Full Judgment Text
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CASE NO.:
Appeal (civil) 4657 of 2000
PETITIONER:
Amiya Bala Paul
RESPONDENT:
Vs.
Commissioner of Income Tax, Shillong
DATE OF JUDGMENT: 07/07/2003
BENCH:
Ruma Pal & B.N. Srikrishna.
JUDGMENT:
J U D G M E N T
RUMA PAL, J
The assessee built a house in a suburb of Kolkata
between the years 1981 to 1983. She filed a return in respect
of the assessment year 1982 â\200\2231983 in which she disclosed that
she had invested an amount of Rs.1,75,000 in the construction
of the house. The return was accepted by the Income Tax
Officer (now known as the Assessing Officer). In respect of the
subsequent assessment year, namely 1983-84, the assessee
disclosed that she had invested a further amount of
Rs 1,70,000 in the construction of the house. This was not
accepted by the Assessing Officer, who referred the question
of the construction cost of the house to the Valuation Officer
under Section 55(A) of the Income Tax Act, 1961 (hereinafter
referred to as the Act). The Valuation Officer submitted a report
to the Assessing Officer. On the basis of the report, the
Assessing Officer re-opened the assessment in respect of the
assessment year 1982-83. The Income Tax Officer then made
an addition of Rs 2,79,000 in respect of the assessment year
1982 - 83 and Rs 1,77,000 in respect of the assessment year
1983- 84 as undisclosed investment in the construction of the
house. The assessee’s appeals from the assessment orders
were turned down by the Commissioner of Income Tax
(Appeals) Guahati. The Income Tax Appellate Tribunal,
however, following an earlier decision, allowed the assessee’s
appeal and held that the Assessing Officer could not have
referred the question of the cost of construction of the
assessee’s house to the Valuation Officer. In this background
the following question was referred to the High Court under
Section 256 (2) of the Act.
"Whether on the facts and in the
circumstances of the case, the Tribunal erred
in law by holding that the Assessing Officer
cannot refer the matter to the Valuation
Cell(sic) for estimating the cost of construction
of the house property".
The Division Bench of the High Court held that although
the Assessing Officer could not have referred the question of
the cost of construction of the assessee’s house to the
Valuation Officer under Section 55 A of the Act, he had ample
power under Sections 131 (1), 133 (6) and 142 (2) of the Act to
ask for a Valuation Report from the Valuation Officer. It was
held that each of these sections were "enabling machinery
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provisions which invested ample powers in the Assessing
Authority", and that any wrong mention of the provision on the
requisition memo would not be material. Accordingly the
question referred was answered in the affirmative and against
the assessee.
In the appeal before us, it was contended on behalf of the
assessee that a reference to a Valuation Officer could only be
made strictly in terms of section 55 A of the Act and that if the
circumstances justifying the reference under that Section were
not prevailing, the Assessing Officer did not have the
jurisdiction to otherwise refer the matter to the Valuation Officer.
It was further pointed out that Section 55 A of the Act only
allows for reference to the Valuation Officer for the purposes of
computing the market value of property in connection with the
computation of capital gains. It was also submitted that
reference to the Valuation Officer had been specifically
provided for under Section 55A and that this implied that a
reference to the Valuation Officer could not be made under any
of the other provisions which generally empowered the
Assessing Officer to ascertain the income of the assessee. The
submission of the appellant was that if the power to refer the
determination of the cost of construction to the Valuation Officer
was otherwise available to the Assessing Officer under the
other provisions of the Act, it was not necessary to
specifically empower the Assessing Officer under Section 55A.
Finally, it is submitted that the Valuation Officer is appointed
under the Wealth Tax Act and that he could exercise the power
only in the manner prescribed by that Act or by any other
statutory provision like Section 55 A of the Act, and that he
could not be called upon to discharge functions not statutorily
prescribed, in his capacity as a Valuation Officer.
