Section 142A DVO reference: extending limitation under section 153

In one line. A valuation reference buys the Assessing Officer time, the statute gives him no reason to be heard before he makes one, and the only thing standing between that and an assessment kept alive indefinitely is a court willing to ask what the reference was actually for.

The Gujarat High Court has now asked that question and given an answer. In Slimtile Private Limited v. Assistant Commissioner of Income Tax & Anr., R/Special Civil Application No. 13575 of 2023, neutral citation 2026:GUJHC:56020-DB, reserved on 25 August 2026 and pronounced on 3 September 2026, a Division Bench of A.S. Supehia and Vaibhavi D. Nanavati JJ quashed a reference to the District Valuation Officer made on 24 June 2023, one day before the assessment for assessment year 2021-22 became time barred on 25 June 2023. The Court held, at paragraph 27, that the Assessing Officer had “very ingeniously raised two issues for making reference to the District Valuation Officer in order to cover-up his inaction in completing the assessment proceedings before 25.06.2023”, and found, at paragraph 25, that he had, “in order to save the assessment proceedings by giving a colorable exercise”, extended a limitation period he had been alive to from the beginning.

Key points

• A reference under section 142A(1) excludes time under clause (v) of Explanation 1 to section 153, and the proviso that follows guarantees at least sixty days after the report arrives. The reference is therefore worth more as a clock than as a valuation.
• Nothing in section 142A requires the Assessing Officer to hear the assessee before making the reference. Section 142(2A) requires exactly that before a special audit. The asymmetry is the whole problem.
• Slimtile does not hold that a late reference is bad as a rule. It holds that this one was a device, and the findings it rests on reduce to nine distinct markers, every one of which is capable of being pleaded.
• The Revenue conceded one of its two grounds. Once it did, the Court treated the pairing of a good ground with a conceded bad one as itself evidence of contrivance.
• The older line of authority, that a reference needs the books rejected or section 69 invoked first, rests on a version of section 142A that Parliament substituted with effect from 1 October 2014. The abuse of power objection does not depend on that line and is the more durable of the two.
• The Income-tax Act, 2025 reproduces the power, the exclusion and the sixty-day floor in sections 269 and 286 without change.

Where the power comes from, and what the 2014 substitution changed

Section 142A of the Income-tax Act, 1961 is headed “Estimation of value of assets by Valuation Officer”. In its present form it reads, so far as matters:

142A. (1) The Assessing Officer may, 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 and submit a copy of report to him.

(2) The Assessing Officer may make a reference to the Valuation Officer under sub-section (1) whether or not he is satisfied about the correctness or completeness of the accounts of the assessee.

That is a wide power, and it was made wide on purpose. The section as it stood until 30 September 2014 was not drafted that way at all. It opened:

142A. (1) For the purposes of making an assessment or reassessment under this Act, where an estimate of the value of any investment referred to in section 69 or section 69B or the value of any bullion, jewellery or other valuable article referred to in section 69A or section 69B or fair market value of any property referred to in sub-section (2) of section 56 is required to be made, the Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to him.

The old section was keyed to named charging provisions. A reference was available where an estimate “is required to be made” for the purposes of section 69, 69A, 69B or section 56(2), and not otherwise. Clause 49 of the Finance (No. 2) Bill, 2014 substituted the section with effect from 1 October 2014, and the substituted section cut that tether. It no longer names a charging provision at all. It permits a reference “for the purposes of assessment or reassessment”, in respect of “any asset, property or investment”, and sub-section (2) goes out of its way to say that the state of the accounts is beside the point.

The rest of the section supplies the machinery and, in two places, the only real statutory discipline on it:

• Sub-section (3) gives the Valuation Officer the powers he has under section 38A of the Wealth-tax Act, 1957.
• Sub-section (4) requires him to estimate the value “after taking into account such evidence as the assessee may produce and any other evidence in his possession gathered, after giving an opportunity of being heard to the assessee”.
• Sub-section (5) permits a best judgment estimate where the assessee does not co-operate.
• Sub-section (6) requires the report to go to the Assessing Officer and the assessee “within a period of six months from the end of the month in which a reference is made under sub-section (1)”.
• Sub-section (7) permits the Assessing Officer to take the report into account “after giving the assessee an opportunity of being heard”.

Read the list again and notice what is not in it. The assessee is heard by the Valuation Officer under sub-section (4). The assessee is heard by the Assessing Officer under sub-section (7) before the report is used. The assessee is heard nowhere before the reference is made. That omission is dealt with below, because it is the reason a case like Slimtile has to be fought in the writ jurisdiction rather than in the appeal.

How a valuation reference moves the limitation date

Section 153 fixes the outer limit for an order of assessment under section 143 or section 144. The principal provision reads “twenty-one months from the end of the assessment year in which the income was first assessable”, and four provisos shorten it for particular years: eighteen months for assessment year 2018-19, twelve months for 2019-20 and eighteen months for 2020-21, nine months for 2021-22, and twelve months for assessment year 2022-23 and every year after it. The third of them governs the year in Slimtile:

Provided also that in respect of an order of assessment relating to the assessment year commencing on the 1st day of April, 2021, the provisions of this sub-section shall have effect, as if for the words “twenty-one months”, the words “nine months” had been substituted:

The nine-month period is confined to that one year. The Finance Act, 2023 omitted the words “or after” from that proviso and added a fourth, under which the period for assessment year 2022-23 and every subsequent year is twelve months. Anyone working the dates on a current file should use twelve months and not nine.

For assessment year 2021-22, therefore, the baseline date was 31 December 2022.

