TMI Blog1992 (1) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... (building as well as fixtures, furniture and machinery fitted therein) at Rs. 18,05,401. The ITO referred the question of valuation of the said cinema theatre to the Valuation Cell, Kakinada, by his requisition dt. 21st Jan., 1988. The Valuation Cell estimated the cost of construction at Rs. 16,89,000. The cost of machinery and furniture was admitted by the assessee itself at Rs. 4,23,407. Hence, the total cost of the cinema hall was worked out at Rs. 21,12,407. The valuation report was signed by the Executive Engineer, Valuation Cell, on 22nd March, 1988. The Valuation Cell furnished the report to the ITO on 28th March, 1988. However, even before the receipt of the valuation report, the ITO completed the assessment under s. 143(1) accepting the total income of Rs. 1,360 returned by the assessee by his assessment order dt. 9th Feb., 1988. 4. The CIT, Visakhapatnam, while making a check of impugned assessment, felt that the difference between Rs. 21,12,407 which was estimated as cost of the cinema hall by the Valuation Cell and its admitted value at Rs. 18,05,401 which comes to Rs. 3,07,006, is to be treated as unexplained investment, while completing the assessment under s. 143. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the reply of the assessee, were rejected. The learned CIT held that the assessment completed by the ITO prior to the receipt of the valuation report sought for by him from the Valuation Cell, had resulted in an underassessment to the tune of Rs. 3,07,006 being the difference in cost of construction which was assessable as unexplained investment under s. 69 of the IT Act. He rejected the tenability of the contention raised in the assessee s petition that the difference in cost of construction would work out to only Rs. 1,53,000. The learned CIT held that the assessee itself admitted the value of the cinema hall building at Rs. 18,05,401 in its IT statement as against the approved valuer s report of Rs. 15,35,449 to be the estimated cost of construction. Ultimately, the learned CIT held that he will set aside, the assessment and direct the ITO to make a fresh assessment after affording to the assessee an adequate opportunity and after placing the Divisional Valuation Cell s valuation report to the assessee for its objections. The learned CIT also held that the ITO may seek the assistance from the Valuation Cell while dealing with the objections of the assessee. 5. Against 263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions orally or in writing in respect of the estimated figure proposed by the Valuation Officer. The notice must call upon the assessee to produce at the hearing, his evidence in support of the returned valuation. Sub-s. (5) sets down the requisites of the hearing before the Valuation Officer. The Valuation Officer should then, taking into consideration all the materials on record, proceed to determine in an order in writing, his valuation of the assets in question. The Valuation Officer, cannot dispense with the statutory requirements as to giving notice to the assessee and hearing him and finalise his orders and report. The Valuation Officer cannot skip the statutory requirements in order to hustle the hearing unfairly, just to make the WTO s position safe with regard to the assessment. Since no preliminary report under s. 16A(4) was given to the assessee and since his objections were not called and he was heard before passing an order under sub-s. (5) of s. 16A, the whole of the valuation report is vitiated. Further, it was contended that a valuation report obtained after the completion of assessment, did not form part of any proceeding before the ITO. So also it cannot form pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting year in question cannot be known and for this reason also the direction to add Rs 4,23,407 is illegal and unjustified and for that reason s. 263 orders of the CIT cannot be sustained. 6. As against these submissions advanced by the learned counsel for the assessee, the learned Departmental Representative submitted that the arguments advanced for the assessee are neither tenable nor relevant. Firstly, the reference to the Valuation Cell was not made either under s. 16A of WT Act for purpose of ascertaining the value of the asset or under s. 55A of the IT Act for purposes of determining the capital gains arising out of the transfer of a capital asset in which case also the whole of the procedure contemplated under s. 16A of the WT Act, should be gone through. In this case, the ITO wanted to know the actual cost of construction, in order to determine whether there was any undisclosed investment. A copy of the report of the Valuation Cell was provided at pp. 32 to 50 of the paper book. In p. 34 itself, the Valuation Cell stated as part of their report the following: "Valuation as an advisory capacity of the property under IT Act, 1961". It is also stated in the same p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentative relied upon the latest Calcutta High Court decision reported in CIT vs. S.M. Oil Extraction (P) Ltd. (1992) 102 CTR (Cal) 142 : (1991) 190 ITR 404 (Cal). In the facts of that case also the CIT sought to base his revisionary order on the valuation report received subsequent to the passing of the assessment order. The question ultimately came up before the Calcutta High Court was, whether such a revisionary order is valid. Upholding the validity of the said revisionary order, the Calcutta High Court held the following : "The expression record as used in s. 263 of the Act is comprehensive enough to include the whole record of evidence on which the original assessment order was based. All proceedings which constitute evidence on which the assessment order is based must normally be regarded as part of the record. So long as the revisional authority does not rely on any extraneous matter, his jurisdiction cannot be questioned. The assessment order which on the face of it was a good order at the time when it was passed may in the light of information which although asked for but received subsequent to the completion of the assessment appear to be erroneous. The CIT has the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rights and cannot be questioned by the assessee. 8. I have heard the arguments on both sides. I have already extracted the ratio of the Calcutta High Court decision in CIT vs. S.M. Oil Extraction (P) Ltd. It is no doubt true that the said decision supports the view canvassed by the Revenue. However, it may be mentioned that the earlier decisions of the Calcutta High Court itself were differently decided holding that the valuation report received subsequently to the closing of assessment proceedings, cannot be made use of by the CIT, for purposes of exercising revisionary jurisdiction. Reference may be made in this connection to the Calcutta High Court decision in Reliance Jute and Industries Ltd. vs. ITO Ors. (1984) 43 CTR (Cal) 168 : (1984) 150 ITR 643 (Cal) and also Smt Uma Devi Jhawar vs. WTO (1983) 32 CTR (Cal) 16 : (1982) 136 ITR 662 (Cal). In those two cases it was held that when the assessment was once completed, the valuation obtained subsequent to the assessment, would not be valid. However, as the matter stands now, the CIT while exercising revisionary jurisdiction, is entitled to look into every record forming part of the assessment proceeding. The word "record" is d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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