections empower the Commissioner (Appeals) to conduct further inquiries, allow additional grounds of appeal, and make necessary orders in the appeal process. The Commissioner (Appeals) had directed the Assessing Officer to obtain a valuation report in 2018, leading to the issuance of the contentious notice in 2020. The Court acknowledged the wide powers vested in the Commissioner (Appeals) to address such matters and directed the Commissioner to consider the plea of limitation raised by the petitioner as a ground of appeal expeditiously.In conclusion, the High Court of Madhya Pradesh addressed the challenges to the valuation proceedings under Section 142 A, clarified the interpretation of the time limit for submitting the valuation report, and discussed the jurisdiction and powers of the Commissioner (Appeals) in handling appeals and obtaining valuation reports. The judgment emphasized the need for the Commissioner (Appeals) to consider the limitation plea promptly and make a decision in accordance with the provisions of the Income Tax Act, 1961.