Learned counsel appearing on behalf of the Revenue
Authorities has submitted that under Section 131 (1), the
Assessing Officer has all the powers of the Civil Court including
issuing of commissions under Section 131(1)(d). Further,
under Section 142 (2), an assessing officer for the purpose of
obtaining full information in respect of the income or loss of any
person, may make "such inquiry as he considers necessary".
While conceding that Section 55-A would not in terms apply to
the assessee’s case, the respondents’ contention was that the
Assessing Officer was otherwise empowered under the other
provisions of the Act to refer the matter to the Valuation Officer.
According to the respondents the powers of enquiry invested in
the Assessing Officer under Secs.131(1),133(6)and142(2) were
wide and that this Court should not read in any limitation to this
power. It was further submitted that there was nothing in the
Wealth Tax Act, 1957 which precluded the Valuation Officer
from giving a valuation report in respect of any matter not
covered by the provisions of that Act. Therefore, it was
submitted, the Assessing Officer’s reference to a Valuation
Officer was correct and could not be held to be without
jurisdiction.
The Valuation Officer to whom a requisition was sent by
the Assessing Officer in this case, is an officer appointed under
the Wealth Tax Act 1957. Section 2 sub-section (r) of the
Wealth Tax Act ,1957, defines "Valuation Officer" as meaning a
person appointed as a Valuation Officer under Section 12 A of
the Wealth Tax Act and includes a Regional Valuation Officer, a
District Valuation Officer and an Assistant Valuation Officer.
Under section 8 of the Wealth Tax Act, it has been provided
that the Income Tax Authorities specified in Section 116 of the
Income Tax Act shall be the Wealth Tax Authorities for the
purposes of the Wealth Tax Act, and "every such authority shall
exercise the powers and perform the functions of Wealth Tax
Authorities under this Act in respect of any individual, Hindu
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undivided family or company and for this purpose his
jurisdiction under this Act shall be the same as he has under
the Income Tax Act by virtue of orders or directions issued
under Section 120 of that Act or under any other provision of
that Act". A brief look at the powers and functions of a
Valuation Officer under the Wealth Tax Act would be apposite
at this stage. Under section 16 A of the Wealth Tax Act for the
purpose of making an assessment under the Wealth Tax Act
and in specified circumstances, the Assessing Officer may refer
the valuation of any asset to a Valuation Officer when, broadly
speaking, the Assessing Officer is of the opinion that the value
of the asset had not been correctly disclosed by the assessee.
Sub section (2) of Section 16 A of the Wealth Tax Act provides
for the Valuation Officer to give a notice to the assessee for
production of various accounts ,records or other documents as
the Valuation Officer may require. If the Valuation Officer is of
the opinion that the value of the asset had been correctly
declared in the return made by the assessee, he shall, under
sub-section (3) of section 16 A, pass an order in writing to that
effect and send a copy of his order to the Assessing Officer
and to the assessee. When, however, the Valuation Officer is
of the opinion that the value of the asset is higher than the
value declared in the return made by the assessee, and in
certain other specified circumstances, the Valuation Officer is
required under sub-section (4) of section 16 A to serve notice
on the assessee intimating the value at which he proposes to
estimate the asset giving the assessee an opportunity to state
his objections either in person or in writing before the Valuation
Officer and to produce or cause to be produced, such evidence
as the assessee may rely in support of his objections. Under
sub-section (5), the Valuation Officer may pass an order in
writing estimating the value of the asset after hearing such
evidence as the assessee may produce and after considering
such evidence as the Valuation Officer may require and after
taking into account all relevant material which he has gathered,
the Assessing Officer is required to complete the assessment in
conformity with the estimate of the Valuation Officer as far as
the valuation of the particular asset in question is concerned in
terms of sub-section (6) of section 16 A.
