Assessing Officer’s referral to Valuation Officer just before limitation expiry deemed a colorable exercise to artificially extend assessment period in Slimtile Pvt. Ltd. case
In a significant ruling delivered on September 3, 2026, the Gujarat High Court (Division Bench) struck down the Income Tax Department's last-minute reference to the Departmental Valuation Officer in the assessment proceedings against Slimtile Private Limited for the Assessment Year 2021-22. The court held that the Assessing Officer's action to refer the valuation of fixed assets just one day before the expiry of the limitation period was a colorable exercise of power aimed at artificially extending the time for completing the assessment.
The case arose after Slimtile Pvt. Ltd. filed its income tax return declaring an income of Rs. 8.17 crores for AY 2021-22. The return was selected for scrutiny, and after a series of notices and replies, the department issued show cause notices in June 2023. Slimtile challenged these notices on the ground that the assessment proceedings were barred by limitation.
In response, the Assessing Officer contended that the limitation period was extended under Explanation 1(v) to Section 153 of the Income Tax Act, 1961, by making a reference to the Valuation Officer under Section 142A. The reference, dated June 24, 2023, sought determination of the fair market value of fixed assets allegedly acquired in individual names but claimed for depreciation by the company.
The petitioner argued that this reference was made in bad faith merely to invoke statutory extension provisions and prolong the assessment deadline beyond June 25, 2023, when the limitation period expired. The petitioner also pointed out that valuation of assets was unnecessary for examining depreciation claims, which could simply be disallowed if found improper.
The Revenue conceded that the reference regarding depreciation was unjustified but sought to justify the valuation reference concerning unaccounted cash transactions linked to group companies. However, the court noted that all relevant materials from the search and survey operations were handed over to the Assessing Officer by December 28, 2022, and there was no satisfactory explanation for the delay in action until June 2023.
Critically, the court observed that the Assessing Officer’s timing of the reference—just one day before limitation expiry—was a calculated move to artificially extend the assessment period by triggering Explanation 1(v) to Section 153. The court held that such a colorable exercise of power was impermissible and illegal.
Consequently, the Gujarat High Court quashed the impugned reference order dated June 24, 2023, thereby protecting the petitioner from protracted proceedings beyond the prescribed limitation period. The judgment emphasized the importance of adherence to statutory timelines and condemned deliberate attempts by authorities to circumvent limitation laws through technical manipulations.
This ruling serves as a critical precedent ensuring that Income Tax authorities exercise their powers within the ambit of law and do not misuse procedural provisions to stall or extend assessments unjustifiably.
Bottom Line:
Income Tax - Reference to Valuation Officer under Section 142A of the Income Tax Act, 1961, made by the Assessing Officer a day prior to the expiry of the limitation period for assessment proceedings, held to be a colorable exercise of power to extend the limitation period artificially.
Statutory provision(s):
Income Tax Act, 1961 Sections 142A, 143(2), 142(1), 153 (Explanation 1(v))
