Income-tax---

---Reassessment---Power of ITO ---Power of enquiry---Reference to Valuation Officer under S. 55-A---Can be made only to ascertain fair market value of capital asset for determining capital gains---Valuation obtained in a case not involving capital gains has no statutory effect---It is open to assessee to rebut the valuation in the course of proceedings for reassessment-- Indian Income Tax Act, 1961, Ss.55A & 143---Constitution of India, Arts. 226 & 227.

The power of the Income-tax Officer in the course of making an assessment under the Act is wide and, for obtaining full information, the Income-tax Officer may make such enquiry as he considers necessary. In this view of the matter, notwithstanding an assessment made under section 143 (1) of the Income Tax Act, 1961, if the Assessing Officer is satisfied that the conditions precedent contained in section 147 are fulfilled in a particular case, then the said Assessing Officer may reopen the assessment. In the course of such enquiry, the Income-tax Officer may take the assistance of any person having expertise. But the Income-tax Officer is not entitled to make a reference to the Valuation Officer under section 55-A of the Income Tax Act. A reference made to a Valuation Officer under section 55-A has a definite connotation and a definite statutory effect and, therefore, unless the conditions precedent for making such reference are satisfied, in exercise of his general power of enquiry, the Income-tax Officer cannot make a4 reference under the said provision.

Held, on the facts, that no capital gain arose and, therefore, no reference could have been made under section 55-A to the Valuation Officer. The valuation report obtained from the Valuation Officer in this case could not be said to be a valuation made in exercise of power under section 55-A and no statutory effect could be attached to such report. It could merely be treated as a piece of evidence which the Income-tax Officer obtained in the course of enquiry and it was open to the assessee to rebut the valuation in the course of the proceedings that had been initiated.

I. Mohanty, R.K. Pradhan and P. Mohanty for the Assessee.

A.K. Ray for the Commissioner.

JUDGMENT

G.B. PATNAIK, J: --The valuation report, valuing the property of the petitioner, made by the Valuation Officer on a reference being made by the Income-tax Officer under section 55-A of the Income Tax Act, 1961, annexed as Annexure-3 to the writ application is being challenged by the petitioner, inter alia, on the ground that the provisions of section 55-A of the Income Tax Act, 1961, can have no 'application to any enquiry under the Income Tax Act, 1961, to find out the investment made by the assessee in the construction of a building.

The petitioner is a registered firm and had constructed a hotel called "Hotel Amar". The construction of the hotel building started in the year 1981 and was completed in the year 1983. The investment made by the petitioner in different assessment years in constructing the hotel building was indicated by the petitioner and ultimately, an assessment was made by the Income-tax Officer under section 143(1) of the Income Tax Act and the investment made was accepted by the Income-tax Officer. The assessee had also furnished the valuation of the house made by a registered valuer. In 1987, in the course of taking up the assessment proceeding of the petitioner, the Income-tax Officer being of the opinion that the valuation of the house submitted by the petitioner was incorrect made a reference to the Valuation Officer, invoking his jurisdiction under section 55-A of the Income Tax Act, 1961, and, on receipt of the report from the said Valuation Officer and finding our a huge difference between the figures submitted by the petitioner with regard to the valuation of the hotel building and the figures arrived at by the said Valuation Officer with regard to the valuation of the said hotel building, the-Income-tax Officer issued a notice under section 148 of the Income Tax Act reopening the assessment proceeding under section 147 (a) of the said Act. At that stage, the petitioner had approached this Court and had obtained an order staying the assessment proceeding which was sought to be reopened in exercise of his power under section 147(a) of the Income Tax Act.

Mr. Mohanty appearing for the petitioner contends that a reference to the Valuation Officer invoking his power under section 55-A of the Income Tax Act can be made only to ascertain the fair market value of a capital asset for the purpose of the said Chapter dealing with capital gains. Since, in constructing a house and making some investments, the assessee has submitted the figures which were accepted under section 143(1) of the Act, even if the Income-tax Officer decides to reopen the assessment in exercise of his power under section 147(a), no question of any capital gain arises and, therefore, the reference made by the Income-tax Officer to the Valuation Officer and the consequent report of the Valuation Officer must be held to be without jurisdiction.

Mr. Ray, learned Standing Counsel for the Department, though he concedes that section 55-A, in terms cannot have any application to the facts and circumstances of the present case as no capital gain is involved, contends that the power of the Income Tax Officer to hold such enquiry as he deems fit and necessary while reopening an assessment proceeding is wide enough under the Act and, in exercise of that power, if the Income-tax Officer takes the assistance of a Valuation Officer for valuing the building of the assessee, the said report is merely an item of evidence and no infirmity can be found in holding such enquiry and obtaining such report from the Valuation Officer.

According to Mr. Ray, even though section 55-A has no application, the report submitted by the Valuation officer is in the nature of an item of evidence with regard to valuation by a person who has the expertise of valuing and that report can always be obtained by the Income-tax officer its the course of an enquiry.

We have no doubt in our mind that the power of the Income-tax Officer to the course of making an assessment under the Act is wide and, for obtaining full information, the Income-tax Officer may make such enquiry as he considers necessary. In this view of the matter, notwithstanding an assessment made under section 143(1), if the Assessing Officer is satisfied that the conditions precedent contained in section 147 are fulfilled in a particular case, then the said Assessing Officer may reopen the assessment and, in the present case, this has been done as the Income-tax Officer is of the opinion that the valuation of the house submitted by the assessee is inaccurate and incorrect. In the course of such enquiry, no doubt the income-tax Officer may take the assistance of any person having the expertise and such valuation made would be merely an item of evidence. But, by no stretch of imagination, the Income-tax Officer is entitled to make a reference to the Valuation Officer under section 55-A of the Income Tax Act. A reference made to a Valuation officer under section 55-A of the Act has a definite connotation and a definite statutory effect and, therefore, unless the conditions precedent for making such reference are satisfied in exercise of his general power of enquiry, the Income tax Officer cannot make a reference under the said provision. As has been stated earlier and as conceded by learned standing council for the Department, in the facts and circumstances of the case, no question of capital gain arises and, therefore, invoking the jurisdiction of the Valuation Officer under section 55-A was wholly inappropriate and in fact, no reference could have been made. In that view of the matter, the valuation report obtained from the Valuation Officer cannot be said to be a valuation made in exercise of power under section 55A of the Act and, to such report, no statutory effect can be attached. It can merely be treated as a piece of evidence which the Income tax officer obtains in the course of enquiry and it is open to the assessee to rebut the said valuation in the course of the proceeding that has been initiated for reopening the assessment already made. With these observations, we dispose of this writ application by requiring the Income-tax Officer to conclude the proceeding as expeditiously as possible. The interim order, dated July 15, 1989, which was made absolute by order, dated August 2,1989, stands vacated. The writ application is disposed of with the aforesaid observations and directions. No costs.

R.K. PATRA, J: --I agree.

M.BA./2409/T Order accordingly.