That is the baseline. It is not the date the Assessing Officer worked to, and the difference matters because the mechanism that moved it is an exclusion under the very Explanation this article is about. On 21 June 2023 the Assessing Officer told the petitioner that the time for completion stood extended under section 153 read with its Explanation and “the period of exclusion of handling over seized incrementing materials”, and his reference order of 24 June 2023 recited that the assessment was getting time barred on 25 June 2023. The exclusion he was invoking is clause (xii) of Explanation 1, which leaves out of the computation the period, not exceeding one hundred and eighty days, from the initiation of a search under section 132 until the seized books, documents or valuables are handed over to the Assessing Officer having jurisdiction, including one to whom the seized documents, or the information in them, relate. The search was initiated on 24 September 2021 and the material reached the Assessing Officer on 28 December 2022, so the cap applied.

Two things should be said plainly about that. One hundred and eighty days from 31 December 2022 is 29 June 2023, not 25 June 2023, so the Assessing Officer’s own date is four days short of the cap and the judgment does not explain the difference. And the Court never adjudicated the anterior extension at all: it decided the case on the second exclusion, the valuation one, and had no need to reach the first. A reader should therefore treat 25 June 2023 as the date the Assessing Officer asserted and the Court proceeded on, not as a date anybody has held to be correct.

Explanation 1 to section 153 then lists the periods that are left out of the computation. Clause (v) is the valuation clause:

(v) the period commencing from the date on which the Assessing Officer makes a reference to the Valuation Officer under sub-section (1) of section 142A and ending with the date on which the report of the Valuation Officer is received by the Assessing Officer; or

Three features of that drafting are worth stating plainly, because each of them is doing work.

It is keyed to the act of making the reference, not to the quality of the reference. The clause does not say “a valid reference”, or “a reference made on reasonable grounds”. It says the period begins “on the date on which the Assessing Officer makes a reference”. On a literal reading the clock stops the moment the letter goes out.

It has no ceiling. The exclusion ends when the report is received. If the report is never received, the words supply no answer. Section 142A(6) tells the Valuation Officer to report within six months, but clause (v) does not import that limit, and whether it is to be read in is a live question dealt with below.

It is confined to section 142A(1). The clause names that sub-section. A reference under some other valuation power is outside it.

The sixty-day floor, which is the part that pays

The exclusion alone would only preserve the time that remained when the reference went out. If an Assessing Officer referred on the last day, he would get the last day back. That is not what the statute does. The first proviso after Explanation 1 reads:

Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in sub-sections (1), (1A), (2), (3) and sub-section (8) available to the Assessing Officer for making an order of assessment, reassessment or recomputation, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly:

This is the provision that makes a late reference worth making. Put the two together and the arithmetic is stark. An Assessing Officer with one day left who makes a reference does not buy one day. He buys the whole of the time the Valuation Officer takes, which may be up to six months, and then sixty days on top of it, during which he may do anything the assessment requires and not merely consider the valuation. A reference costing a letter converts a dead file into a file with eight months left in it.

That is the incentive. It exists in the statute, it is visible to everyone, and nothing in section 142A asks the Assessing Officer to justify himself before taking advantage of it.

Slimtile: the timeline

The facts matter in this case more than usual, because the Court decided it on them. They are drawn from paragraphs 4, 15, 16, 18 and 24 of the judgment, not from any one of them, and are reproduced here in order.

Date	What happened
22.09.2021	Survey at M/s Ratnakala Exports Pvt. Ltd.
24.09.2021	Search under section 132 at Ratnakala Exports
16.11.2021	Show cause notice under section 127 for transfer of the petitioner’s case. The petitioner objected; the case was ultimately transferred from Rajkot to Surat, on a date the judgment does not give
14.03.2022	Petitioner files its return for assessment year 2021-22, total income Rs 8,17,74,420
29.06.2022	Notice under section 143(2)
05.08.2022, 16.11.2022, 21.11.2022	Notices under section 142(1). None refers to the search or the survey. The last asks for details of assets and of repairs and maintenance of plant and machinery of Rs 4,07,66,736, with the ledger and supporting evidence
12.08.2022, 21.11.2022, 02.12.2022	Replies. The reply of 02.12.2022 explains the payments on computer, machinery, factory shed, vehicle, furniture and office equipment, with bank details
28.12.2022	The material from the search and survey of Ratnakala is forwarded by the DDIT (Investigation), Surat and handed over to the DCIT, Surat
31.12.2022	The baseline date on the third proviso to section 153(1). The judgment makes no finding on it; it appears at paragraph 18 as the petitioner’s case
(asserted)	The Assessing Officer treats limitation as extended to 25.06.2023, on the exclusion for the period up to the handing over of the seized material. Never adjudicated
17.06.2023 and 20.06.2023	Show cause notices on unaccounted payment. Both silent on the valuation of assets
21.06.2023	The Assessing Officer informs the petitioner by email that the show cause notice was already served by email on 20.06.2023, for assessment years 2018-19 and 2021-22, and that time stands extended under section 153 read with its Explanation and the period of exclusion for the handing over of the seized material. The email is not reflected on the ITBA portal
20.06.2023	The petitioner replies to the show cause notice, tendering its explanation of the unaccounted payment (paragraph 24)
22.06.2023	The petitioner objects that the assessment is time barred, and that a notice sent by email is not on the portal
24.06.2023	The impugned order of reference to the District Valuation Officer under section 142A. The Assessing Officer records that proceedings are pending and getting time barred on 25.06.2023, and asks for the report “earliest and preferably by 30.06.2023”
25.06.2023	The date on which, on the Assessing Officer’s own recital, limitation expired

Two things about this table are worth pausing on. The first is the six months between 28 December 2022 and 17 June 2023, during which the Assessing Officer had the search material and did nothing with it. The second is the request for a valuation report within six days. The statute gives the Valuation Officer six months. An officer who genuinely wants a valuation does not ask for one by the end of the week.