The decision of the Valuation Officer is amendable by
him under section 35 (aaa) of the Wealth Tax Act. The decision
may also be the subject matter of appeal under Section 23 (ha)
in which event the Appellate Authority is required, under
section 23 (3A), to give the Valuation Officer an opportunity of
being heard or if necessary direct the Valuation Officer to hold a
fresh inquiry. There is a similar provision in respect of appeals
before the Commissioner (Appeals). It is thus seen that the
Assessing Officer, under Section 16 A does not retain the
power of enquiry. There is a similar provision in respect of the
particular asset in respect of which the requisition is made to
the Valuation Officer. The entire process of inquiry is solely
conducted by the Valuation Officer alone whose responsibility it
is to arrive at a correct valuation of the asset.
The inquiry by the Valuation Officer is distinct from the
power of the Assessing Officer who is otherwise invested with
the power to enquire into the actual wealth of an assessee
under the Wealth Tax Act. For this purpose, under section
37(1) of the Wealth Tax Act, the Assessing Officer is given, the
powers of a Court under the Code of Civil Procedure, 1908
when trying a suit in respect of:
(a) discovery and inspection
(b) enforcing the attendance of any person, including any
officer of a banking company and examining him on
oath;
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(c) compelling the production of books of account and
other documents; and
(d) issuing commissions.
Under section 38 of the Wealth Tax Act, the Wealth Tax
Authority is also given the power to obtain any statement or
information from any individual, company,(including a banking
company) firm, Hindu undivided family or other person and to
"serve a notice requiring such individual, company, firm, Hindu
undivided family or other person, on or before a date to be
therein specified, to furnish such statement or information on
the points specified in the notice, and the individual or the
principal officer concerned or the manager of the Hindu
undivided family, as the case may be, shall, notwithstanding
anything in any law to the contrary, be bound to furnish such
statement or information to such wealth-tax authority". Thus it
is apparent that the Assessing Officer’s power to enquire under
sections 37(1) and 38 of the Wealth Tax Act is distinct from his
power to refer to the Valuation Officer under Section 16A.
There is no overlapping.
Section 55 A of the Income Tax Act occurs in Chapter IV,
Part E which deals with capital gains. For the purpose of
assessing the fair market value of a capital asset in connection
with the computation of capital gains it incorporates several
provisions relating to a Valuation Officer in the Wealth Tax Act
and reads as follows
"55A. With a view to ascertaining the fair
market value of a capital asset for the
purposes of this Chapter, the Assessing
Officer may refer the valuation of capital asset
to a Valuation Officer â\200\223
(a) in a case where the value of the asset as
claimed by the assessee is in accordance
with the estimate made by a registered
valuer, if the Assessing Officer is of
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 â\200\223
(i) that the fair market value of the
asset exceeds the value of the
asset as claimed by the assessee
by more than such percentage of
the value of the asset as so claimed
or by more than such amount as
may be prescribed in this behalf; or
(ii) that having regard to the nature of
the asset and other relevant
circumstances, it is necessary so to
do,
and where any such reference is made, the
provisions of sub-section (2), (3), (4), 5) and (6) of
section 16A, clauses (ha) and (i) of sub-section
(1) and sub-sections (3A) and (4) of section 23,
sub-section (5) of Section 24, section 34AA,
section 35 and section 37 of the Wealth tax Act,
1957 (27 of 1957), shall with the necessary
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modifications, apply in relation to such reference
as they apply in relation to a reference made by
the Assessing Officer under sub-section (1) of
section 16A of that Act.
Explanation â\200\223 In this section, "Valuation Officer"
has the same meaning, as in clause ( r) of
section 2 of the Wealth-tax Act, 1957 (27 of
1957)."
Clearly this section in terms can have no application to
the assessee’s case. But can the Assessing Officer otherwise
make a reference to a Valuation Officer for generally computing
the assessee’s taxable income? The respondents say he can,
and have referred us to Sections 131(1) and 133(6) of the Act.
