TaxTMI 
TaxTMI 
Reforming Asset Valuation in Tax Assessments : Clause 269 of Income Tax Bill, 2025 Vs. Section 142A of Income-tax Act, 1961
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....in situations where the value of assets is in dispute or where there is suspicion of understatement or misreporting. The legislative evolution from Section 142A to Clause 269 reflects both the need for procedural clarity and the desire to address practical challenges encountered in tax administration. This commentary provides a comprehensive analysis of Clause 269, examines its objectives and practical implications, and offers a detailed comparative analysis with Section 142A, highlighting the continuities, changes, and potential impacts on stakeholders. Objective and Purpose The primary objective of Clause 269, as with its predecessor Section 142A, is to empower the Assessing Officer to seek an independent and expert estimation of the va....
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....operty, or investment. This is a broad enabling provision, not restricted to any specific type of asset or circumstance, thereby giving the AO considerable discretion. Sub-section (2) clarifies that such a reference can be made irrespective of the AO's satisfaction regarding the correctness or completeness of the assessee's accounts. This effectively allows the AO to seek valuation whenever deemed necessary, without the prerequisite of establishing a defect in the accounts. 2. Powers and Procedures for Valuation (Sub-section 3) Sub-section 3 is a significant expansion over Section 142A, as it provides detailed procedures and powers for the Valuation Officer and those assisting him: * Entry and Inspection: The VO, or any authoriz....
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....cation and Rectification of Report (Sub-sections 6 and 7) The VO is required to send the valuation report to both the AO and the assessee (sub-section 6). Notably, sub-section 7 introduces the power of rectification, allowing the VO to amend the report to correct any mistake apparent from the record, as per section 287. This is a significant addition, providing a mechanism for correcting errors without the need for protracted litigation. 5. Use of Valuation Report by Assessing Officer (Sub-section 8) Upon receipt of the VO's report, the AO may take it into account for assessment or reassessment, after providing the assessee an opportunity of being heard. This procedural safeguard ensures that the assessee can contest or clarify the v....
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....The VO is given substantial powers, including those of a civil court, but these are counterbalanced by procedural checks (notice, hearing, rectification). * For Tax Administration: The provision aims to streamline valuation proceedings, reduce litigation, and ensure assessments are based on credible, expert evidence. * Compliance and Procedural Impact: The six-month time limit and rectification mechanism are likely to improve efficiency and accuracy, but may also increase the workload for VOs and their assistants. Comparative Analysis: Clause 269 vs. Section 142A Provision Section 142A (Income-tax Act, 1961) Clause 269 (Income Tax Bill, 2025) Key Differences / Comments Reference to Valuation Officer AO may refer to VO for e....
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....riod. Time limit maintained; in Clause 269, the time frame is in a separate sub-section for clarity. Definition of Valuation Officer As per Wealth-tax Act, 1957. Central Government to appoint VOs; senior officials may appoint assistants. Moves towards self-contained administration, less reliance on external statutes. Application in Assessment AO to give opportunity of being heard before using VO's report. Same safeguard retained. No substantive change; procedural fairness maintained. Key Observations on Comparative Analysis * Procedural Detailing: Clause 269 is more comprehensive and self-contained, detailing the powers, procedures, and safeguards, whereas Section 142A relies on cross-references to the Wealth-tax Ac....
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.... record," which may be narrowly construed, potentially leaving out substantive errors. * Overlap with Other Statutes: Despite moving towards a self-contained code, there may still be overlaps or inconsistencies with other valuation-related provisions in tax or property laws. * Resource Constraints: The effectiveness of the provision depends on the appointment and availability of qualified VOs and assistants, which may be a challenge in practice. Conclusion Clause 269 of the Income Tax Bill, 2025, represents a significant advancement in the procedural framework for asset valuation in tax assessments. By providing a detailed, self-contained, and balanced mechanism for reference to Valuation Officers, it addresses many of the practical a....