It is also worth noting what the petitioner did not do. At the outset of the hearing, counsel told the Court that the challenge to the show cause notices of 17 and 20 June 2023 was not being pressed, and that the petition was confined to the reference of 24 June 2023. The attack was aimed at the clock, not at the merits of the additions. That is a deliberate choice and a sound one: the merits could be fought in the appeal, the limitation could not.

The two grounds the Assessing Officer gave, and the one the Revenue gave up

Paragraph 20 of the judgment sets out the two grounds recorded in the reference order.

Ground one. The search had yielded seized material showing that the petitioner had paid large sums of unaccounted cash to the group company Ratnakala Exports in connection with share purchases and movable properties, and the petitioner’s own accounts showed an increase in fixed assets, including land and building, plant and machinery, vehicles and computers, totalling Rs 64,00,02,502.

Ground two. During the assessment it had been noticed that the fixed assets were purchased in the names of individual owners while depreciation on them was claimed in the company’s books, so the depreciation claim was bogus.

At the hearing, learned Senior Standing Counsel for the Revenue made a concession on the second ground. The Court recorded it at paragraph 21: it was “fairly accepted” that the reference “could not have been made on such issue as it is always open for the Assessing Officer to disallow the depreciation, if it is found to be bogus”.

That concession was correct and it was unavoidable. If assets are in somebody else’s name, the consequence is that the depreciation claim fails. Working out what the assets are worth tells you nothing about whose name is on them. The valuation and the alleged defect simply do not meet.

What is interesting is what the Court did with the concession, which was more than dispose of one of two grounds.

Why the depreciation ground could not support a reference

The Court’s treatment at paragraph 22 goes past the concession to the inference the concession permits:

In our considered opinion, the Assessing Officer has acted illegally in order to further strengthen his first ground for reference relating to the valuation of assets and attempted to create another ground of claim of bogus depreciation on such assets for extending the limitation, which was getting time barred on 25.06.2023. It cannot be countenanced that the Assessing Officer was ignorant of the provision of the Chapter IV of the Act, which regulates depreciation, investments etc, while making the reference on depreciation of assets by alleging bogus claim, which he could have disallowed.

Two moves are being made there and both are worth having in a submission.

The first is that an Assessing Officer is not permitted to plead ignorance of the Act he administers. The proposition that a bogus depreciation claim is disallowed rather than valued is elementary. An officer who writes it into a reference order is either unaware of Chapter IV, which the Court declined to accept, or is writing it for some reason other than the one stated.

The second is the use of a bad ground to characterise a good one. The Court did not simply strike out ground two and go on to test ground one on its own merits. It treated the manufacture of ground two as evidence about the purpose of the whole exercise: the second ground was created “to further strengthen his first ground”. Where two reasons are given and one of them is conceded to be incapable of supporting the decision, the concession is not a neutral event. It is material from which the court may infer what the decision was really for.

Why the valuation ground failed too: asked, answered, dropped, resurrected

Ground one was the serious one, and the Court dealt with it at paragraphs 23 and 24. It began bluntly: the first reason “also appears to be intentional, and is raised in order to extend the limitation period of completing the assessment”.

The reasoning behind that sentence is a chronology, and it is the most useful part of the judgment for anyone who has to plead a case like it.

The question had already been asked. The notice under section 142(1) of 21 November 2022 asked the petitioner for details of the assets acquired during the year and for the expenses of repair and maintenance of plant and machinery of Rs 4,07,66,736, together with the ledger account and supporting evidence.

It had already been answered. By reply of 2 December 2022 the petitioner explained the payments made on computer, machinery, factory shed, vehicle, furniture and office equipment, and gave the details of payments made through the bank.

It had then been dropped. The Court put this as an inference rather than as a direct finding, and the distinction is worth preserving: “Hence, it is to be presumed that after the petitioner-Company tendered its detail reply dated 02.12.2022 to the show cause notice issued on 21.11.2022 under the provisions of Section 142(1) of the Act, the Assessing Officer did not choose to reopen or question the payment on assets by the petitioner-Company.”

The show cause notices that followed said nothing about it. The notices of 17 and 20 June 2023 called on the petitioner to explain why the amounts should not be treated as unaccounted payment. On the valuation of assets, the Court found, “the notices are silent”.

And then it came back. The issue “was cropped-up on 24.06.2023 in the impugned order of reference”.

That sequence is what converts an arguable reference into an indefensible one. A question that is raised, answered, abandoned for the whole of the next six months and more, omitted from two show cause notices issued in the week before limitation, and then resurrected in a reference order on the penultimate day is not a question the officer wanted answered. The Court also recorded that none of the earlier section 142(1) notices referred to the search or the survey at all, which makes the sudden appearance of search-derived reasoning in the reference order harder still to explain.

Six months of inaction, and a lame explanation

The Revenue had an explanation for the gap between 28 December 2022, when the search material was handed to the DCIT, Surat, and 17 June 2023, when the first show cause notice went out. Senior Standing Counsel submitted that during that period the Assessing Officer had scrutinised the seized material and correlated it with the audited reports and the return disclosures, and that this consumed time.

The Court rejected it in terms. At paragraph 24 it found that “For the period of six months the Assessing Officer sat tight on such material”. At paragraph 26 it held that “no satisfactory explanation has been tendered by the Revenue to explain the delay”, and called what had been offered “a lame explanation”.

It then made the point that disposes of the Revenue’s position entirely:

In case, the Assessing Officer had scrutinized all the material within time limit then while issuing notices on 17.06.2023 and 20.06.2023, he could have re-examined the explanation tendered by the petitioner-Company to the payments made on the assets vide his reply dated 02.12.2022 and also the claim of depreciation, and there would have been no further need to resurrect the issue, while passing impugned order dated 24.06.2023 referring the determination of valuation on assets which he missed in the subsequent notices issued on 17.06.2023 and 20.06.2023.

