1995 (4) TMI 43 - HC - Income Tax

Summary

Issues: Valuation of building for income tax assessment

1. Valuation Discrepancy:
The petitioner, a co-owner of a building, "Kandonkulathy Towers," faced valuation discrepancies during income tax assessment. The construction cost, as per the petitioner's books, was Rs. 52,16,035, while an Approved Valuer estimated it at Rs. 53,30,672. However, the District Valuation Officer valued it at Rs. 1,30,41,085, leading to a significant difference. The Assessing Officer reopened assessments based on this report.

2. Assessment Proceedings:
The Assessing Officer referred the matter to the Valuation Cell of the Income-tax Department, resulting in an inflated valuation of the building. Despite objections from the co-owners and a deduction granted, the Assessing Officer's orders lacked reasoning. The co-owners appealed to the Commissioner of Income-tax (Appeals), who set aside the assessment, emphasizing the lack of reasoning in the District Valuation Officer's report.

3. Fresh Valuation Request:
Following the first respondent's directions, the Assessing Officer requested a detailed valuation from the District Valuation Officer. However, the Officer refused, prompting the petitioner to file a representation before the Commissioner of Income-tax (Administration). While awaiting action on the representation, the petitioner received an assessment order based on the erroneous valuation report.

Judgment:
The High Court quashed the assessment order (exhibit P-5) and directed the Assessing Officer to reassess the petitioner solely based on a valid valuation report free from the errors highlighted by the first respondent. The Court held that assessing the petitioner based on a flawed valuation report was improper, emphasizing the need for a correct valuation for income tax assessment purposes. The original petition was allowed in favor of the petitioner.