COMMISSIONER OF INCOME TAX Vs. HOTEL JOSHI

JUDGEMENT

(1.) THIS application under Section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), has been filed at the instance of the Revenue seeking mandamus to the Tribunal for drawing up the statement of case and referring the following question of law :

(2.) THE respondent-assessee constructed a hotel building during the period between October 1, 1981, and October 15, 1984. As per his say, he maintained regular books of account for construction of the hotel building. THE expenses of the construction were completely vouched except the expenses to the extent of Rs. 71,000. THEy were not supported by vouchers because the nature of the expenses was such that the maintenance of the vouchers was not practicable. THE respondent-assessee filed a yearwise break up of the day-to-day expenses incurred as per details below : <FRM>JUDGEMENT_478_ITR242_2000Html1.htm</FRM>

(3.) A plain reading of the provision shows that an Assessing Officer with a view to ascertain the fair market value of a capital asset, has a discretion to refer to the Valuation Officer, only in the eventualities provided in the said provision. One of the eventualities is where the value of the asset as claimed by the assessee is in accordance with the assessment made by the registered valuer and in the opinion of the Assessing Officer, the value so claimed is less than its fair market value. Thus, in a case where the value of the asset is claimed by the assessee on the basis of regular books of account maintained for the purpose of construction of the asset and not on the basis of the valuation of the registered valuer, it will not be open for the Assessing Officer to make a reference to the District Valuation Officer unless the Assessing Officer forms an opinion that having regard to the nature of the asset and other relevant circumstances, it is necessary to do so. Thus, the powers under Section 55A cannot be exercised in a routine manner. For invoking Sub-clause (ii) of Clause (b) of Section 55A, the Assessing Officer is required to form an opinion on the basis of the material on record that reference to the District Valuation Officer for ascertaining the fair market value of the asset is necessary having regard to the nature of the asset and other relevant circumstances. It is also necessary to record as to why it is necessary to adopt such a course.