In other words, the Revenue’s own explanation defeated it. If the six months were spent studying the material, the study was complete by 17 June, and the notices issued on 17 and 20 June were the place to put the results of it. They did not. The valuation point appeared for the first time four days later, in a document whose operative effect was to move the limitation date.

The nine markers the Court used

Before turning to them it is worth recording paragraph 19, which is the hinge of the judgment and is a single sentence: “We agree with the submissions advanced by learned advocate Mr.Soparkar on the scrutiny of the established facts.” The Court adopted the petitioner’s reading of the record, and everything from paragraph 20 onwards proceeds on it.

Reduced to its working parts, the judgment identifies the following. They are set out here as a list because they are what a submission in the next case will have to establish, and because not all of them will be present in every matter.

1. The reference was made one day before limitation expired. Timing on its own proves nothing, but it is where the enquiry starts.
2. The Assessing Officer recorded the limitation date in the reference order itself. The Court noted at paragraph 16 that he “has specifically recorded that the assessment proceedings are pending in this case and it is getting time barred on 25.06.2023”, and held at paragraph 25 that he “was very much alive to the limitation period for the assessment proceedings, which would get expired on 25.06.2023, as he himself has referred to in the impugned order”. An officer who writes the date down cannot later say the timing was coincidence.
3. He asked for the report within six days. The reference asked the District Valuation Officer to send the report “earliest and preferably by 30.06.2023”, against a statutory period of six months. A timetable that no valuer could meet is not a timetable for a valuation.
4. All the material had been in his hands for six months. Nothing had arrived late. The Court found that “All the material from the search and survey and from the petitioner was already available with the Assessing Officer, however, he showed remissness in completing the assessment before 25.06.2023”. The finding of remissness is the operative characterisation and is more use in a submission than the bare availability of the material.
5. The delay was not explained. Six months of inaction on seized material, met with an explanation the Court found lame.
6. The question had been asked and answered, and then dropped. The 21 November 2022 notice, the 2 December 2022 reply, and six months and three weeks of silence.
7. The show cause notices immediately before the reference were silent on the subject of the reference. If the officer had genuinely wanted a valuation, the notices of 17 and 20 June were where he would have said so.
8. One of the two grounds was conceded to be incapable of supporting a reference. And its presence was treated as evidence about the purpose of the other.
9. The ground conceded was one no officer could honestly have thought was a valuation question. Bogus depreciation is disallowed, not valued, and the Court would not accept ignorance of Chapter IV.

The Court’s conclusion, at paragraph 25, drew these together in a sentence that is worth quoting in full because it is the sentence that will be cited:

Thus, on a close scrutiny of the facts and the documentary evidence on record, we find that the Assessing Officer in order to save the assessment proceedings by giving a colorable exercise extended the limitation of the assessment proceedings which was going to be over on 25.06.2023 by passing the impugned order of reference.

And at paragraph 25 again, the characterisation that matters doctrinally: the officer, “by creating an artificial cause of action of referring determination of valuation of assets and the claim of depreciation on such assets has attempted to extend the time by resorting to Explanation-1(v) to Section 153 of the Act”.

This is the language of fraud on power, and it is not new language. In State of Punjab v. Gurdial Singh, AIR 1980 SC 319, Krishna Iyer J described bad faith as “the attainment of ends beyond the sanctioned purposes of power by simulation or pretension of gaining a legitimate goal”, called it “sometimes called colourable exercise or fraud on power”, and held that “Fraud on power voids the order if it is not exercised bona fide for the end designed”. A reference under section 142A is designed for the end of obtaining a valuation. Used to obtain time, it is not exercised for the end designed, and the width of the power is no answer, because the objection is not that the officer lacked the power but that he used it for something else.

The Revenue’s best argument, and why it did not save this reference

The Revenue did not only rely on the width of section 142A. Its substantive case, put at paragraphs 12 and 13, deserves to be stated properly, because it is a good argument and it will be run again.

In a matter arising out of a search, counsel submitted, two factors have to be established to make an assessment legally robust: the generation or availability of unaccounted cash, and the utilisation of that cash. The seized material in this case indicated cash transactions, which raised a question of assessment relevance as to whether, and to what extent, the cash stood deployed or invested in tangible assets. The financial statements for the year ended 31 March 2021 disclosed significant additions to tangible assets. The incriminating material received from the investigation wing on 28 December 2022 revealed unaccounted cash transactions within the group concerns. Determining the true and fair market value of the assets as against the declared investment was therefore necessary, and an exercise of exactly the kind section 142A is there for.

That argument is sound as a matter of principle and the Court did not say otherwise. Where unaccounted cash has been generated, the Department is entitled to ask where it went, and if the answer is that it went into assets, the gap between what the assets are worth and what the books say was paid for them is a legitimate subject of enquiry. A valuation is the orthodox way to measure that gap. If section 142A is for anything, it is for that.

What defeated the Revenue was not the principle but the chronology. The material that was said to have raised the question had been in the Assessing Officer’s hands since 28 December 2022. The additions to tangible assets were in financial statements he had had since the return was filed on 14 March 2022. He had put the asset question to the assessee in November 2022 and received a detailed answer in December 2022, and had let it go. If the deployment of unaccounted cash into tangible assets was the live question, it was live for six months before anything happened, and it was still missing from the two show cause notices issued in the week before the reference.

