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T. Banusekar

I AM a salaried employee. In the assessment years (AYs) 2002-03 and 2003-04, my total income was below Rs 50,000. In the AY 2004-05, my total income was Rs 52,000. This would mean that I have to pay tax on Rs 2,000, which is the sum in excess of the basic exemption of Rs 50,000.

I am informed that even if I do not file my return before October 31, 2004, no penalty will be charged. I am also informed that only interest will be charged on the tax payable for the delay. Is this correct?

S. Jain

Reply

Interest will be charged under Section 234A at 1 per cent per month or part thereof, on the tax payable by you for the period of delay beginning November 1, 2004, up to the date on which you file a return and if you do not file one up to the date on which the assessment is completed. No penalty can be levied for the delay in filing the return until the expiry of the assessment year relevant to the previous year in question. This would mean that no penalty can be levied for a failure to furnish a return in your case until March 31, 2005.

If you do not file your return before this date a penalty of Rs 5,000 may be imposed on you under Section 271F.

Query

I had constructed a house property. In completing the assessment the assessing officer (AO) has relied on the valuation report obtained by him from the Departmental Valuation Officer. Relying on such valuation report, he had made an addition towards undisclosed investment since the report gave a value higher than what was stated by me to be the cost of the property. The matter was taken in appeal by me before the Commissioner of Income Tax (Appeals).

I had challenged the assessment based on the Supreme Court decision in Smt. Amiya Bala Paul vs CIT (2003 263 ITR 407 SC) where it had been held that no reference could be made to a valuation officer under the Income-Tax Act by the AO. The Finance Act 2004 has amended the I-T Act by inserting a new Section 142A so as to nullify the decision of the Supreme Court in the aforesaid case. Under the circumstances, what is the course of action I must adopt in appeal when the case comes up for hearing?

Rajesh Thakkar

Reply

It is true that the Supreme Court in the Amiya Bala Paul case had held that the power to require a valuation to be done by a valuation officer cannot be exercised by an AO. It is also true that in the wake of this judgment, the Finance Act 2004 inserted a new Section 142A conferring on the AO the power to refer a matter relating to valuation to a valuation officer.

This section vests in the AO the power to make a reference to a valuation officer for the purpose of making an assessment or the reassessment. The proviso to the section validates all references to a valuation officer prior to the insertion of this section provided the assessment has not become final or conclusive on or before September 30, 2004. This would mean that if any appeal or revision proceedings are pending on that date, the reference to the valuation officer, already made by the AO will be valid. In your case, as the appeal is stated to be pending as on date, the reference to the valuation officer made by the AO during the course of the assessment would get validated.

The Supreme Court decision would, therefore, be of no avail. The burden of establishing the cost of construction and to account for the same is on the taxpayer. It would, therefore, be necessary for you to establish in appeal that the valuation report of the departmental valuation officer is not a correct one. This may be done by discrediting such valuation report by pointing out the flaws therein and bringing in your part to justify the cost of construction that has been admitted by you. You may, in this connection, obtain a valuation report from a registered valuer to strengthen your claim relating to the cost of construction. It has also been held in a plethora of cases that it will not be open for an AO to rely merely on the valuation report without rejecting the books of account in which the cost of construction is recorded.

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