TMI BlogREFERENCE BY ASSESSING OFFICER TO DEPARTMENTAL VALUATION OFFICERX X X X Extracts X X X X X X X X Extracts X X X X ..... REFERENCE BY ASSESSING OFFICER TO DEPARTMENTAL VALUATION OFFICER - By: - Mr. M. GOVINDARAJAN - Income Tax - Dated:- 7-4-2015 - - At times in the process of completion of the assessment of a taxpayer or for any other purpose, the tax authorities need to ascertain the value of any capital asset. In such a case, the tax authorities can make a reference to the valuation officer for ascertaining the value of the capital asset. section 55A contains the provision relating to the power of the tax authorities for making a reference to the valuation officer for ascertaining the value of a capital asset. Apart from the provisions of section 55A , section 142A also empowers the Tax Authorities to make a reference to a Valuation Officer. Unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 142A, the Assessing Officer for the purposes of assessment or reassessment, make a reference to a Valuation Officer to estimate the value, including fair market value, of any asset, property or investment. The Assessing Officer may make a reference to the Valuation Officer as above whether or not he is satisfied about the correctness or completeness of the accounts of the taxpayer. The Valuation Officer, on a reference made by the Assessing Officer, shall, for the purpose of estimating the value of the asset, property or investment, have all the powers that he has under section 38A of the Wealth-tax Act, 1957 . The Valuation Officer shall, estimate the value of the asset, property or investment after taking into account s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch evidence as the taxpayer may produce and any other evidence in his possession gathered, after giving an opportunity of being heard to the taxpayer. The Valuation Officer may estimate the value of the asset, property or investment to the best of his judgment, if the taxpayer does not co-operate or comply with his directions. The Valuation Officer shall send a copy of the valuation report, to the Assessing Officer and the taxpayer, within a period of six months from the end of the month in which a valuation reference is made. The Assessing Officer may, on receipt of the report from the Valuation Officer, and after giving the taxpayer an opportunity of being heard, take into account such report in making the assessment or re-assessment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In K.K. Seshaiyer V. Commissioner of Income Tax - 1998 (7) TMI 6 - MADRAS High Court the Madras Division Bench held that when the actual cost of construction was duly recorded by the assessee and that cost also was set out in the agreement with the contractor, specifying the rates and which rates had been accepted by the Tribunal and there was no finding that the building was larger than the assessee had claimed or had better quality of construction or features than the assessee had recorded in his books, the opinion of the valuer could not be straightway substituted for the actual cost that was recorded in the assessee s books. The Tribunal had found that the books maintained by the assessee were credible. Therefore the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not right in not accepting the valuation of house property submitted by the assessee, In Sargam Cinema V. Commissioner of Income Tax - 2009 (10) TMI 569 - Supreme Court of India the Supreme Court held that the assessing authority could not have referred the matter to the Departmental Valuation Officer without the books of account being rejected. In Commissioner of Income Tax V. Bajrang Lal Bansal - 2010 (8) TMI 65 - DELHI HIGH COURT the High Court held that the primary burden to prove understatement or concealment of income was on the Revenue and it was only when such burden was discharged that it would be permissible to rely upon the valuation given by the Departmental Valuation Officer. The opinion of the DVO, pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r se, was not an information and could not be relied upon without the books of account being rejected which had not been done in the case of assessee. In Family of SP.S.S. SP. Subramanian Chettiar V. Income Tax Officer - 2015 (2) TMI 772 - MADRAS HIGH COURT the appellant constructed a multi storeyed residential-cum-commercial complex at Karaikudi during the assessment years 1994-95, 1995-96 and 1996-97. The appellant submitted the total cost of construction as ₹ 41,49,070. The Assessing Officer and the Departmental Valuation Officer estimated the cost of construction at ₹ 58,09,000/-. The appellant made objections against the valuation of DVO. The Assessing Officer considered the objections raised by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessment order was passed treating the difference as income for the three financial years. Accordingly a sum of ₹ 4,84,610/- was added in the income of 1996-97 and the assessment was completed. The assessee filed an appeal against the order of assessing authority before Commissioner of Income Tax (Appeals). The Commissioner (Appeals) reduced the cost from ₹ 58,09,000/- to ₹ 46,04,145/- and directed the assessing authority to adopt the said value as cost of construction. The appellant and the Department filed appeals before the Tribunal against the order of the Commissioner (Appeals). The Tribunal held that it is an admitted fact that the Assessing Officer could not find out anything over and above the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments made to the contractors as the cost of construction as per the bills raised by them. The assessee has accounted for the entire amount paid to the contractor. Further the Assessing Officer could not find out any defect in respect of the cost accounted for in the books of account and the Departmental Valuation Officer has valued the property at plinth area rates. The DVO has taken into account the excess plinth area compared to the actual and the rate adopted by the Department was also excessive as he has applied the CPWD rates. Since the construction was carried out in a mofussil area and the quality was ordinary, the State PWD rates should have been applied. The Tribunal held that the Commissioner (Appeals) has reasonably re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced the cost of construction taking into consideration the local area rates, quality of materials in construction etc., The question of law to be considered by the High Court is taken as - Whether the Assessing Officer is entitled to refer the matter to the Departmental Valuation Officer, when the books of accounts were not rejected? The assessee contended before the High Court as below: The onus probandi lies on the Assessing Officer to establish that the assessee has understated or concealed the actual cost of construction; Without discharging the onus, the Assessing Officer is not empowered to rely upon the valuation given by the Departmental Valuation Officer, when the books of account were never rejected; The R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue did not dispute the fact that the books of account furnished by the assessee were never rejected by the Department. The High Court found that the books of account furnished by the assessee were never rejected. No explanation was called for from the assessee stating that there was concealment or understatement of amount in the books of account. The High Court held that since the initial burden cast on the Department to prove that there was understatement or concealment of income has not been discharged the Assessing Officer is not empowered to refer the matter to the Departmental Valuation Officer or rely on such report. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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