This matters for how the judgment is used. Slimtile is not authority that a section 142A reference cannot be made in a search matter, or that a reference made in the last month of limitation is bad as such. A reference made late because the material arrived late, on a question that the notices had actually raised, with a realistic timetable for the report, is a different case and may well survive, though Adhukia is a reminder that lateness is not cured merely by the reference having been made inside the period. The judgment is authority that the Court will look behind the reference order at the conduct of the assessment as a whole, and that an officer who has sat on material and then reaches for section 142A in the final week is going to be asked why.

The older objection: rejection of books, and section 69

Running alongside the abuse of power objection is an older line of authority, and practitioners should understand the difference between them because only one of the two is secure.

The older line says that a reference is not available at large. Its leading statement is Sargam Cinema v. Commissioner of Income-tax, (2010) 328 ITR 513 (SC), where the Supreme Court held that unless the books of account are rejected, the Assessing Officer cannot make a reference to the Valuation Officer. The Gujarat High Court has applied it repeatedly, including through Goodluck Automobile (P) Ltd. v. ACIT, 359 ITR 306 (Guj), where it held that “the rejection of books of account should precede the reference to the Valuation Officer” and that “the report of the Valuation Officer cannot form the foundation for rejection of the books of account”.

The two Gujarat decisions the petitioner in Slimtile relied on belong to this family. In Me & Mummy Hospital v. Assistant Commissioner of Income Tax, Special Civil Application No. 7543 of 2005, decided on 12 February 2014 by Akil Kureshi and Sonia Gokani JJ and reported at (2014) 45 taxmann.com 248 (Gujarat), the Assessing Officer referred the valuation of a hospital building on 30 March 2005 and passed the assessment on 31 March 2005. The facts rhyme with Slimtile almost exactly, and the reference order in that case likewise recited that “The Assessment is getting time barred on 31/3/2005 for A.Y.2002-03”. The Court held that the starting point for triggering a reference had to be the invocation of sections 69, 69A or 69B, that the “Sequence cannot be put in the reverse”, that using a reference to find out whether an unexplained investment existed “would only amount to fishing inquiry”, and that “in absence of any valid reasons for making a reference, in our opinion, the order must fail”. It quashed the reference.

The second, Anand Banwarilal Adhukia v. Deputy Commissioner of Income-tax, Circle-14, Special Civil Application No. 6203 of 2011, decided on 20 October 2016 by Akil Kureshi and A.J. Shastri JJ, the judgment delivered by Shastri J, and reported at (2016) 75 taxmann.com 301 (Gujarat) and [2017] 244 Taxman 243 (Gujarat), followed Me & Mummy Hospital and quashed the reference. The Court held that “the Assessing Officer had no cogent material available” to satisfy himself about the requirement of section 69, and that “in the absence of it, the reference could not have been made under Section 142A of the Act”.

Adhukia matters here for a second reason, which is usually missed because the decision is filed under the precondition heading. It also decides the timing point. Rejecting the suggestion that a reference was legitimate merely because it was made while the assessment was still alive, the Court said at paragraph 11:

Simply because prior to 2 days the reference order came to be made, it cannot be said that the action of making reference during the period of assessment is justified. In fact, no purpose would be served to make such reference especially when the contingencies reflected hereinabove are not satisfied on the background of present facts.

Slimtile is therefore not the first Gujarat decision to look hard at a reference made on the eve of limitation. It is the first to decide one squarely on the ground that the reference was a device, and to set out the material from which that is inferred.

Here is the difficulty with that line. Every one of those decisions is about the section as it stood before 1 October 2014. Me & Mummy Hospital concerned a reference of March 2005, Adhukia references of December 2010 to April 2011. Sargam Cinema was decided on an old assessment year, and the usual criticism of it is that the Supreme Court’s short order does not discuss section 142A at all; the section was in any event inserted by the Finance (No. 2) Act, 2004 with retrospective effect from 15 November 1972, so the age of the year is not itself an answer.

But the difficulty with the line is not one difficulty, it is two, and the 2014 substitution does not deal with them alike. The decisions are not all about the same precondition.

Sargam Cinema and Goodluck Automobile are about rejection of the books of account. Section 142A(2) answers them in terms: the Assessing Officer may refer “whether or not he is satisfied about the correctness or completeness of the accounts of the assessee”. That is as direct a legislative answer as could be drafted, and on that branch the older line is gone.

Me & Mummy Hospital and Adhukia are about something different: the invocation of section 69, 69A or 69B as the thing that makes a valuation relevant at all. The old section 142A(1) was expressly keyed to those provisions and to section 56(2), so reading the trigger into it took no straining: it was in the opening words. The substituted section has no such words. But section 142A(2) does not supply them either. It speaks only to the state of the accounts and says nothing about whether the valuation must be referable to a head of charge.

That distinction is why the Tribunal at Chandigarh could apply this second branch in February 2026, to references made in 2022, nearly eight years after the substitution, holding that “unless there is prima-facie application of Sec.69, reference to the valuer under Sec.142A is simply not permissible”, without having to confront section 142A(2) at all.

The argument for that view is that a power exercisable “for the purposes of assessment or reassessment” is not a power exercisable for no assessment purpose, and that Parliament removed a precondition about the accounts without removing the requirement that the valuation be relevant to something. The argument against it is that the opening words naming the charging provisions were deliberately deleted and a court should not put them back, and the Department will make it. The first branch is lost. The second is genuinely open, and it is worth pleading.

The abuse of power objection does not depend on any of that. It does not say the officer lacked the power. It accepts that he had it and asks what he used it for. Widening a power does not license its use for a collateral purpose, and no amendment to section 142A has touched that principle or could. For a reference made after 1 October 2014, the Slimtile route is the stronger of the two, and where both are available they should be pleaded in that order.

