Opinion Of Eminent Legal Luminaries On Controversial Issues

Can Assessment Be Reopened Or Rectified On The Basis Of Valuation Report Of DVO?

QUERY: Can an assessment be made subject to receipt of the report of the DVO? If Yes, whether recourse has to be taken of section 154 or 148 or section 263?
ANSWER: The Calcutta High Court in Saharanpur Light Railway Co. Ltd. vs. CIT [208 ITR 882] has observed that the Assessing Officer loses his power in the matter of valuation only when the Valuation Officer makes a report, the power of valuation has to revert to the Assessing Officer, unless the Valuation Officer sends his report, there is no bar on the Assessing Officer’s completing the assessment taking the value of asset referred for valuation in the best possible method in the limiting circumstances of the situation. So if, till the expiry of limitation, no report of valuation comes from the DVO, the original power of the Assessing Officer to value the asset himself revives.

However, no recourse could be under section 148, as a valuation report is only an opinion of valuer. The same does not amount to information nor can it form a ground for reason to believe. An opinion of a third person cannot be a "reason to believe" of the Assessing Officer. It is the Assessing Officer who has to assert on materials available that he has reason to believe that any income chargeable to tax has escaped the assessment. The reason to believe cannot be substituted by an opinion of the valuer. [See Bhola Nath Majumdar vs. ITO – 221 ITR 608 (Gau.)]

Similarly, in Girdhar Gopal Gulati vs. UOI [269 ITR 45] the Allahabad High Court held that where an assessment is completed after detailed enquiry under section 143(3), valuation report subsequently obtained by the Assessing Officer cannot justify a revision by the Commissioner under section 263 on the same reasoning that valuation report is only an opinion and cannot constitute information to justify the inference of understatement of income and therefore prejudice to revenue.

Further, DVO’s report on valuation of property is debatable issue and therefore not possible to rectify under section 154 of the Act.
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