Rc/54/2002 Of Commissioner Of Income-Tax v. Dr.p. Siva Reddy

THE HON’BLE SRI JUSTICE L.NARASIMHA REDDYANDTHE HON’BLE SRI JUSTICE CHALLA KODANDA RAMR.C.No.54 of 2002 ORDER:(per the Hon’ble Sri Justice L.Narasimha Reddy) This reference is made at the instance of the Revenue by theHyderabad Bench ‘A’ of the Income Tax Appellate Tribunal throughorder dated 17.06.2002 in R.A.No.438/Hyd/1995 inI.T.A.No.819/Hyd/1990. The respondent is an assessee. He filed returns for theAssessment Year 1985-86. The Assessing Officer has chosen to referthe matter to Valuation Cell on certain aspects, through hisassessment order dated 31.03.1989. On such reference, a sum ofRs.3,70,864/- was added. Aggrieved by that, the respondent filedappeal before the Commissioner. Through order dated 05.03.1990,the Commissioner upheld the reference to Valuation Cell, but reducedthe differential amount to Rs.75,000/-. The appellant on the one hand and the respondent on the othercarried the matter to the Tribunal assailing the order of theCommissioner. Through order dated 24.03.1995, the Tribunal upheldthe contention of the respondent and took the view that once theAssessing Officer did not express any doubt or find defect in the booksof account or cost of construction furnished by the assessee, there isno basis for him to refer the matter to Valuation Cell. Not satisfied withthat, the Revenue filed R.A.No.438/Hyd/1995 with a request to referthe relevant question to this Court. Accordingly, the following questionis referred: “Whether on the facts and circumstances of the case,the Tribunal is justified in holding that the very reference madeto the Valuation Cell is not valid when the Assessing Officerhas not pointed out any defects in the books of account orcost of construction maintained by the assessee?” Heard Sri S.R. Ashok, learned Senior Counsel for the appellant and Sri A.V.Siva Kartikeya, learned counsel for the respondent. The exercise of referring any aspect to a Valuation Cell isresorted to under Section 55-A of the Income Tax Act, 1961 (for short‘the Act’). It is mostly in relation to the ascertainment of the marketvalue of the assets, which are transferred and the resultant saleproceeds are subject to capital gains tax. The Judicial opinion differedas to whether the mechanism of referring the matter to Valuation Cellcan be pressed into service, for other purposes. The parliamentstepped in and enacted Section 142A in the year 2004, wherein suchexercise was made applicable to various other purposes. Theprovision was given a retrospective effect, from the year 1972. With the retrospective amendment caused by inserting Section142A, there does exist legal basis for the Assessing Officer to refer thematter to Valuation Cell. However, the existence of power, by itself isnot a justification, for exercise thereof. It is only when the situationscontemplated under law warrant, that power can be exercised. In theinstant case, there is no material to suggest that the Assessing Officerhas expressed any doubt, on the books of account, or other particularsof cost of construction of the building as maintained by therespondent. Be that as it may, the tax component in this case isslightly above the amount stipulated in the notification issued underSection 268-A of the Act. We, therefore, decline to answer the question. L.NARASIMHA REDDY, J Date: 23.07.2014 va CHALLA KODANDA RAM, J