2003 (7) TMI 4 - SC - Income Tax

Valuation Officer limited to statutory functions; Assessing Officer cannot refer house construction cost estimation except under sections 55A or 269L/269G

Smt. Amiya Bala Paul Versus Commissioner of Income-Tax

SC allowed the appeal and set aside the HC decision, holding that a Valuation Officer appointed under the Wealth-tax Act may act only within the statutory ... Reference to Valuation Officer under section 55A - undisclosed investment in the construction of the house - HELD THAT:- The Valuation Officer referred to has, according to the Explanation to the section, the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957. Under sub-section (2) of section 269L, the Valuation Officer to whom a reference is made under clause (a) or clause (b) of sub-section (1) is given all the powers he has under section 38 of the Wealth-tax Act, 1957. And if, in an appeal under section 269G against the order for acquisition of any immovable property, the fair market value of such property is in dispute, the Appellate Tribunal shall, on a request being made in this behalf by the competent authority, give an opportunity of being heard to any Valuation Officer nominated for the purpose by the competent authority. From this it is clear that whenever reference to a Valuation Officer appointed under the Wealth-tax Act is permissible under the Income-tax Act, it has been statutorily so provided. Valuation Officer is appointed under the Wealth-tax Act and can discharge functions within the statutory limits under which he is appointed. It is not open to a Valuation Officer to act in his capacity as Valuation Officer otherwise than in discharge of his statutory functions. He cannot be called upon nor would he have the jurisdiction to give a report to the Assessing Officer under the Income-tax Act except when a reference is made under and in terms of section 55A or to a competent authority under section 269L. We are, therefore, of the view that the High Court incorrectly answered the question referred to it in the affirmative. The Tribunal had not erred in holding that the Assessing Officer cannot refer the matter to the Valuation Officer for estimating the cost of construction of the house property. The appeal is accordingly allowed and the decision of the High Court set aside. Issues Involved:1. Whether the Assessing Officer (AO) could refer the cost of construction of the assessee's house to the Valuation Officer under section 55A of the Income-tax Act, 1961.2. Whether the AO had the power under sections 131(1), 133(6), and 142(2) of the Income-tax Act to request a valuation report from the Valuation Officer.3. The role and jurisdiction of the Valuation Officer under the Wealth-tax Act and its applicability under the Income-tax Act.Issue-wise Detailed Analysis:1. Reference to Valuation Officer under Section 55A of the Income-tax Act:The assessee disclosed investments in the construction of a house for the assessment years 1982-83 and 1983-84. The AO accepted the return for 1982-83 but referred the cost of construction for 1983-84 to the Valuation Officer under section 55A of the Income-tax Act. The Valuation Officer's report led to the reopening of the assessment for 1982-83 and additions to the assessee's income for both years. The Income-tax Appellate Tribunal held that the AO could not refer the matter to the Valuation Officer under section 55A, and the High Court, while agreeing that section 55A was not applicable, held that the AO had ample power under sections 131(1), 133(6), and 142(2) to request a valuation report.2. AO's Power under Sections 131(1), 133(6), and 142(2):The High Court held that the AO could request a valuation report under sections 131(1), 133(6), and 142(2) of the Income-tax Act, which are enabling machinery provisions. However, the Supreme Court disagreed, stating that these sections do not include the power to refer a matter to the Valuation Officer. The Court emphasized that section 55A specifically empowers the AO to refer the valuation of a capital asset to a Valuation Officer for the purpose of computing capital gains, and this specific provision prevails over the general powers of inquiry granted under sections 131(1), 133(6), and 142(2).3. Role and Jurisdiction of the Valuation Officer:The Valuation Officer is appointed under the Wealth-tax Act and has specific functions and powers under that Act. The Supreme Court noted that section 55A of the Income-tax Act incorporates several provisions from the Wealth-tax Act and applies them to the valuation of capital assets for computing capital gains. The Court clarified that the Valuation Officer cannot act outside his statutory functions under the Wealth-tax Act and cannot be called upon to provide a report to the AO under the Income-tax Act, except when a reference is made under section 55A or section 269L. The Court also highlighted that section 55A was introduced when sections 131(1), 133(6), and 142(2) were already in place, indicating that the legislature intended section 55A to be the specific provision for such references.Conclusion:The Supreme Court concluded that the High Court incorrectly answered the question in the affirmative and upheld the Tribunal's decision that the AO could not refer the matter to the Valuation Officer for estimating the cost of construction of the house property. The appeal was allowed, and the High Court's decision was set aside.