AI Drafter 
TaxTMI 
TaxTMI 
2003 (6) TMI 8
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....e Income-tax Officer was justified in referring the question of cost of construction of a building belonging to the appellant to the Departmental Valuation Officer?" The applicant is an individual, who is an assessee under the Act. The assessment year concerned is 1977-78. The Assessing Officer referred the question of cost of construction of a building constructed by the assessee during the relevant accounting period ended on March 31, 1977, to the Executive Engineer, Valuation Cell, Thiruvananthapuram. The said officer had valued the cost of construction of the building at Rs. 3,53,000, as against the cost of construction of Rs. 2,09,094 furnished by the assessee in her return. Based on the valuation made by the Executive Engineer, the....
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....contention of the assessee that there is no provision as such in the Act for reference of the cost of construction of a building except for the purpose of determining the capital gain contained in section 55A of the Act. The first appellate authority, however, held that the provisions of section 142(2) of the Act gave sufficient power to the Assessing Officer to make such enquiry as he considers necessary for the purpose of obtaining full information in respect of the income or loss of any person. According to the first appellate authority, this power conferred under section 142(2) of the Act enables the Assessing Officer to refer the cost of construction of the building to the Departmental Valuer, since the Assessing Officer does not have ....
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.... investment. He also submitted that the reliance placed on the provisions of section 142(2) of the Act by the two appellate authorities are not justified. Learned standing counsel for the Revenue, on the other hand, submits that the provision of section 55A of the Act, providing for valuation of the cost of construction of an asset for the purpose of capital gains would equally apply for determination of the cost of construction of a building for other purposes also. He further submitted that even assuming that section 55A is not attracted, sections 131,133(6) and 142(2) of the Act enable the Assessing Officer to collect a valuation report in respect of the cost of construction of a building by making a reference to the Departmental Valu....
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.... reference of the question of cost of construction of a building to the Departmental Valuer for the purpose of finding out whether there is any unexplained investment in the building. The only specific provision available in the Act for reference to the Departmental Valuation Officer to ascertain the cost of construction of a building is contained in section 55A of the Act. Admittedly, such a reference is required only for the purpose of arriving at the fair market value of an asset for the purpose of capital gains tax. In fact, a Division Bench of this court in Dr. C. Ashokan Nambiar' case [2000] 245 ITR 37 has held that section 55A has application only to transaction involving capital gains. Of course, the Madras High Court in C.T. Laxman....
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....en the view that a reference is permissible under section 142(2) of the Act. Since the two appellate authorities have only relied on the provisions of section 142(2) of the Act to justify the reference of the question of cost of construction of the building by the Assessing Officer to the Executive Engineer, Valuation Cell, Thiruvananthapuram, we will also advert to the said provision. The heading of section 142 reads, "Enquiry before assessment", and subsection (2) thereof reads thus: "(2) For the purpose of obtaining full information in respect of the income or loss of any person, the Income-tax Officer may make such enquiry as he considers necessary." In the instant case, as already noted, the assessee had furnished the cost of ....
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.... to the assessee, nor was the assessee given any opportunity by the Executive Engineer before preparing the report. This is virtually a collection of information behind the assessee with regard to the cost of construction of the building. In such circumstances, the assessee can legitimately contend before the Assessing Officer that the information regarding the cost of construction, thus gathered behind the assessee, should be furnished to the assessee so as to enable the assessee to file objections. There is no dispute that all such opportunities have been given and the Assessing Officer has, after considering the objections, modified the estimation by way of deleting certain expenses incurred. According to us, section 142(2) of the Act en....