Section 131 (1) of the Act is in pari materia with Section 37(1)
of Wealth Tax Act and Section 133 (6) of the Act is substantially
similar to section 38 of the Wealth Tax Act. On a parity of our
earlier reasoning, the power of the Assessing Officer under the
Sections 131 (1) and 133 (6) of the Income Tax Act is distinct
from and does not include the power to refer a matter to the
Valuation Officer under Section 55A. Nor does the third
section viz., S.142(2) on which reliance has been placed by the
respondents allow him to do so. Section 142 (2) of the Act
provides:
"For the purpose of obtaining full information in
respect of the income or loss of any person,
the Assessing Officer may make such inquiry
as he considers necessary".
The common feature of Sections 133 (6) and 142 (2) is
that the Assessing Officer is the fact-finding authority. It is his
opinion on the basis of the facts as found on an enquiry
conducted by himself which results in the assessment order. A
report by the Valuation Officer under Section 55 A is on the
other hand the outcome of an inquiry held by the Valuation
Officer himself and reflects his opinion on the evidence before
him. Such a report would not be the result of an inquiry by the
Assessing Officer under the provisions of Section 133 (6) or
Section 142 (2). It is true that the Assessing Officer is not
bound by strict rules of evidence and a report of a Valuation
Officer under Section 55A may be considered by the Assessing
Officer as a piece of evidence if it is relevant. (See CIT V. East
Commercial Co. Ltd : 1967 LXIII ITR 449, 457) However, the
power of inquiry granted to an Assessing Officer under
Sections 133 (6) and 142 (2) does not include the power to
refer the matter to the Valuation Officer for an enquiry by him.
Learned counsel for the respondents has however
particularly drawn our attention to clause (d) of sub section (1)
of section 131 which provides inter alia that the assessing
officer shall, "for the purposes of this Act, have the same
powers as are vested in a court under a Code of Civil
Procedure, 1908, (referred to as ’the Code’) when trying a suit
in respect of the following matters, namely: --
"(d) issuing commissions."
The Court’s power to issue commissions is contained in
sections 75 to 78 of the body of the Code and Order XXVI of
the Schedule to the Code. Sections 76 to 78 are not relevant
for our purposes. Section 75 which delineates the power of
Court to issue commissions says:
"Power of court to issue
commissions. Subject to such
conditions and limitations as may be
prescribed, the court may issue a
commission â\200\223
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(a) to examine any person;
(b) to make a local investigation;
(c) to examine or adjust accounts; or
(d) to make a partition;
(e) to hold a scientific, technical, or
expert investigation;
(f) to conduct sale of property which
is subject to speedy and natural
decay and which is in the custody
of the court pending the
determination of the suit;
(g) to perform any ministerial act."
Order XXVI provides for the procedure for issuing
commissions in respect of each of the purposes mentioned in
sections 75. Thus Rules 1 to 8 are in respect of commissions
to examine witnesses, Rules 9 to 10 C are in respect of
commissions for local investigations; Rules 11 and 12 relate to
commissions to examine accounts and Rules 13 and 14 pertain
to commissions to make partitions. If at all the Assessing
Officer could have issued a commission to a Valuation Officer it
could only be under Rule 9 which lays down that:
"Commissions to make local
investigations.â\200\224In any suit in which
the Court deems a local investigation to
be requisite or proper for the purpose of
elucidating any matter in dispute, or of
ascertaining the market-value of any
property, or the amount of any mesne
profits or damages or annual net profits,
the Court may issue a commission to
such person as it thinks fit directing him
to make such investigation and to report
thereon to the Court.
Provided that, where the State
Government has made rules as to the
persons to whom such commission shall
be issued, the Court shall be bound by
such rules."
Assuming that the Valuation Officer was appointed in
terms of Order XXVI Rule 9, it is not clear whether the report
submitted by the Valuation Officer was in keeping with Rule 10
sub-section 1 which requires the Commissioner not only to hold
"such local inspection as he deems necessary" but also to
reduce in writing the evidence taken by him and to return such
evidence together with his report in writing signed by him to the
court. If this were done then the report of the Commissioner
and the evidence taken by him "shall be evidence in the suit
and shall form part of the record" ". However the Court and any
of the parties to the suit, with the permission of the Court, may
examine the Commissioner personally "touching any of the
matters referred to him or mentioned in his report, or as to his
report, or as to the manner in which he has made the
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investigation".
