TMI Blog1993 (3) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... e by a registered valuer who inspected the site on 24-8-1986. The cost of construction as per the accounts maintained by the assessee was Rs. 1,69,180. The said building was used for own residence of the assessee. As per the registered valuer's report, the cost of construction came to Rs. 1,19,200 plus Rs. 58,500 is equivalent to Rs. 1,77,700. For assessment year 1987-88, the assessee returned an income of Rs. 18,890 and it was accepted by the Income-tax Officer by the assessment order dated 26-10-1987 completed under section 143(1). After the assessment was over, the Income-tax Officer on his own, reported the question of valuation of this building to the Departmental Valuation Cell. The Departmental Valuation Cell submitted its report long after the assessment was over on 26-10-1987. According to the valuation done by the Departmental Valuation Officer, the cost of construction of property was estimated at Rs. 2,63,000 resulting in a difference of Rs. 93,820. After the departmental valuation report, the learned Commissioner of Income-tax, Visakhapatnam had taken up the case for scrutiny and found that the assessment completed under section 143(1) is prejudicial to the interests o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In support of this proposition, the assessee relied on the decision of the Tribunal in Sri Harisankar Cashew Mfg. Co.'s case. This argument was sought to be challenged by the learned Departmental Representative on the following grounds : (i) According to him, any reference to the Departmental Valuation Officer can be made either in cases where capital gains tax is to be levied or in cases where the Income-tax Officer wanted to know the estimated cost of construction and for this proposition, learned departmental representative relied upon the Andhra Pradesh High Court's decision in Daulatram v. ITO [1990] 181 ITR 119. Under the provision of section 55A of Income-tax Act, a reference can be made to the Valuation Cell more than once in the same proceedings and therefore the Departmental Valuation Officer's report, received in this case, is perfectly valid order and cannot be held to be invalid, under any ground whatsoever. Thus, it is argued by the learned Departmental Representative that a reference under section 55A can be made for any purpose contemplated under Chapter-IV which is titled " Computation of total income ". 4. In that case, the first reference was made with the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. [1991] 190 ITR 404 (Cal.) and (vii) Kanhaiyalal v. CIT [1981] 20 CTR (Raj.) 105. The learned Advocate for the assessee Sri Ranganathachary submitted before this Tribunal that each one of the above authorities cited by the learned Departmental Representative does not support the proposition for which they have been cited and they are distinguishable on facts with the present case and ratios of none of those decisions apply to the present case before this Tribunal and they are distinguishable. This Tribunal had gone through all the decisions cited on behalf of both the parties. The Tribunal is of the opinion that none of the decisions cited by the learned Departmental Representative come to support the proposition for which they are cited and the ratios of those decisions cannot be applied to the facts of the present case which are distinguishable. For instance, Daulatram's case what all that is held by the Andhra Pradesh High Court is that a reference can be made under section 55A of Income-tax Act to the Departmental Valuation Officer for any purpose contemplated under Chapter-IV which is titled ' Computation of total income '. Even though section 55A falls under the sub-ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found the following at page 89 of the reported decision :--- " Moreover, the assessee will have full opportunity of showing to the Income-tax Officer whether he had jurisdiction or not and whether the income assessed in the assessment orders which were originally passed was correct or not. " So also the question of jurisdiction was allowed to be contested in the fresh assessment that is to be made by the Income-tax Officer. Thus, the Supreme Court's decision cannot be taken to be the authority for the proposition that the enquiries made subsequent to the assessment can be validly taken for consideration. The Explanation to section 263 was substituted with new Explanation with effect from 1-6-1988. For the first time, Explanation defines the word " record " and it includes all the records relating to the proceedings under this Act, available at the time of examination by the Commissioner. It is not simply enough if the recorded information is available at the time of examination by the Commissioner. It is also essential that such ' record ' should relate to the proceedings under this Act. The prime objection for treating the departmental valuer's report which was called for and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that section can be resorted to only if there are pending proceedings. We are not on that question at all. In that decision either section 131 of Income-tax Act or section 55A of Income-tax Act were at all discussed or their scope determined. Therefore, the Delhi High Court's decision cannot be of any help to the revenue. The Supreme Court's decision in the case of Pooran Mal does not apply since it was contended in that case that even supposing the District Valuer's report is obtained subsequent to the closer of the assessment and even though such report is obtained illegally, the consideration of such report cannot be excluded. However, the decision of the Hon'ble Supreme Court at page 525 repelled such a contention, advanced on behalf of the appellants before the Hon'ble Supreme Court and it is as follows :--- " Now, if the Evidence Act, 1871, which is a low consolidating, defining and amending the law of evidence, no provision of which is challenged as violating the Constitution, permits relevancy as the only test of admissibility of evidence (see section 5 of the Act) and, secondly, that Act or any other similar law in force does not exclude relevant evidence on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of exercise of jurisdiction under section 263. The Calcutta High Court held that it can form such a basis. At page 407, the following is what is held by the Calcutta High Court :--- " Where any proceeding is initiated in course of the assessment proceeding having a relevant and material bearing on the assessment to be made and the result of such proceeding was not available with the Income-tax Officer before the completion of the assessment, but the result came subsequently, the revising authority is entitled to look into such material as it forms part of the assessment records of the particular assessment year. An assessment made without considering the valuation report for which proceedings had already been initiated in the course of an assessment proceeding is not a proper assessment and such assessment is erroneous insofar as it is prejudicial to the interest of the revenue. " The Hon'ble Calcutta High Court decided that when a reference is made during the pendency of proceedings, then even though the report was received subsequent to the proceedings, such a report still forms part of the proceedings. However, they did not decide the validity of the report when a referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such a circumstance, the ITO has no authority to refer the question of valuation on his own to the Valuation Cell. A report which is obtained after the assessment proceeding was over, regarding valuation of a property, cannot be of any value, nor can such a report form part of record of any proceeding under the IT Act. Therefore, the valuation report is invalid. We are inclined to agree with the arguments advanced by Sri Man Mohan, learned Advocate for the assessee especially when he argued that the valuation report dated 21st November, 1988 does not form part of any proceeding before the ITO and, therefore, cannot form the basis for exercising revisionary powers under section 263 by the CIT. We are also one with him when he argned that the said report of the Valuation Officer cannot be considered to be forming part of ' record ' which the Commissioner is entitled to examine to invoke jurisdiction under section 263, since the same does not relate to any proceeding under the IT Act. We further agree with his contention that for invoking powers under section 131, a valid proceeding should be pending before the ITO. " Having regard to all the above, this Tribunal is of the opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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