Is the exclusion open-ended? Section 142A(6) and the Chandigarh line

Clause (v) ends the excluded period on the date the report is received. It does not say what happens if the report is late, or never comes. Read literally, an assessment could be kept alive indefinitely by a reference that the Valuation Officer never answers.

The Income Tax Appellate Tribunal at Chandigarh has held that it cannot. In Singla Builders and Promoters Ltd. and Credo Assets Private Ltd. v. DCIT/ACIT (Central)-1, Chandigarh, ITA Nos. 487, 482 and 484/Chandi/2025 for assessment years 2013-14, 2017-18 and 2018-19, pronounced on 3 February 2026, Rajpal Yadav, Vice President and Manoj Kumar Aggarwal, Accountant Member held:

The use of words “shall” in sub-section (6) clearly shows that these provisions are mandatory in nature

the period of six months, in our considered opinion, has to be construed as mandatory timeline which must be fulfilled

there is no unlimited extension of time limit as provided under clause (v) of Explanation-1 to Sec.153

The consequence the Tribunal drew was that the Assessing Officer “has erred in taking cognizance of this time-barred valuation report”, and that the assessment was “barred by limitation and accordingly, liable to be quashed on legal ground”.

The facts of those appeals are worth noting for their own sake, because they show that what happened in Slimtile is not a Gujarat peculiarity. The reference there was made on 30 March 2022, against a limitation date of 31 March 2022: the same one day, in a different state, fifteen months before the reference in Slimtile. The Tribunal also held that construction cost is revenue expenditure and so not an “asset”, “property” or “investment” within section 142A(1) at all, and that the Valuation Officer had applied CPWD rates without confronting the assessee, had issued no draft report, and had not served the final report as sub-section (6) requires.

This is a Tribunal view, on a question the High Courts have not settled, and the Department’s answer is available on the words: clause (v) says what it says, and section 142A(6) governs the Valuation Officer rather than the Assessing Officer’s limitation. The point is worth taking and the client should be told it is not yet secure.

The exclusion bites only on a section 142A(1) reference

Clause (v) is drafted by reference to “sub-section (1) of section 142A”. A valuation reference made under a different power is not within it.

In Naina Saluja v. DCIT, ITA No. 393/LKW/2018 for assessment year 2013-14, decided on 25 October 2019 and reported at [2019] 76 ITR (Trib.) 135 (Lucknow), the Tribunal held that “There is no provision for extension of time for completing the assessment in case the reference is made u/s 55A or u/s 50C”. Because the references there were not made under section 142A, no time stood excluded, the assessment had to be completed by 31 March 2016, and the order passed after that date was quashed.

The practical instruction is short. Read the reference order and find the power it actually invokes. An order that cites section 55A, or section 50C, or that cites nothing at all, does not stop the clock, and the point is available on the face of the document.

Nobody has to hear you before the clock moves

This is the structural problem the whole subject turns on, and it is worth putting beside the comparable provision.

Section 142(2A) permits the Assessing Officer, with approval, to direct a special audit. A direction under it also extends limitation, through its own clause of Explanation 1. For many years it carried no hearing requirement either, and in Sahara India (Firm) v. Commissioner of Income Tax, Central-I, Civil Appeal No. 2783 of 2008, decided on 11 April 2008 by B.N. Agrawal, P.P. Naolekar and D.K. Jain JJ, the Supreme Court held that “the requirement of observance of principles of natural justice is to be read into the said provision”. Parliament had by then already acted: a proviso inserted with effect from 1 June 2007 provides that no direction for special audit shall be issued without affording a reasonable opportunity of hearing to the assessee. The reasoning was that a direction of that kind carries civil consequences for the assessee, and the extension of the assessment period is among them.

Section 142A has no equivalent. The assessee is heard by the Valuation Officer, and heard again before the report is used against him, but is not heard before the reference that moves the limitation date. By the time he is heard, the thing he would have objected to has already happened and cannot be undone by anything said at either of the later stages. The point he most needs to make, that the reference serves no purpose except to buy time, is one the statute gives him no occasion to make.

That is why these cases are writ cases. There is no appealable order. An objection taken in the assessment will be answered by an assessment order passed within the extended time, and by then the limitation argument has to be run against a completed assessment rather than against the step that enabled it. What the petitioner in Slimtile did, which was to go to the High Court against the reference itself and expressly not press the challenge to the show cause notices, is the shape this litigation has to take. It also explains why the Court rejected the prematurity objection in Me & Mummy Hospital: if a reference cannot be challenged when it is made, it cannot effectively be challenged at all.

Whether section 142A should carry a hearing requirement of its own is a question for Parliament, and the Income-tax Act, 2025 did not take the opportunity to answer it.

The ITBA point the Court recorded and did not decide

Two communications in this case travelled by email and not through the Income Tax Business Application portal. The show cause notice of 20 June 2023 was sent by email and, the petitioner objected, was not reflected on the portal. The Assessing Officer’s communication of 21 June 2023 asserting that time stood extended was also sent by email, and the Court described it, at paragraph 4, as a communication which “significantly, is not reflected on the Income Tax Business Application (ITBA) portal”.

The Court used the word “significantly” and then did not return to the point. It decided the case on the reference, and the service question was not necessary to the result.

It should not be read as decided either way. But the adverb was chosen, the fact was recorded twice, and in a matter where the Department’s case on limitation rested on an assertion made in a communication that its own system does not show, the observation is worth preserving. Anyone running a service or limitation point on an off-portal communication now has a Division Bench having thought it worth noting.

What a quashed reference leaves behind

Paragraph 28 of the judgment is one sentence:

Hence, the writ petition succeeds. The impugned order dated 24.06.2023, whereby the Assessing Officer referred the matter to the Departmental Valuation Officer a mere day prior to the assessment proceedings becoming time-barred, is hereby quashed.

