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Reference to Valutation Officer

Started by satyanveshi, June 11, 2012, 07:52:57 AM

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An A.O. after conducting a survey u/s 133A in a case of builder, referred the stock in trade i.e. constuction cost  to valuation cell with a doubt that expenditure incurred may be more than what has been recorded in books of accounts. The Valuation Officer is behind the builder asking to produce vouchers for the expenditure incurred. Now, can the builder request the A.O. under what section the reference is made because, as per the provisions of the Act, only sec. 142A empowers the AO to refer the case to valuation cell. However, fortunately/unfortunately sec. 69C is not mentioned in sec. 142A which means that the law makers didnot envisage that this type of  situation will also arise wherein the stock in trade is to be referred to valuation cell and therefore, they didnot include sec. 69C in sec. 142A. The consequent of which is that this type of  cases cannot be referred to valuation cell asking to estimate the value of stock in trade.  Under the above mentioned circumstances, the builder came across a case of Delhi High Court reported in 319 ITR 276 wherein it was categorically held that there is no provision in IT Act to refer the case of a builder to valuation cell. When this is brought to the notice of AO, he says that in any case, if excess valuation, if any,  estimated by the Valuation Officer  will be added u/s 69, 69B if not under 69C and directed the builder to cooperate with the valuation officer. Under these circumstances, what is the remedy available to the builder except filing a writ.


First of all check whether any proceedings were pending or any new proceedings were initiated before referring the case for valuation as 142A starts with for the purpose of any assessment or reassessment... therefore there must be some case pending for assessment or reassessment at the time of referring to valuation officer. So first check whether any notice u/s 148 was issued before making such reference....


Secondly there must be some incriminating material in the hands of AO to form an opinion that any investment is made outside the books of accounts... i.e he has found some construction bills which were not entered in the books of accounts... and for that purpose he should have seen the books of accounts before referring the case for valuation...


Even if valuation is done and the difference in valuation as per books of accounts and valuation is less than 10%, the same is to be ignored and action  could be taken only if the difference is more than 10%