Section 55A

Section 55A of Income Tax Act

Section 55A of Income Tax Act

The income-tax laws may in certain cases require the tax authorities to ascertain the value of any capital asset while completing the assessment of a taxpayer or for other purposes. In such cases, the authorities may refer to the valuation officer to ascertain the value of the capital asset. Section 55A contains the provisions that are related to the power of such authorities. This article talks about Section 55A of the Income Tax Act.

Types of Valuer

There are two types of valuers, namely Registered Valuer and Valuation Officer. Registered Valuer and the Valuation Officer both perform the same task. A registered valuer working in a private company can be called as a Private Valuer.

Registered Valuer

Registered Valuers work in private capacity under a license issued by the Board. The valuation done by the Private Valuer is not binding on the tax authorities.

Valuation Officer

Valuation Officer, also known as Departmental Valuer, are recognised by the Income-tax Department and are authorised valuer of the same. The departmental valuer is a valuation officer approved/ authorised by the Income-tax Department. The tax authorities utilise the value estimated by these valuers. In other terms, if the tax authorities have to ascertain the value of an asset, they may request the valuation officer to ascertain the value of the capital asset; and the value that is determined by them will be considered by the tax authorities.

Need for Reference to the Valuation Officer

According to Section 55A, to ascertain the fair market value of a capital asset, the Assessing Officer refers to the valuation of the capital asset to a Valuation Officer. The following are the circumstances when references are made by the Assessing Officer to the valuation officer:

  1. If the value of the asset as claimed by the taxpayer is by the estimate that is made by a registered valuer. This happens when the taxpayer has obtained a valuation report of a registered valuer.
  2. If the case is not covered as given above, then the Assessing Officer can refer to the valuation officer if
    • the fair market value of the asset is more than the value of the asset that is claimed by the taxpayer bu more than such percentage of the value of the asset as claimed.
    • It is necessary to regard the nature of the asset and other relevant circumstances.

Provisions of Section 142A

In addition to Section 55A, Section 142A authorises the Tax Authorities to refer to the Valuation Officer. The provisions of Section 142A are given below.

As per Section 142A, for assessment or reassessment, the Assessing Officer refers to a Valuation Officer to estimate the value, with the inclusion of the fair market value of any asset, property or investment.

  • The Assessing Officer may refer to the Valuation Officer as mentioned above if he is satisfied with the correctness or completeness of the accounts of the taxpayer.
  • The Valuation Officer is vested with all the powers concerning the value estimation of asset, property or investment under Section 38A of the Wealth-tax Act, 1957.
  • The Valuation Officer estimates the value of the asset, property or investment after considering the evidence produced and any other evidence obtained.
  • The Valuation Officer estimates the value of the asset, property or investment to the best of his judgement if the taxpayer does not provide information or documents as requested.
  • The Valuation Officer sends a copy of the valuation report to the Assessing Officer and taxpayer within six months from the end of the month from when the valuation reference is made.
  • The Assessing Officer after giving the taxpayer an opportunity of being heard, take into account such report to make the assessment or re-assessment.

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