rallis india limited vs. deputy commissoner of income tax range 1(3) and ors.

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WP/392/2006HC Bombay03 April 2006Bench: HON'BLE SHRI JUSTICE R.M. LODHA, HON'BLE SHRI JUSTICE J.P. DEVADHAR6 pages
AI SummaryAllowed

What did the High Court hold?

The Tribunal held that the Assessing Officer is not competent to refer the valuation of a capital asset to the Valuation Officer under Section 55A of the Income Tax Act, 1961, after the assessment order has been passed. The reasoning is that the entire exercise of referring a capital asset for valuation is for the purpose of computing the total income of the assessee, which is a prerequisite for passing the assessment order. Once the assessment order is passed, this exercise is complete, and the AO loses the competence to make such a reference. Consequently, the notice dated April 19, 2005, issued under Section 55A was rendered bad-in-law and was quashed. The Tribunal did not leave any issue undecided.

What were the facts?

The assessee, Rallis India Limited, is challenging a notice dated April 19, 2005, issued under Section 55A of the Income Tax Act, 1961. This notice was issued by the Assessing Officer (AO) to the District Valuation Officer for valuation of a property located at Suren Road, Andheri (E), Mumbai. The AO had already passed an assessment order under Section 143(3) on March 24, 2005, for assessment year 2002-2003. In that assessment order, the AO had applied a formula to determine the property's value as of April 1, 1981, by dividing the sale value by 7.5. The challenge is to the AO's competence to seek a valuation after completing the assessment and passing the order.

What were the issues?

1. Whether the Assessing Officer is competent to seek valuation of a capital asset under Section 55A of the Income Tax Act, 1961, after having already completed the assessment and passed the assessment order for the relevant year? The assessee contends that the AO's action is without competence as the purpose of Section 55A is to ascertain fair market value for the computation of total income, which is a pre-assessment order exercise. The revenue, through its counsel, argued that Section 55A does not specifically prohibit seeking valuation after the assessment order has been passed, implying it could be done for academic exercise or self-satisfaction. The Tribunal framed the core issue as the AO's competence to refer the matter to the Valuation Officer post-assessment order.

Which sections of the Income-tax Act were involved?

Section 55A,Section 143(3)

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.392 OF 2006 Rallis India Limited, ) having its registered ) office at Apeejay House, ) 7th Floor, Dinshaw Vachha ) Road, Churchgate, ) Mumbai - 400 020 ) .. Petitioner. V/s. 1. Deputy Commissioner of ) Income Tax Range 1(3), ) having his office at ) Aaykar Bhavan, M.K. ) Road, Mumbai 400 020 ) 2. District Valuation Officer ) I, having his office at ) Piramal Chambers, 2nd Floor, ) Parel, Mumbai - 400 012 ) 3. Union of India, ) Aayakar Bhavan, ) M.K. Road, ) Bombay - 400 020 ) .. Respondents. Mr.F.V. Irani with Mr.Jitendra Jain i/b. Mr.Atul K. Jasani for the petitioner. Mr.D.S. Chopra for the respondents. CORAM : R.M. LODHA & CORAM : R.M. LODHA & CORAM : R.M. LODHA & J.P. DEVADHAR, JJ. J.P. DEVADHAR, JJ. J.P. DEVADHAR, JJ. DATED : 3RD APRIL, 2006. DATED : 3RD APRIL, 2006. DATED : 3RD APRIL, 2006. ORAL JUDGMENT (Per R.M. Lodha, J.) : The writ petition raises an interesting question. The question is : is Assessing Officer competent to seek valuation of the property under CNR No : HCBM020031962006 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:16:11

2 Section 55A of the Income Tax Act after he has already assessed the income of the assessee and passed assessment order. 2. We, accordingly, issue rule and dispose of the same at this stage by consent of the counsel for parties. 3. The notice dated 19th April, 2005 issued under Section 55A of the Income Tax Act, 1961 is under challenge in the writ petition. 4. That in respect of assessment year 2002-2003, the Assessing Officer passed an assessment order under Section 143(3) on 24th March, 2005 is not in dispute. After having passed an assessment order, he has sought valuation of the property, ‘land located at Suren Road, Plot bearing CTS No.221 to 227, 229 to 233, 236, 237, 244 and 245 village Gundavali Andheri (E), Mumbai 93’. 5. The Assessing Officer in the assessment order applied the formula for valuation of the aforestated property as on 1st April, 1981 by dividing the value at which the property was sold by 7.5. According to him, the value of the property as on 1st April, 1981 was 7.5 time lesser than the value at which it was Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:16:11

3 sold. 6. Section 55A of the Income Tax Act, 1961 reads thus : "55A. With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer - (a) in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the Assessing Officer is of opinion that the value so claimed is less than its fair market value ; (b) in any other case, if the Assessing Officer is of opinion - (i) that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do, and where any such reference is made, the provisions of sub-sections (2), (3), (4) (5) and (6) of section 16A, clauses (ha) and (i) of sub-section (1) and sub-sections (3A) and (4) of section 23, sub-section (5) of subsection 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall with the necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:16:11

4 7. Section 55 provides that the Assessing Officer may refer the valuation of capital asset to a Valuation Officer with a view to ascertain the fair market value for the purposes of Chapter IV. This chapter deals with computation of total income. In other words, reference to the Valuation Officer for ascertaining the valuation of capital asset is for the purposes of computation of total income of the assessee. Having already completed this exercise and determined the value of the capital assets as on 1st April, 1981 and passed an assessment order on 24th March, 2005, in our view, it was not open to the Assessing Officer to refer the matter to the Valuation Officer for determination of fair market value of the said property. 8. Mr.D.S. Chopra, the counsel for the revenue submitted that Section 55A did not prohibit the ascertainment of the fair market value of the capital asset of the assessee for the purposes of capital gains after the assessment order has been passed by the Assessing Officer. He is right that Section 55A does not specifically prohibit so but it was not required to be prohibited specifically in Section 55A as the very purpose of ascertaining the fair market value of the capital assets of an assessee for capital gains by the Assessing Officer is for the Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:16:11

5 purposes of computing the total income of the assessee which may enable him to pass the assessment order. If the counsel for revenue wants to suggest that even after the assessment order has been passed by the Assessing Officer, by way of an academic exercise or to satisfy himself that he correctly determined the value of the property while computing the total income, he referred the matter for valuation, we are afraid, he is wrong. The entire exercise of reference to the Valuation Officer for ascertaining the fair market value of the capital assets of an assessee is for the purposes of computation of income from capital gains and for completion of assessment order and once that has been done, the Assessing Officer has no competence to refer to the Valuation Officer. 9. In our view, therefore, the reference made by the Assessing officer to the Valuation Officer for determination of the fair market value of the aforestated property is without competence and as a consequence thereof, the notice dated 19th April, 2005 issued under Section 55A of the Income Tax Act, 1961 is rendered bad-in-law and we quash the said notice. 10. Rule is disposed of accordingly. No costs. Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:16:11

6 (R.M. LODHA, J.) (J.P. DEVADHAR, J.) Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:16:11 Powered by TCPDF (www.tcpdf.org)

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