Article discusses about Basic provisions, Circumstances in which reference under section 55A of Income Tax Act, 1961 can be made to valuation officer, etc.
Introduction
At times in the process of completion of the assessment of a taxpayer or for any other purpose, the tax authorities need to ascertain the value of any capital asset. In such a case, the tax authorities can make a reference to the valuation officer (*) for ascertaining the value of the capital asset. Section 55A contains the provision relating to the power of the tax authorities for making a reference to the valuation officer for ascertaining the value of a capital asset. In this part you can gain knowledge about various provisions of section 55A.
(*) Valuation Officer has the same meaning, as in clause (r) of section 2 of the Wealth-tax Act, 1957. As per section 2(r) of Wealth-tax Act, valuation officer means a person appointed as a Valuation Officer under section 12A of the Wealth-tax Act, 1957, and includes a Regional Valuation Officer, a District Valuation Officer, and an Assistant Valuation Officer. Section 12A of the Wealth-tax Act, 1957 provides for appointment of valuation officers by Central Government.
Basic provisions
Section 55A has provided the circumstances in which and the purposes for which a reference could be made by the tax authorities to a Valuation Officer for valuation of capital asset.
Before getting into detailed provisions in this regard, it is important to understand basic provisions relating to nature of Valuer. There are two types of Valuer (1) Registered Valuer and (2) Valuation Officer. Registered Valuer and valuation officer both perform the same task but registered Valuer work in private capacity and can be termed as Private Valuer.
Registered Valuer i.e. Private Valuer work in private capacity under a license issued by the Board. Valuation done by the Private Valuer is not binding on the tax authorities.
Valuation officer can be termed as Departmental Valuer. They are recognised by the Income-tax Department and are authorized valuer of Income-tax Department. Departmental valuer i.e. valuation officers are the valuation officer approved/ authorised by the Income-tax Department. The tax authorities will take the recourse of the value estimated by these valuers. In other words, if the tax authorities need to ascertain the value of an asset, then they will request the valuation officer to ascertain the value of the capital asset and the value determined by them will be taken into consideration by the tax authorities.
Circumstances in which reference can be made to valuation officer
After understanding the difference between private valuers and valuation officer i.e. departmental valuer, now we shall understand the circumstances in which the Assessing Officer can make a reference to the valuation officer.
As per section 55A, with a view to ascertaining the fair market value of a capital asset, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer. The circumstances in which reference can be made by the Assessing Officer to the valuation officer will be broadly classified as follows:
(1) A case in which the value of the asset as claimed by the taxpayer is in accordance with the estimate made by a registered valuer. In other words, this will be a case in which, the taxpayer has obtained a valuation report of a registered valuer i.e. a private valuer. Such a report is generally obtained by the taxpayer to support the value of the capital asset claimed by him.
If the case is covered under (1) above i.e. a case where the value of the asset as claimed by the taxpayer is in accordance with the estimate made by a registered valuer (i.e. private valuer), then the Assessing Officer can make a reference to the valuation officer (i.e. departmental valuer) if the Assessing Officer is of the opinion that the value of the asset as claimed by the taxpayer is at variance with its fair market value. In other words, in such a case there is no quantum of variation to be established to make a reference to the valuation officer. The only requirement is that the Assessing Office should be of the opinion that the value of the asset claimed by the taxpayer and the fair market value of the asset are in variation i.e. both the values differ. The variation i.e. the difference could be of any amount.
(2) A case other than above
If the case is not covered under (1) above, then the Assessing Officer can make a reference to the valuation officer if he is of the opinion:
(i) that the fair market value of the asset exceeds the value of the asset as claimed by the taxpayer 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.
(*) Currently the prescribed rate is 15% and prescribed value is Rs. 25,000.
In other words, in a case other than covered by (1) above, the Assessing Officer can make a reference to the valuation officer in any of the following cases:
(i) if the value of the asset as claimed by the taxpayer and the fair market value as per the Assessing Officer’s opinion differ and the difference is either more than 15% of the value of asset or more than Rs. 25,000, as the case may be; or
(ii) if having regard to the nature of the asset and other relevant circumstances, it is necessary to doso.
When any reference is made by the Assessing Officer to the valuation officer under section 55A, then the provisions of following sections of Wealth-tax Act, 1957, shall apply with the necessary modifications:
- Provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A of the Wealth-tax Act, 1957. Section 16A of Wealth-tax Act, 1957, is similar to section 55A of Income-tax Act. Section 16A of Wealth-tax Act, 1957, contains the provisions relating to making a reference to the valuation officer for making assessment under the Wealth-tax Act.
- Provisions of clauses (ha)sub-section (1) and sub-sections (3A) and (4) of section 23 of Wealth-tax Act, 1957. Section 23 of Wealth-tax Act, 1957 deals with appeal to Deputy Commissioner (Appeals).
- Provisions of sub-section (5) of section 24 of Wealth-tax Act, 1957. Section 24 of Wealth-tax Act, 1957 deals withappeal to Appellate Tribunal.
- Provisions of section 34AA of Wealth-tax Act, 1957. Section 34AA of Wealth-tax Act, 1957 provides for appearance by registered valuers before the tax authorities on behalf of the taxpayer.
- Provisions of section 35 of Wealth-tax Act, 1957. Section 35 of Wealth-tax Act, 1957 contains provisions relating to rectification of mistake apparent from records in any order of the tax authorities.
- Provisions of section 37 of Wealth-tax Act, 1957. Section 37 of Wealth-tax Act, 1957 contains provisions relating to the power of tax authorities to take evidence on oath, etc.
Apart from the provisions of section 55A, section 142A also empowers the Tax Authorities to make a reference to a Valuation Officer. The provisions of section 142A are as follows:
Under section 142A, the Assessing Officer for the purposes of assessment or reassessment, make a reference to a Valuation Officer to estimate the value, including fair market value, of any asset, property or investment. “Valuation Officer” has the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957.
The Assessing Officer may make a reference to the Valuation Officer as above whether or not he is satisfied about the correctness or completeness of the accounts of the taxpayer.
The Valuation Officer, on a reference made by the Assessing Officer, shall, for the purpose of estimating the value of the asset, property or investment, have all the powers that he has under section 38A of the Wealth-tax Act, 1957.
The Valuation Officer shall, estimate the value of the asset, property or investment after taking into account such evidence as the taxpayer may produce and any other evidence in his possession gathered, after giving an opportunity of being heard to the taxpayer.
The Valuation Officer may estimate the value of the asset, property or investment to the best of his judgment, if the taxpayer does not co-operate or comply with his directions.
The Valuation Officer shall send a copy of the valuation report, to the Assessing Officer and the taxpayer, within a period of six months from the end of the month in which a valuation reference is made.
The Assessing Officer may, on receipt of the report from the Valuation Officer, and after giving the taxpayer an opportunity of being heard, take into account such report in making the assessment or re-assessment.
One Taxpayer a small entrepreneur sold his landed property to one Trust and incurred loss. While filing an income tax return, he filed the same in ITR4 as there was only capital loss and the sale proceeds received by him were not taxable. He claimed TDS on the sale proceeds but Income Tax authority has not considered a refund of TDS while processing the return. Please let me know how to make rectification for getting refund of TDS.
Sir, it is nice article with meaningful guidelines.
Still I want to know, if the fair market value of immovable property (Agri Land) is 2 Cr. but guideline value (valuation from registrar) is very high i.e. 6.5 Cr., then in this case what steps should be taken for better results.
Please advise.
Thank you.
Shrikant Borade