There are different circumstances in which an Assessing Officer and Income Tax Officer shall refer the Valuer Officer in order to ascertain the Fair Market Value (FMV) of a capital asset. The Assessing Officer may refer the valuation of capital asset to a Valuation Officer –

a)  In a case where the value of asset is made by a registered valuer, if the Assessing Officer is of the opinion that the value so claimed is less than its fair market value;

b)  In any other case, if the Assessing Officer is of opinion –

       i.  that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more 15% of the value of the asset as so claimed or by more than Rs. 25000; or

      ii.  that having regard to the nature of the asset and other relevant circumstances, it is necessary to do so,

The jurisdiction of the Valuation Officer has been defined under Rule 3A of The Wealth Tax Rules. The valuation officer exercises the same jurisdiction for Income Tax purposes also.

Situation in which reference should be given to Valuation Officer

Situation 1: If Valuation Done By Registered Valuer –  

Reference shall be made to valuation officer if FMV (Fair Market Value) of the Asset as per Assessing Officer’s opinion exceeds value given by registered valuer.

Example: Registered Valuer gives FMV= Rs. 20lacs

As per Assessing Officer FMV should be Rs. 12lacs.

Then, Assessing Officer will refer the matter to Valuation Officer

Situation 2: If Valuation NOT Done By Registered Valuer –

FMV (Fair market value) of the asset as per Assessing Officer’s opinion exceeds value of Asset

By Rs.25000 or 15% as the case may be.

Example: Assessee gives FMV of Rs. 1lac.

Assessing Officer says FMV should be Rs. 1, 30,000.

Assessing Officer will refer matter to the Valuation Officer.

Note: Registered Valuer is nothing but Professional Valuer.