The Assessing Officer in this case had made a reference
under section 55 A of the Act. This action cannot be supported
by reference to Section 131(1) of the Act read with Order XXVI
Rule 9 of the Code since the consequences of reference to a
Valuation Officer under Section 55A of the Act and of a
commission issued under Section 75 read with Order XXVI
Rule 9 of the Code are different. It is not, therefore, a case of
correction of an error in mentioning the section by the
Assessing Officer, an error which could be ignored by referring
the action to the appropriate source of power.
Besides section 55 A having expressly set out the
circumstances under and the purposes for which a reference
could be made to a Valuation Officer, there is no question of the
Assessing Officer invoking the general powers of enquiry to
make a reference in different circumstances and for other
purposes. [ See Padam Sen v. State of U.P: AIR 1961 SC 218
para 8; Arjun Singh v. Mohindra Kumar : AIR 1964 SC 993
(para 19) ]. It is noteworthy that Section 55 A was introduced in
the Act by the Taxation Laws (Amendment) Act, 1972 when
Sections 131 (1), 133 (6) and 142 (2) were already on the
statute book. Learned counsel for the appellant has correctly
submitted that if the power to refer any dispute to a Valuation
Officer were already available in Sections 131 (1), 133 (6) and
142 (2), there was no need to specifically empower the
Assessing Officer to do so in certain circumstances under
Section 55 A.
We may also note Section 269L of the Act which enables
the competent authority appointed under Section 269B:
(1) (a) "for the purpose of initiating
proceedings for the acquisition of any
immovable property under section 269C
or for the purpose of making an order
under section 269F in respect of any
immovable property require a Valuation
Officer to determine the fair market
value of such property and report the
same to him;
(b) for the purpose of estimating the
amount by which the compensation
payable under sub-section (1) of section
269J in respect of any immovable
property may be reduced or, as the case
may be, increased under clause (a) or
clause (b) of sub-section (2) of that
section, require the Valuation Officer to
make such estimate and report the same
to him.
The Valuation Officer referred to has, according to the
Explanation to the Section, the same meaning as in clause ( r)
of Section 2 of the Wealth Tax Act, 1957. Under sub-section
(2) of Section 269L, the Valuation Officer to whom a reference
is made under clause (a) or clause (b) of sub-section (1) is
given all the powers he has under Section 38 of the Wealth Tax
Act, 1957. And if in an appeal under Section 269G against the
order for acquisition of any immovable property, the fair market
value of such property is in dispute, the Appellate Tribunal
shall, on a request being made in this behalf by the competent
authority, give an opportunity of being heard to any Valuation
Officer nominated for the purpose by the competent authority.
From this it is clear that whenever reference to a
Valuation Officer appointed under the Wealth Tax Act is
permissible under the Income Tax Act, it has been statutorily so
provided.
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Apart from the aforesaid, a Valuation Officer is appointed
under the Wealth Tax Act and can discharge functions within
the statutory limits under which he is appointed. It is not open
to a Valuation Officer to act in his capacity as Valuation Officer
otherwise than in discharge of his statutory functions. He
cannot be called upon nor would he have the jurisdiction to give
a report to the Assessing Officer under the Income Tax Act
except when a reference is made under and in terms of Section
55 A or to a competent authority except under section 269L.
We are therefore of the view that the High Court
incorrectly answered the question referred to it in the
affirmative. The Tribunal had not erred in holding that the
Assessing Officer cannot refer the matter to the Valuation
Officer for estimating the cost of construction of the house
property. The appeal is accordingly allowed and the decision of
the High Court set aside. There will be no order as to costs.