Opinion Of Eminent Legal Luminaries On Controversial Issues

Inquiry before assessment– Special audit– Reference to Valuation Officer

QUERY: Assessing Officer ascertaining the defect in the books, as to accounting for Cost of Construction refer it to “Valuation Officer” u/s. 142A.
Can Assessing Officer refer it, without finding any defect in books as to the Cost of Construction?
ANSWER: Yes, in CIT v. Bhavani Shankar Vyas [311 ITR 8] the Uttarakhand High Court held that, section 142A was inserted in the Income-tax Act, 1961 by the Finance Act of 2004, with retrospective effect from November 15, 1972. Under section 142A of the Act, full power has been given to the Assessing Officer to call for a report from Valuation Officer. A perusal of section 144 read with sections 145, 142A and 131(1)(d) make it clear that it is not mandatory for the Assessing Officer to reject the books of account first before making reference under section 131(1)(d) of the Act or calling for a report of the valuer under section 142A.
However, the Supreme Court in Sargam Cinema v. CIT [328 ITR 513] has held that before making a reference to the Valuation Officer it is mandatory for the Assessing Officer to reject the books of account..
The aforesaid judgment of the Supreme Court has been considered by the Andhra Pradesh High Court in Bharathi Cement Corporation P. Ltd. v. CIT [356 ITR 74]., wherein the Court observed that the said judgment is very short judgment and nothing is placed before us to infer that the matter pertains to a year after the amendment of section 142A by the Finance (No. 2) Act, 2004. The relevant facts are not discernible from the judgment and in our opinion this decision cannot, therefore come to the rescue of the petitioner.
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