The Court quashed the reference. It did not declare the assessment barred, direct that no assessment be made, or say anything about what should happen next.

The consequence nonetheless follows from the statute rather than from the judgment, and the reasoning is short. Clause (v) excludes “the period commencing from the date on which the Assessing Officer makes a reference to the Valuation Officer under sub-section (1) of section 142A”. If the order making that reference has been quashed, there is no reference under section 142A(1), and the clause has nothing to operate on. No period stood excluded. The sixty-day floor in the proviso is triggered only by an exclusion, so it does not arise either. The limitation date is therefore whatever it was without the reference, and on the facts of Slimtile that date had passed on 25 June 2023.

That is an argument, and a strong one, but it is an argument and not a holding, and it should be pleaded as a consequence of the quashing rather than presented as something the Court decided. The Tribunal at Chandigarh reached the destination by a different road, holding the report time-barred under section 142A(6) and then finding the assessment barred, which suggests that the consequential step is being taken but is still being argued rather than assumed.

There is also a caution the other way. Sahara India (Firm) is a reminder that a court which strikes down a limitation-extending step does not always undo the extension: having read natural justice into section 142(2A), the Supreme Court applied its ruling prospectively and held that it would not be open to those appellants to urge that the extended period was unavailable. A court exercising writ jurisdiction retains a discretion about consequential relief, and a petitioner who wants the limitation consequence spelt out should ask for it in the prayer rather than leave it to inference.

There is a second answer the Department will give, and it should be anticipated. Section 153(6)(i) takes an assessment made “in consequence of or to give effect to any finding or direction contained in” an order under one of the named sections “or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act” outside the time limits in sub-sections (1), (1A) and (2), and permits it to be made within twelve months from the end of the month in which the order is received or passed by the Principal Commissioner or Commissioner. A writ petition is a proceeding otherwise than by way of appeal or reference under the Act, and the Department will say that an order quashing the reference opens that twelve-month window. The answer is that the sub-section is triggered by a finding or direction, and an order which quashes a reference and says nothing else contains neither. That is one more reason to settle the prayer with care.

The Income-tax Act, 2025: sections 269 and 286

The Income-tax Act, 2025 carries all of this forward. Not in substance only, but, apart from the insertion of a single definite article, in the same words.

The valuation power is now section 269, headed “Estimation of value of assets by Valuation Officer”. Sub-section (1) reads:

The Assessing Officer may, for the purposes of assessment or reassessment, make a reference to a Valuation Officer to estimate the value, including the fair market value, of any asset, property or investment and submit a copy of report to him.

Sub-section (2) reads:

The Assessing Officer may make a reference to the Valuation Officer under sub-section (1) whether or not he is satisfied about the correctness or completeness of the accounts of the assessee.

Those are section 142A(1) and (2) transcribed, the only difference being “including the fair market value” for “including fair market value”. The six-month period for the report is preserved: the Valuation Officer “shall send the report referred to in sub-section (6) within six months from the end of the month in which the reference is made under sub-section (1)”.

Limitation is now section 286, headed “Time limit for completion of assessment, reassessment and recomputation”. It works through a Table rather than through a principal period with provisos: sub-section (1) provides that no order in respect of the proceedings in column B shall be made after the period in column D, calculated from the date in column C. The exclusions are in sub-section (3), and clause (e) of it is the valuation clause:

the period commencing from the date on which the Assessing Officer makes a reference to the Valuation Officer under section 269(1) and ending with the date on which the report of the Valuation Officer is received by him; or

The sixty-day floor survives as sub-section (4):

Where immediately after exclusion of the period as mentioned in sub-section (3), the remaining period for completion available to the Assessing Officer, as specified in sub-section (1), for making an order of assessment, reassessment or recomputation, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid time limits for completion shall be deemed to have been extended accordingly.

So the concordance is:

Subject	Income-tax Act, 1961	Income-tax Act, 2025
Power to refer for valuation	s. 142A(1)	s. 269(1)
Reference regardless of the state of the accounts	s. 142A(2)	s. 269(2)
Powers of the Valuation Officer	s. 142A(3)	s. 269(3), recast and widened
Opportunity of being heard before the Valuation Officer	s. 142A(4)	s. 269(4)
Best judgment estimate where the assessee does not co-operate	s. 142A(5)	s. 269(5)
Report sent to the Assessing Officer and the assessee	s. 142A(6)	s. 269(6)
Six months for the report	s. 142A(6)	s. 269(9)
Opportunity of being heard before the report is used	s. 142A(7)	s. 269(8)
Rectification of the Valuation Officer’s report	no equivalent	s. 269(7)
Exclusion of the valuation period from limitation	s. 153, Explanation 1, clause (v)	s. 286(3)(e)
Sixty-day floor after the exclusion	s. 153, first proviso after Explanation 1	s. 286(4)

One drafting change is worth noting. Under the 1961 Act the duty to send the report and the six-month period for doing it sit together in section 142A(6). The 2025 Act separates them: section 269(6) requires the report to be sent to the Assessing Officer and the assessee, and section 269(9) supplies the six months. The argument that the six months is mandatory, dealt with above, now has to be made on section 269(9) rather than on the sub-section that imposes the duty, and the Department may say the separation tells against reading the period as a condition of the report’s validity. The point should be anticipated.

Three observations follow from the concordance.

The question is not going away. Everything that made the device available under the 1961 Act is available under the 2025 Act. A reference still stops the clock, the stopping is still keyed to the making of the reference rather than to its quality, and the sixty-day floor still turns a last-day reference into two months and more.

Nothing has been added by way of control, and something has been added by way of power. There is still no requirement to hear the assessee before a reference is made, no requirement to record reasons in any particular form, and no cap on the excluded period written into section 286(3)(e) itself. Section 269 goes the other way in two places. Where section 142A(3) did no more than confer on the Valuation Officer the powers he has under section 38A of the Wealth-tax Act, 1957, section 269(3) spells out a power to enter land and premises and inspect the asset, to require the person in charge to provide facilities for survey and valuation and access to the books, subject to the owner’s consent and two days’ written notice for entry into a building, and, where those facilities are refused or evaded, the powers of a civil court under the Code of Civil Procedure, 1908 as to discovery and inspection, attendance and examination on oath, production of documents and the issue of commissions. And section 269(7), which allows the Valuation Officer to amend his own report to rectify a mistake apparent from the record under section 287, has no counterpart in section 142A at all. The second of those gives the Department something to say against the Chandigarh line on a late report that it does not have under the 1961 Act.

One source of confusion has been introduced. The 2025 Act contains a second valuation reference power, in section 247(9), which belongs to the search provisions and is exercised by the authorised officer during or within sixty days of the search, with the valuer required to report within sixty days. That is a different power, exercised by a different officer, at a different stage, with a different timetable. Section 286(3)(e) excludes time for a reference “under section 269(1)”. A reference under section 247(9) is not a reference under section 269(1). The Naina Saluja point therefore has a new field to operate in, and the first thing to check in a 2025 Act matter is which of the two powers the reference order invokes.

What to do when a reference lands late

For the assessee who has just received one, or whose adviser is reviewing a file where the assessment was completed on extended time.

Get the reference order itself. Not the intimation, the order. It is the document the case is decided on, and in Slimtile it was the Assessing Officer’s own recital of the limitation date in that order that the Court used against him twice.

Fix the dates before anything else. The baseline limitation date on the statute. The date of the reference. The date the report was asked for, and the date it arrived. Every earlier notice and reply bearing on the subject matter of the reference.

Ask what power the order invokes. Section 142A(1), or section 269(1) under the new Act, or something else. If it is something else, no time was excluded.

Test the subject matter against the notices. Was the question raised in any notice before the reference? Was it answered? Was it then dropped? Did the notices issued in the weeks before the reference mention it? In Slimtile the answers were yes, yes, yes and no, and that pattern is what the Court acted on.

Ask when the material arrived. A reference prompted by material received the week before is defensible. A reference on material held for six months is the Slimtile case.

Look at the timetable the officer set. A request for a report in days, against a statutory period of six months, says what the reference was for.

Count the grounds, and test each. If one of several grounds could not possibly need a valuation, say so and say what follows: not merely that the ground is bad, but that its presence tells you about the purpose of the exercise. The Revenue’s concession in Slimtile was handed over at the hearing, and it cost the Department the case.

Check the report against section 142A(6). If it came after six months from the end of the month of reference, the Chandigarh line is available, both as to the report and as to whether the exclusion could keep running.

Decide where to fight. The reference is not appealable and the extension it produces cannot be undone later by anything said about the merits. If the point is to be taken at all it is taken in the writ jurisdiction, and it is taken against the reference. Consider expressly not pressing a challenge to the show cause notices, as the petitioner did here, so that the Court is asked one question and not three.

Ask for the consequence in the prayer. Quashing the reference and leaving the limitation consequence to inference is not the same as having it declared.

One discrepancy inside the order

A note for anyone working from the judgment. The amount of the second show cause notice appears twice and does not match. At paragraph 15(d), in the Court’s own findings of fact, the notices of 17 and 20 June 2023 are described as being “for unaccounted payment of Rs.1,01,00,113/- and Rs.19,75,00,000/-“. At paragraph 24 the same notices are described as having been issued “of Rs.1,01,00,113/- and Rs.90,75,00,000/- for unaccounted payment”.

The first figure is the same in both places. The second differs by a factor of roughly four and a half. This has been checked against the text of the order and the discrepancy is in the order, not in the reading of it. Nothing in the reasoning turns on the amount, and the point is recorded here only so that nobody quotes one figure in a submission and is shown the other.

There is a second feature of the order worth noting for the same reason. At paragraph 17, setting out the provision under which the Revenue took shelter, the Court reproduces section 153(1) in its twenty-one-month form and does not set out the provisos, including the third proviso, which substitutes nine months for assessment years commencing on 1 April 2021 and which is the limb that produces the 31 December 2022 date the judgment itself proceeds on at paragraph 18. Nothing turns on it either, but anyone quoting paragraph 17 for the text of section 153(1) should quote the provisos with it.

Where this leaves the subject

Section 142A gives the Assessing Officer a power that is deliberately wide, that moves the limitation date the moment it is used, that carries a sixty-day floor making a late use of it more valuable than an early one, and that he may exercise without hearing the person it affects. Parliament has re-enacted every part of that in sections 269 and 286 of the Income-tax Act, 2025, and in section 269(3) and (7) has given the Valuation Officer more than he had.

Against that, the only reliable control is the one the Gujarat High Court applied: that a power must be used for the purpose it was given for, and that a court will look at the whole conduct of an assessment to decide what a reference was really for. The older objections, that the books must be rejected or section 69 invoked first, rest on a version of the section that no longer exists and may or may not survive the 2014 substitution. The abuse of power objection survives any widening of the power, because it concedes the power and attacks the use.

Slimtile is useful not because it states a new principle but because it shows what the old principle looks like when it is proved. Nine facts, each of them on the file, each of them capable of being pleaded, adding up to a finding that an officer created an artificial cause of action to cover up his own inaction. That is a template, and the next case will be won or lost on how much of it the file supports.

This note is general commentary on the law as at 07 October 2026 and is not advice on any matter. The position in a particular case depends on its own facts.